Reporting Season 2026: Key Themes, Learnings, and Market Insights

What is the latest reporting season telling investors about the direction of markets?

Corporate earnings updates often provide the clearest signals about how businesses are performing and how investors are interpreting those results. In a period shaped by shifting sentiment, global uncertainty, and changing market leadership, those signals are particularly important.

In the following interview, Emanuel Datt, Chief Investment Officer at Datt Capital, shares his perspective on the recent reporting season and the key developments long-term investors should be paying attention to. 

Question 1: What surprised you most this reporting season, and where did you see the clearest separation between structurally strong businesses and those facing deeper challenges?

What surprised us most this reporting season was the clear divergence between the underlying earnings delivered by companies and the way markets reacted to those results.

Across a large portion of the market, the fundamental earnings outcomes were generally quite solid. Many companies reported results that were either in line with or slightly ahead of expectations. However, equities that merely met consensus forecasts were frequently sold down.

This suggests that markets are currently operating with a more defensive posture. Investors appear to be prioritising liquidity and capital preservation rather than rewarding companies for delivering acceptable results. In that environment, the hurdle for a positive market reaction becomes significantly higher.

Another important observation was that the number of companies exceeding market expectations was lower compared with the previous reporting period. In earlier cycles, companies that delivered strong operational performance were more consistently rewarded by the market. In contrast, this reporting season felt more like a broad reassessment of risk.

What this ultimately created was a temporary compression in valuation multiples across a wide range of sectors. Businesses with structurally strong earnings drivers were not necessarily rewarded in the short term, which in our view has opened a broader opportunity set for disciplined investors.

Over time, markets tend to differentiate more clearly between businesses with durable structural advantages and those facing more fundamental challenges. The current environment may simply reflect a period where macro uncertainty is temporarily overshadowing company fundamentals.

Question 2: Based on what you observed this reporting season and the recent volatility, what structural characteristics are likely to define the next phase of market leadership, and where are you seeing emerging value?

One of the most significant structural themes shaping markets today is the rapid development and adoption of Artificial Intelligence (AI). The speed at which AI capabilities are advancing has prompted investors to reassess the competitive landscape across many industries, particularly within the technology sector.

In the short term, this has created a degree of uncertainty. Some investors have interpreted AI as a force that could dramatically reduce the barriers to software development. If software becomes easier to build, the argument follows that existing technology companies may lose some of their competitive advantage.

That perception has contributed to a broad sell-off across parts of the technology sector. However, when examining the underlying economics of many of these businesses, the situation appears somewhat different.

A number of technology companies possess access to proprietary or regulated data sets that cannot easily be replicated. These data sets effectively form a structural moat. Even if software development becomes more efficient through AI tools, access to these data assets remains scarce.

In many cases, these companies also operate under multi-year contractual arrangements with their customers. As a result, their revenue base is relatively stable, while the productivity of their workforce improves through the adoption of AI tools.

This creates a powerful dynamic. If productivity increases while revenue continues to grow, operating margins can expand significantly over time.

What makes the current environment particularly interesting is that many of these businesses are now trading at valuation multiples that are considerably lower than they were several years ago. In some cases, technology companies are trading at the lowest multiples seen in five years despite the potential for improved profitability driven by AI adoption.

From our perspective, the combination of improving structural economics and compressed valuations presents a compelling opportunity within parts of the technology sector.

Question 3: You mentioned strong M&A activity in the small-cap space. What does this signal about valuations in public markets today?

One of the more encouraging signals we are observing in the current market environment is the increase in merger and acquisition activity, particularly within the small-cap universe.

When strategic buyers and private market participants begin acquiring listed businesses, it often indicates that the public market valuation of those companies is lower than what private investors are prepared to pay.

Private buyers typically focus on long-term earnings potential rather than short-term market sentiment. As a result, they are often willing to pay a premium for businesses that possess strong fundamentals or strategic value.

In the current environment, we are seeing a number of listed small-cap companies become acquisition targets. In several cases, those acquisitions have occurred at prices that represent a meaningful premium to the prevailing market price.

This dynamic suggests that there is currently a valuation gap between public markets and private markets. Public market investors may be adopting a cautious stance due to macroeconomic uncertainty, which can result in valuation compression even for fundamentally strong businesses.

From a structural perspective, increased acquisition activity often acts as a signal that parts of the market are undervalued. It also provides a form of price discovery that highlights the intrinsic value of certain businesses.

For long-term investors, this can be an important indicator. If private capital is consistently acquiring listed businesses at premiums, it suggests that the public market may be undervaluing segments of the small-cap universe.

Question 4: Given the current instability in the Middle East, what should long-term investors be paying close attention to?

Geopolitical events inevitably generate uncertainty in financial markets. However, investors should focus on the underlying economic facts rather than reacting purely to headlines.

In the case of the current situation in the Middle East, one of the key concerns relates to Iran and its position within global oil supply chains. Iran is an important oil producer, and the Strait of Hormuz is one of the world’s most critical shipping routes for energy exports.

However, it is also important to recognise that Iran has been subject to extensive economic sanctions for decades. As a result, its integration into the global economy is relatively limited compared with larger economies.

Another important aspect relates to the current disruption in shipping activity. At present, the disruption appears to be driven more by insurance considerations than by physical blockages of the shipping channel. Insurers have restricted coverage because the region is classified as a conflict zone, which has slowed vessel movement through the area.

However, developments such as the United States offering insurance coverage for vessels may allow shipping flows to resume more quickly.

From a market perspective, it is also useful to examine how key asset classes are responding. In periods of severe geopolitical stress, investors typically move towards safe haven assets such as gold, while oil prices often rise sharply due to supply concerns.

Interestingly, that has not been the case to the extent one might expect. Gold prices have softened and oil prices have remained relatively stable despite the circumstances.

This suggests that markets are not currently anticipating a prolonged disruption. Instead, the market appears to be pricing in the possibility that the situation may stabilise in the relatively near term.

Question 5: In another interview, you highlighted WiseTech Global as a stock with strong structural tailwinds. Given the recent disruption in global trade routes, does this change your outlook for the company?

Our outlook for WiseTech Global remains constructive despite the current geopolitical developments.

WiseTech operates mission-critical software for the global logistics industry. Its platform supports freight forwarders and logistics operators across a vast global network, providing strong visibility over long-term demand.

While the current conflict has created temporary disruption within certain shipping routes, particularly around the Strait of Hormuz, we view these disruptions as temporal rather than structural.

It is also important to consider the broader dynamics of global trade. Iran is not one of the world’s major trading economies due to the sanctions that have been in place for many years. As a result, the overall impact on global trade flows may be more limited than initial headlines might suggest.

In some cases, geopolitical disruptions can actually increase logistical complexity. When supply chains shift or shipping routes change, businesses often rely more heavily on logistics software to manage freight movements efficiently.

Historically, periods of geopolitical tension have also coincided with increased shipping activity as countries and companies build inventory buffers and secure supply chains.

For these reasons, while the current environment introduces short-term uncertainty, it may ultimately reinforce the importance of logistics infrastructure platforms such as WiseTech within global trade networks.

From a long-term perspective, we continue to view the company as structurally well positioned within the global logistics ecosystem.

About Datt Capital

Datt Capital is an independent investment fund manager based in Australia, focused on delivering consistent, risk adjusted returns through disciplined research and independent thinking.

The firm manages the Datt Absolute Return Fund and the Datt Small Companies Fund, investing in a concentrated portfolio of carefully researched opportunities across Australian equities. Its investment process is built on rigorous primary research, long term conviction, and strong alignment with investors.

Datt Capital’s principals are among the largest investors in the firm’s funds, ensuring that investment decisions are made with a shared commitment to protecting and growing client capital over time.