How Tariffs, AI Wealth, and Data Centre Boom Shaped Europe's Q2 Earnings

Philips, Hochtief, and LVMH Lead as Tariff and AI Tailwinds Lift Earnings

Europe’s second-quarter earnings season painted a starkly divided picture, with companies exposed to US tariff recalibrations, the artificial intelligence boom, and wealthy American consumers reaping almost all of the benefits. Dutch medical device maker Philips topped the list of surprises, reporting a 16.4% adjusted EBITA margin — more than four percentage points ahead of consensus — after receiving long-awaited US customs duty refunds. The windfall allowed chief executive Roy Jakobs to raise the full-year margin target to 13.5-14.0%, up from 12.5-13.0%, and to lift free cash flow guidance by €200 million.

While Philips rode a one-off tariff tailwind, construction giant Hochtief and chipmaker Intel underscored the structural demand shift created by AI. Hochtief, a new entrant in Germany’s DAX index, lifted its 2026 operating profit forecast by up to 9% on the back of “very strong demand” for data centres, particularly through its US subsidiary Turner, which builds facilities for Meta. Intel’s revenue jumped 25% year-on-year as data centre chip sales rebounded, posting its fastest growth in years. On the other side of the Atlantic, French luxury group LVMH — owner of Louis Vuitton and Tiffany — said US sales rose 6% in the quarter, attributing the increase to purchasing power created by the AI and technology boom.

The quarter was far less kind to companies wrestling with geopolitics and Chinese competition. Crane builder Palfinger saw profit fall as the Iran conflict and US tariffs delayed customer investments, prompting a €25 million annual cost-savings programme. Automotive groups faced a particularly tough road: Mercedes-Benz warned it would now sell slightly fewer cars this year, blaming a “fiercely competitive” Chinese market, while Volkswagen’s second-quarter net profit slumped by a third. Even SAP, Europe’s largest software company, tempered its 2026 operating profit outlook because of dilution from two recent acquisitions, despite higher cloud revenue and a strong bottom line.

Telecoms and chemicals provided further evidence of the split. T-Mobile US, majority-owned by Deutsche Telekom, raised its free cash flow forecast after seeing 60% of new subscribers choose premium plans. Dow‘s profit exploded on the back of a 20% jump in plastic prices caused by supply disruption in the Strait of Hormuz. By contrast, TeamViewer reported shrinking revenue and operating profit as customers left and currency headwinds bit, and Jungheinrich cut its earnings outlook due to strike-related costs, higher material prices, and fierce competition. As the dust settles on the reporting season, the message is clear: external forces — tariffs, AI investment, and the geographic distribution of wealth — are trumping company-level execution in determining short-term corporate fortunes.

Behind the Numbers: The Three Megatrends Reshaping Corporate Europe

Tariff Tetris: Winners and Losers in Cross-Border Trade

The quarter’s most direct trade-policy impact came from US customs duties. Philips pocketed a 4.2-percentage-point margin boost from completing its refund process, a one-off that nonetheless lifted full-year guidance. For others, tariffs were a pure headwind: Palfinger explicitly linked its profit decline to US levies and war-related customer uncertainty. Meanwhile, Dow benefited indirectly from the Middle East conflict, which constricted Hormuz chemical supplies and pushed plastic prices 20% higher. This geographic mismatch — US duty relief for some, higher raw-material costs for others — reveals a corporate landscape where trade and conflict risk are now embedded in earnings almost as strongly as demand trends.

The AI Data Centre Gold Rush

Nowhere was the AI tailwind clearer than at Hochtief and Intel. Hochtief’s revised 2026 profit target — now €1.025–1.1 billion, implying 30–40% growth — is anchored in hyperscaler demand for US data centres. Intel’s 25% revenue leap, far outpacing expectations, confirms that even legacy chipmakers are surfing the infrastructure wave. This theme extends to T-Mobile US, where premium-plan uptake hints at enterprise spending on high-speed connectivity for AI workloads. The common thread is a rush to build physical and digital capacity, a cycle that shows little sign of fatigue in the second half.

The Wealth Divide Fuelling Luxury Resilience

LVMH’s results crystallised a new consumer reality: US luxury spending is being propelled by stock-market and tech-wealth gains, not broad-based prosperity. The 6% US sales bump, combined with an 11% surge in jewellery and watches, indicates that the top end of the income spectrum remains insulated from macroeconomic wobbles. Yet the picture is fragile — European sales stagnated, partly because Middle East tensions dented tourism, and a sharp US equity correction could quickly reverse the “wealth effect” that benefited Tiffany and Bulgari.

Investor Radar: Post-Q2 Targets, Risks, and Sector Plays

• Philips: With the tariff refund process largely complete, the underlying margin run-rate and the new €1.5–1.7 bn cash flow target become the benchmarks. Any shift in US trade policy could reintroduce the margin volatility of recent years.
• Data-centre plays: Hochtief’s raised 2026 profit forecast confirms multi-year visibility in data-centre construction. Investors should monitor order intake from hyperscalers in the next quarterly call and watch for any signs of capacity overbuild.
• German auto: Mercedes’ China volume warning and VW’s 33% profit drop make second-half cost-cutting execution critical. Track monthly China wholesale data and any fresh tariff announcements on imported vehicles that could further pressure margins.
• Luxury: LVMH’s US outperformance driven by tech wealth contrasts with fragile European demand. A softening in aspirational purchases would likely follow any US equity-market wobble; watch high-frequency consumer sentiment indicators for early signals.