After a brief pause, the European stock market has returned to record highs: Who are the leaders, and who are the laggards?

The STOXX 600, a benchmark index of European stocks, closed at 656.86 points on August 4, surpassing the all-time high reached in early July. European indices have been “flirting with record highs” since the end of last month, and one of the main reasons is rising corporate profits, explained Saxo Bank strategist Ruben Dalfovo.

Earnings season confirms that the rally has a solid foundation. By early August, more than half of the STOXX 600 companies had reported their quarterly results. Their combined earnings rose 23% year-over-year, compared with a consensus estimate of 11.5%, according to a FactSet report.

According to a Goldman Sachs estimate cited by FactSet, the median company in the European index saw its earnings rise by about 7% last quarter—nearly the same as the median S&P 500 stock. And for the first half of the year, EPS rose 13%—the fastest pace in three years. “The common perception that European companies are struggling to grow profits is increasingly at odds with the actual data,” the report states.

Growth across sectors does not appear to be uniform. According to FactSet, the energy sector is currently performing the best: EPS for these companies rose by 116%, while revenue increased by 35%. Basic materials producers nearly doubled their EPS, and their sales rose by 6%. In the technology sector, EPS rose by 19%, and sales by 15%. Meanwhile, in the consumer discretionary sector, earnings fell by 13% amid stagnant demand.

51% of companies beat expectations for EPS, with the technology sector surprising the most (71%), followed by the financial sector (69%) and healthcare (67%). The sectors with the lowest rates were discretionary consumer goods (25%) and telecommunications (10%). FactSet considers these two segments to be the main reasons for caution through the rest of earnings season.

Sector-specific divergence is even more pronounced in the performance of individual stocks. All five of the top-performing stocks in 2026 are in the semiconductor industry: Soitec shares have gained 371% since January, AT&S—330%, Technoprobe by 123%, Aixtron by 116%, and STMicroelectronics by 101%. However, a correction has already begun within the segment: AT&S and Aixtron have lost more than 20% compared to their mid-June highs, notes CNBC.

The second strong sector is banking: the Euro STOXX Banks index rose 18% thanks to a wave of mergers and acquisitions, particularly in France and Italy. Economic resilience, moderate loan write-offs, and a stable interest margin have created “nearly ideal conditions” for major banks, said Russ Mold, chief investment officer at AJ Bell.

In the energy sector, oil and gas companies are coming out on top: the majors are reaping windfall profits from rising fuel prices due to the war in the Middle East. British oil giant BP reported this week that its quarterly profits had doubled. Its stock has already risen 20% this year.

At the other end of the spectrum are luxury and automotive brands. Since January, LVMH shares have fallen 24%, Hermès shares 26%, and Kering shares 8% amid weak demand in China—which accounts for about one-third of the global luxury market—and in Asia as a whole. The European auto industry is experiencing a long-standing structural crisis: weak interest in electric vehicles, the expansion of Chinese manufacturers, and expensive loans are keeping sales below pre-pandemic levels. CNBC identifies Porsche and Stellantis as among the biggest underperformers in the European auto industry: their stock prices have fallen 28% and 49%, respectively, since the start of the year.

This article was AI-translated and verified by a human editor