2025 is the baseline for what sustained cost volatility could look like, S&P Global expert warns CFOs

As we move into the final quarter of 2025, companies are facing more expenses than many companies budgeted at the beginning of the year.

luckNino PaoliI mentioned on Stunning new research from S&P Global finds that corporate expenses are expected to rise by at least $1.2 trillion in 2025 compared to projections set in January.

How did analysts arrive at this number? Standard & Poor’s Global estimates that global corporate margins shrank by about 64 basis points, representing $907 billion in lost profits among companies covered by sell-side analysts.

According to the report, companies are sacrificing profit margins to absorb rising costs, but they are also shifting part of the burden to customers. Nearly $592 billion of lost profits are passed on to consumers through higher prices, while about $315 billion is absorbed internally as lower profits.

The S&P Global analysis takes into account additional cost pressures: about $155 billion in expected expenses from “undiscovered public companies” and another $123 billion from private equity firms and venture capital-backed companies. Adding these two figures to the initial amount of $907 billion brings the total expected costs for 2025 to approximately $1.2 trillion.

The study is based on the forecasts of more than 15,000 analysts who track 9,000 public companies, representing about $111 trillion of the $130 trillion global stock market, or nearly 85% of its total value.

What it means for financial managers

What does this massive cost increase suggest for finance chiefs as they plan for 2026? To find out, I asked one of the paper’s authors, Daniel Sandberg, global head of research and quantitative solutions at S&P Global Market Intelligence.

He said the $907 billion earnings contraction reflects a broad scope Repricing costs All over the world.

“Tariffs were an obvious surprise that wasn’t factored into forecasts at the beginning of the year, but they’re not the whole story,” Sandberg explained. “Rising wages, logistics bottlenecks, and increased spending on artificial intelligence and automation have all contributed to margin pressure.”

For CFOs, “this underscores the importance of treating 2025 not as an outlier, but as a baseline for what continued cost fluctuations look like,” Sandberg said. “The mix of pressures varies by geography and sector, so the challenge is less about predicting shocks and more about building resilience into budgets and supply chains to absorb them.”

When asked what surprised him most about the research, Sandberg pointed to the scale of the transformation.

“The $900 billion expenditure shock – shown through models created by 15,000 sell-side analysts – shows how dramatically market expectations can change when policy, inflation and investment priorities shift simultaneously.”

“It’s not about one thing; it’s the convergence of tariffs, labor costs, and reinvestment in technology, all happening at the same time,” he added.

Cheryl Estrada
sheryl.estrada@fortune.com

Leaderboards

I’m iclo He was promoted to CFO of The besta division of UnitedHeathcare Group, effective November 1. Eklo replaces Roger Connor, who was named Optum’s CFO in May, Reuters reported. Eklo is a long-time CFO at the company. The Optum unit includes the company’s pharmacy benefits business, along with a suite of home care and medical clinic programs, and a technology and data unit.

Big deal

KPMG Q3 2025, Private Equity Pulse The report provides data, trends and forecasts for private equity dealmaking across key global regions.

In the United States, private equity investment reached a 14-quarter high of $300.1 billion in the third quarter, bringing total investment since the beginning of the year to $827.8 billion and putting 2025 on track to achieve a four-year high in terms of deal value, according to the report.

The rally was dominated by a handful of large-scale transactions, including the $55 billion acquisition of Electronic Arts, led by Silver Lake, Affinity Partners, the Public Investment Fund of Saudi Arabia, and the $28.2 billion acquisition of Air Lease. Investors have largely focused on high-conviction, high-quality assets.

Another key finding is that the exit environment has strengthened significantly, with the value of private equity exits already exceeding annual totals for the past three years – driven largely by the reopening of the IPO market and improving valuations, according to KPMG.

Go deeper

In an episode of the Wharton Show.“This Week in Business” podcast.Gad Allon, professor of operations, information and decisions at Wharton, explores the current state of global supply chains and explains how emerging technologies such as artificial intelligence and digital twins are reshaping the way companies prepare for and manage risk in an increasingly volatile world.

I heard

“Like novice athletes, many business leaders treat AI as a sprint, chasing speed, hype, and short-term victories, while expecting sustainable results over the long term. In both racing and business, success depends on pacing yourself, building endurance, and maintaining focus on the long game.”

– Dennis Woodside, president and CEO of Freshworks and former Google and Dropbox executive, wrote in an article luck Opinion piece It’s titled “I’m a CEO who’s run 18 Ironman races and the AI ​​ROI isn’t much different.”