— Only 37% of Brazilian companies beat net income estimates in Q4 2025, the lowest in XP’s history, while just 21% topped EBITDA forecasts versus a 42% long-term average
— XP attributes the weak results to the peak impact of the Selic rate at 15%, the highest since 2006, which has compressed domestic economic activity
— Despite the disappointing quarter, forward earnings estimates remain stable, and markets are pricing in Copom’s first rate cut on March 18 as the start of an easing cycle
The worst Brazil Q4 earnings season on record — at least by one key measure — has laid bare the toll that 15% interest rates have taken on corporate profitability. According to XP Investimentos, which tracked 71 companies in its coverage universe, the proportion of firms beating net income estimates fell to 37%, far below the 51% historical average. EBITDA beat rates collapsed to just 21% against a 42% norm, while revenue surprises dropped to 27% versus a typical 39%. The data captures what strategists Fernando Ferreira, Lucas Rosa, and Raphael Figueredo described as the likely “peak of the domestic economic deceleration.” This is part of The Rio Times’ daily coverage of Brazil financial news English and Latin American financial markets.
Brazil Q4 Earnings: Where the Pain Concentrated
The damage was uneven across sectors. Oil and gas companies performed worst, with 67% reporting results below expectations, though the season remains incomplete for the sector. Mining and steel showed a split personality: 40% positive surprises against 40% negative. Commercial real estate and utilities delivered broadly weak results, with most firms missing estimates. Agribusiness companies generated profit-line surprises but disappointed on revenue, where 60% missed forecasts, and EBITDA, where 80% fell short — a pattern suggesting cost management is holding up better than top-line growth.
The standout was paper and pulp, where Suzano delivered results strong enough to lift the entire sector’s surprise metrics on both revenue and profit. Technology, media, and telecoms also produced above-average earnings beats. Notably, XP observed that much of the decline in positive surprises was matched by a rise in “in-line” results to the highest levels in the firm’s historical series, suggesting forecasters are getting more precise rather than systematically wrong — a subtle but important distinction for investors trying to read the signal through the noise.
Rate Cuts and the Path Forward
The critical context is timing. The Copom is widely expected to deliver its first Selic cut since the tightening cycle began, reducing the benchmark by 25 basis points to 14.75% at its March 17–18 meeting. The consensus for full-year easing is approximately 275 basis points, which would bring the rate to around 12.25% by December — still restrictive but substantially less punishing for corporate balance sheets. Itaú BBA forecasts a 20% increase in Ibovespa company profits in 2026, driven by lower rates, residual GDP resilience, and stable corporate leverage. As The Rio Times has tracked throughout the rate-cut debate, the question is no longer whether easing will begin but how fast it can proceed without re-igniting inflation, currently running at 4.1% on the IPCA-15 measure.
Perhaps the most encouraging signal in XP’s analysis is what did not happen: forward earnings estimates for coming quarters remained broadly stable despite the Q4 disappointments. The market, in other words, is treating the weak quarter as a cyclical trough rather than a structural deterioration. Stock-price reactions also defied expectations, with negative-surprise names actually outperforming positive-surprise names — an unusual pattern that suggests macro factors, particularly the rate-cut narrative and foreign inflows that pushed the Ibovespa up 15.7% in the year’s first six weeks, are overwhelming micro fundamentals. Whether that confidence survives the geopolitical volatility from the Middle East and the approaching election cycle will determine if the Q4 trough proves to be the turning point analysts are banking on.