Australian companies recorded higher profits in 2025, although earnings remained well below the exceptional levels reached during the post-pandemic commodity boom.
The study measures company revenues, profits and cash flow since 2015 and compares them to total shareholder distributions over the same period.
Capital Group said profit growth was supported by lower one-off costs, while weaker results from mining, energy and banking weighed on overall performance, highlighting a normalisation following the record earnings of 2021 and 2022.
Annual profits in 2025 were US$67.7 billion for Australian companies, according to Capital Group’s index, up from US$66.3 billion in 2024, with revenues rising 0.4 per cent in US dollar terms.
The firm said growth was boosted by lower one-off costs, reducing earnings quality. Profits in the key mining and energy sectors declined year-on-year, while banking profits were also lower, impacted by restructuring costs, weaker non-interest income and the weak Australian dollar.
The remaining sectors contributed less than one third of Australia’s profits in 2025, though most companies in Capital Group’s index reported higher earnings. Profits have fallen over the past three years from the “exceptional” levels reached in 2021 and 2022, when high metal and energy prices drove record earnings for Australia’s large commodity companies. The inevitable normalisation in those markets has since pulled profits lower.
Globally, profits among the world’s largest listed companies rose 12.2 per cent over the year, comfortably outpacing revenue growth and supporting another record US$3.5 trillion in dividends and share buybacks returned to shareholders.
The study shows margin expansion, rather than revenue growth alone, was the key driver globally, allowing companies to fund record shareholder payouts while maintaining solid balance-sheet cover.
In the wider Asia-Pacific region, chip makers continued to drive profit growth in Taiwan and South Korea. Japan and the UK sat in the middle of the pack, with diverging fortunes across their major companies.
Among major nations, the United States and Canada recorded some of the strongest profit growth in 2025. In the US, growth remained heavily reliant on a handful of large companies, while banks accounted for more than half of the gains in Canada.
Europe lagged amid ongoing weakness in the automotive sector, which masked stronger performance in other industries, while China and Japan showed increasing scope for higher shareholder distributions as balance sheets strengthened.
Andy Budden, equity investment director, said the sustained growth in profits, cash flow and shareholder returns highlighted the importance of earnings quality and capital discipline.
“Profits, cash flow and shareholder distributions have all doubled since 2016, expanding twice as fast as global inflation. This long-term growth has driven up share prices bringing large capital gains, and generated trillions of dollars in cash to return to shareholders,” Budden said.
He noted that corporate balance sheets are stronger than they were pre-pandemic, and the discipline of capital return has spread beyond the US.
“Markets such as Japan and China have significant headroom to increase shareholder distributions, while in those with tighter cover, like the US, earnings growth is key to sustainably higher payouts. For investors, this underscores the importance of focusing on companies with durable profitability and strong fundamentals,” Budden said.
In an environment where growth is uneven, he highlighted the importance of an active manager, as deep company research, careful navigation and selectivity matters more than ever.
Despite the sharp rise in dividends and share buybacks, Capital Group said shareholder returns remained broadly sustainable, with profits covering distributions by 1.39 times in 2025, only slightly better than the 1.31x average of the past decade. Cash flow also exceeded payouts, indicating companies retained sufficient capacity to reinvest or absorb earnings volatility, even as capital returns reached record levels.
Capital Group cautioned that not all of the profit growth reflected underlying strength, with around a third of the increase in 2025 driven by lower one-off costs and supported by favourable currency movements.
While these factors were unlikely to be repeated, the study found that even stripping out these effects, earnings growth still exceeded revenue growth, pointing to ongoing margin expansion across most sectors and regions.
The findings underscore a shift in global equity markets toward fewer but more profitable winners, as margin expansion and capital discipline increasingly determine returns.
With earnings growth uneven across regions and sectors, Capital Group said active stock selection and a focus on companies with durable profitability would be critical for investors navigating the next phase of the cycle.
