Investing.com -- Barclays sees further downside risks to U.S. earnings estimates, warning that the recent wave of revisions is likely just the beginning.

Despite already sharp cuts into the first-quarter reporting season, the bank argues that current forecasts still fall short of reflecting the potential negative impact of macroeconomic uncertainty and trade-related disruptions.

Strategists led by Venu Krishna note that Q1 2025 and full–year earnings per share (EPS) revisions for S&P 500 excluding Big Tech “are trending more negative than what you would see at this point in a typical year.”

They point out that the most pronounced cuts have come from cyclical sectors like Industrials, Tech, Consumer Discretionary (excluding Amazon (NASDAQ: AMZN )), and Energy. Estimates for Financials and Utilities, by contrast, have remained more resilient.

Revisions so far show a 2.5% decline in 2025 (FY25) consensus earnings, which Barclays notes is worse than a typical year but not yet as severe as periods marked by negative GDP.

“Current revisions to FY25 (-2.5% YTD) do not seem to be pricing in such an outcome yet,” the strategists said, adding that Barclays economists expect a negative GDP print in the second half of the year. If that view proves correct, the firm believes "consensus has room to reset further."

The strategists also see little scope for a strong market rebound during the earnings season, even if valuations have come down. "Multiples may have come down but uncertainty is even higher, making it unlikely that 1Q25 earnings can support a sustainable rebound," they wrote.

Big Tech remains a relative bright spot, with FY25 revisions holding up better than the broader index. But even here, some pressure is evident due to capital expenditure (capex) guidance and changing investor sentiment.

Barclays maintains its FY25 EPS forecast for the S&P 500 at $262, still below the Street’s $266.

Based on its base-case valuation of 22.5 times earnings, this implies a year-end index target of 5,900—modest upside from current levels, but dependent on earnings risks not materializing further.