10 lessons from the FY26 reporting season
The Financial Year 2026 (FY26) reporting season has concluded with corporate Australia in considerably better shape than many had feared.
Before getting too excited, however, it’s worth noting corporate Australia may not be in as good shape as the headline numbers suggest.
Aggregate profits rose by around 11.6 per cent. Excluding mining and energy, however, the increase was just 5.3 per cent. Only 36 per cent of companies beat earnings expectations, below the historical average of about 40 per cent. Meanwhile, analysts have been cutting FY27 forecasts.
As always, the most useful conclusions from August reporting season are less about what companies earned last year and more about what those results reveal about the year ahead.
- FY26 was better than feared. FY27 is the real question.
Companies generally survived FY26 in reasonable shape. Balance sheets remain sound, dividends have held up, and there has been no broad-based earnings collapse.
But investors buy future earnings, not last year’s profits.
Consensus FY27 forecasts were cut by about two per cent during August, even as companies reported their FY26 numbers.
That divergence matters. A satisfactory FY26 result accompanied by deteriorating FY27 expectations isn’t necessarily good news.
- The headline earnings recovery is narrower than it looks.
Resources contributed disproportionately to market profit growth.
Miner BHP (ASX: BHP) demonstrated why. Underlying attributable profit jumped 30 per cent to US$13.2 billion, with copper becoming its most important earnings engine – ahead of iron ore.
Strip out mining and energy, however, and corporate profit growth fell to just 5.3 per cent. That means an apparently strong market-level earnings recovery shouldn’t be confused with widespread economic strength.
- Guidance matters more than the result
Perhaps the defining feature of this season was how often a respectable FY26 result was followed by a decline in the share price.
Electronics retailer, JB Hi-Fi (ASX: JBH) reported record sales of $11.06 billion and lifted its ordinary dividend by 22.5 per cent. Yet comparable Australian sales deteriorated sharply in the fourth quarter and July 26 trading started negatively. Consequently, the shares were punished, falling17.5 per cent from the day before the results were released.
- Valuation determines whether “good” is good enough.
When a stock is priced for perfection, meeting expectations can be disappointing.
Conversely, deeply depressed expectations can create extraordinary upside from an apparently mediocre result.
Global biotechnology company CSL (ASX: CSL)is a case in point. FY26 underlying net profit after tax and amortisation (NPATA) fell two per cent at constant currency to US$3.1 billion, yet the company’s improving outlook prompted investors to reassess what had become deeply pessimistic expectations. The shares surged 27 per cent in the three days following the results.
- The consumer isn’t dead – but value is king.
Wesfarmers-owned Bunnings increased earnings 5.1 per cent and Kmart six per cent, helped by promotions centred on value. Officeworks, by contrast, suffered a substantial earnings decline.
Diversified conglomerate Wesfarmers (ASX: WES) owns Bunnings, Kmart and Officeworks.
JB Hi-Fi’s slowdown and retailer Harvey Norman’s (ASX: HVN) weaker Australian comparable sales tell a similar story.
Consumers are still spending, but they’re becoming much more selective about where they spend.
- Banks are wonderful businesses, but expensive stocks.
CBA (ASX: CBA) produced another record result, with cash profit rising by 7.1 per cent to $10.98 billion and dividends reaching $5.05 per share.
The problem was the future: mortgage applications fell 15 per cent. Across the major banks, home-loan applications have been declining at double-digit rates while competition remains intense.
When valuations are stretched, as they have been for the banks for some time, slowing growth becomes pivotal. Bank investors should distinguish between balance-sheet quality and prospective share market returns, noting CBA’s share price has remained essentially unchanged over the past 18 months.
- Cost cutting supports profits – but it can’t replace revenue growth.
One consistent feature of the season was management teams leaning heavily on productivity, restructuring and efficiency programs.
CBA expects sizeable savings from artificial intelligence (AI), CSL is restructuring, and several companies are simplifying operations and removing costs, such as:
APA Group (ASX: APA), an energy infrastructure company, described FY26 as ongoing business simplification, including divestments, an operating-model restructure, restructuring corporate functions, reducing external expenditure and streamlining IT delivery. APA also said it exceeded its cost-out target.
Perpetual (ASX: PPT), financial services group, said its formal Simplification Program has delivered $72.6 million of annualised savings, already ahead of its FY26 target of $60 million. The broader strategy also includes selling its Wealth Management business and reducing debt.
Southern Cross Media / Seven West Media: (ASX: SXL), leading media group. Following the merger, management has undertaken a substantial cost-reduction program, resulting in 250–300 fewer full-time equivalent employees. Including merger ‘synergies’, it expects $145–150 million of annual run-rate savings.
WiseTech Global (ASX: WTC), a logistics software company, reduced its global workforce by around 1,700 as part of its integration and AI-driven efficiency program. It reported about $34 million in annualised operating cost reductions already achieved and is targeting further savings.
Enero Group (ASX: EGG). The microcap’s revenue fell 7%, but earnings before interest, tax, depreciation and amortisation (EBITDA) rose 9% as the advertising group restructured operations and cut costs, particularly as its Hotwire business confronted weaker technology-sector spending.
AGL Energy (ASX: AGL), is a leading energy company. Its Retail Transformation Program has already produced $25 million of savings, with management ultimately targeting $70–90 million of annual pre-tax cash savings, although implementation is taking longer and costing more than originally planned.
Virgin Australia (ASX: VGN). Perhaps more accurately described as an ongoing transformation rather than FY26 restructuring, Virgin’s post-administration program has delivered around $1.1 billion of cumulative savings, with management continuing to focus heavily on productivity, route economics and AI-assisted efficiency.
Fleetwood (ASX: FWD), a modular building and accommodation solutions company, undertook portfolio simplification and restructuring during FY26, recording $29.6 million of restructuring costs while reshaping the group.
Woodside Energy (ASX: WDS), a global energy company is simplifying strategically rather than merely cutting overheads: it has abandoned several lower-return clean-energy ambitions, refocused capital on core oil and gas and identified around US$350 million of cost reductions from 2028.
These initiatives are sensible. But ultimately, sustainable earnings growth needs revenue growth too. Investors should be wary when the investment thesis increasingly depends on management finding another round of cost savings.
- Balance sheets remain reassuring.
Despite slower economic growth, corporate Australia doesn’t appear financially stressed.
Buy-backs announced during the season reportedly reached a record $4.4 billion, while dividends remained resilient.
That provides companies with an important buffer should economic conditions deteriorate – and differentiates today’s environment from genuine corporate downturns, when debt reduction rapidly replaces distributions as management’s priority.
- Healthcare: hated but deserves attention.
Healthcare stocks rallied around 19 per cent through the season after several difficult years.
CSL, hearing implant company Cochlear (ASX: COH), sleep and respiratory care company ResMed (ASX: RMD) and others entered reporting season carrying varying degrees of investor scepticism. Cochlear’s underlying profit actually fell 22 per cent to $322.4 million, yet management expects profit of $330–350 million in FY27 as conditions gradually improve.
The best opportunities aren’t always found in companies producing the best numbers. Sometimes they’re found where bad news has already been comprehensively priced in and all that’s required is a catalyst.
- Stock selection becoming more important.
Goldman Sachs found 58 per cent of stocks were moving more than five per cent on reporting days – an extraordinary level of dispersion.
That volatility tells us the market is increasingly distinguishing between companies with genuine revenue growth, pricing power and strong balance sheets, and those relying on cost reductions, generous valuations or increasingly optimistic forecasts.
Conclusion
The broad conclusion from the FY26 reporting season, then, is not particularly bearish or bullish.
Corporate Australia came through FY26 in reasonably good shape. But with earnings expectations being revised lower, cost pressures persisting and valuations elevated in parts of the market, FY27 will demand considerably more from companies. And that should favour investors prepared to look beyond the index – and concentrate instead on the gap between price, expectations and underlying business quality.
Disclaimer:
The Montgomery [Private] Fund, The Montgomery Fund and The Australian Eagle Equities Fund owns shares in BHP, CSL, Wesfarmers, Woodside, Cochlear, Resmed. The Montgomery Fund and The Australian Eagle Equities Fund own shares in CBA. This article was prepared 3 September 2026 with the information we have today, and our view may change. It does not constitute formal advice or professional investment advice. If you wish to trade these companies, you should seek financial advice.
Roger Montgomery is the Founder and Chairman of Montgomery Investment Management. Roger has over three decades of experience in funds management and related activities, including equities analysis, equity and derivatives strategy, trading and stockbroking. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.
He is also author of best-selling investment guide-book for the stock market, Value.able – how to value the best stocks and buy them for less than they are worth.
Roger appears regularly on television and radio, and in the press, including ABC radio and TV, The Australian and Ausbiz. View upcoming media appearances.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
