Data indicates that the German DAX index constituents are projected to achieve a profit growth of 13%-15% in the second half of 2025 and throughout 2026, surpassing the S&P 500’s expected 13.5% increase. This marks the first time in recent years that German equities have led the United States in earnings expectations. The DAX index has surged by 21% this year, outperforming all major global indices. While markets remain concerned about Trump’s tariff threats, German companies are quietly preparing for an earnings surge.
Bloomberg data shows that DAX constituents are anticipated to see profit growth of 13%-15% in late 2025 and 2026, exceeding the S&P 500’s 13.5% growth rate. Kevin Thozet, a member of Carmignac’s investment committee managing approximately $39 billion in assets, stated: ‘The German tiger is awakening. I hope more people realize that by 2026, the average profit growth of German companies should exceed that of the United States.’ This expectation is already reflected in stock performance, with the DAX rising 21% year-to-date, leading global indices. In contrast, the pan-European Stoxx 600 benchmark has gained only about 9%, and the S&P 500 only recently turned positive. Defense spending is a core driver of growth, with European nations heavily investing to strengthen military capabilities. Analysis suggests that Rheinmetall AG, Airbus, and MTU Aero Engines AG will contribute approximately 20% of the DAX’s earnings per share growth in the second half of 2025. Stocks in energy transition, electric vehicles, and artificial intelligence are also viewed as key catalysts, fueled by increased data center investments, electrification progress, and the rise of new AI applications. Additionally, Germany’s cabinet has approved a corporate tax relief package worth about €46 billion ($53 billion). Starting in July, new machinery purchases will enjoy a 30% tax deduction, and the federal corporate tax rate will gradually decrease from 15% to 10% beginning in 2028. Electric vehicles will be eligible for a 75% first-year depreciation on their purchase price. These measures are part of broader efforts to revitalize an economy that has stagnated for three consecutive years. Furthermore, plans by the new Chancellor to accelerate defense and infrastructure spending could contribute 1.6 percentage points to economic growth in 2026. Analysts estimate this would provide a 6% boost to DAX earnings per share and a 12% boost to mid-cap MDAX stocks. Despite tariff concerns, German companies demonstrate unexpected resilience. Analysts Kaidi Meng and Laurent Douillet note that the German index may suffer less from potential U.S. tariff impacts than initially feared.While automakers Mercedes-Benz Group and BMW, along with automotive chip manufacturer Infineon Technologies, remain vulnerable to potential tariffs under the Trump administration’s trade policies, the broader benchmark index appears more resilient. Service providers such as software giant SAP and insurer Allianz avoid direct exposure to goods tariffs, while industrial powerhouses like BASF and Siemens benefit from their U.S. production bases.
Jim Zelter, President of Apollo Global Management, noted in a media interview that Germany under the new government is ‘an excellent place to do business.’ He stated, ‘This is a $4 trillion economy aiming to reach $6 trillion within the next 10 to 12 years. We are prepared to deploy over $100 billion in capital through our financing tools.’ Charu Chanana, Chief Investment Strategist at Saxo, observed: ‘Germany is gaining strategic relevance as investors seek diversification from U.S. policy and fiscal risks—supported by growth-friendly reforms and industrial strength. Germany isn’t just riding market waves; it’s entering a potential era of policy revitalization.’ Emmanuel Cau’s team of Barclays strategists commented: ‘Germany’s long-term domestic prospects are improving, with pro-growth policy shifts and fiscal spending likely to drive investment.’ Risk Warning and Disclaimer: Markets involve risks, and investments should be approached with caution. This document does not constitute personal investment advice and does not consider individual users’ specific investment objectives, financial situations, or needs. Users should assess whether any opinions, views, or conclusions herein align with their particular circumstances. Investment decisions based on this content are made at one’s own risk.
