QQQ quarterly outlook report

Performance Takeaways

• Invesco QQQ’ NAV returned 8.94% and outperformed the S&P 500 Index’s total return of 8.12% in Q3 2025.
• QQQ’s overweight exposure to the Technology sector and lack of exposure to the Financials sector (per Industry Classification Benchmark- ICB) were the largest contributors to relative performance against the S&P 500 Index.
• The positive performance from seven of the ten ICB sectors in QQQ helped the ETF’s per share price finish the quarter near all-time highs. 

QQQ Q3 Performance

Invesco QQQ ETF (QQQ) built on the momentum seen in Q2 and rose by 8.94% (on an NAV basis, 06/30/2025 – 9/30/2025). QQQ outperformed the S&P 500’s total return of 8.12% and slightly underperformed the Russell 1000 Growth Index’s 10.51% quarterly return.¹ Year-to-date (through 09/30/2025), QQQ is up by 17.92% and has outperformed the S&P 500 Index (+14.83%) by 3.09% and the Russell 1000 Growth Index (+17.24%) by 0.67%. Seven sectors (per Industry Classification Benchmark- ICB)² out of the ten that QQQ has exposure to finished in positive territory for the quarter and with seven sectors positively contributing to relative performance against the S&P 500 Index.

QQQ’s overweight exposure to the Technology sector and lack of exposure in the Financials sector were the largest contributors to relative performance against the S&P 500 Index. For the quarter, the Technology sector averaged a 62.34% weight in QQQ (vs. a 39.49% weight in the S&P 500) and traded higher by 14.59% (vs. +14.81% in the S&P 500). Technology was the best performing sector in QQQ for Q3, similar to Q2 where it was also the top performing sector. During Q3, the Financials sector had no exposure in QQQ vs.10.72% weight in the S&P 500 Index. The sector underperformed both QQQ and the S&P 500 Index with a return of 0.55%.

The largest single company to QQQ’s outperformance vs. the S&P was AppLovin’ Corp. and had an average weight of 0.78% in QQQ while having only a 0.03% weight in the S&P 500. AppLovin’, a company that develops software to help with advertising and marketing, is a fairly new holding in QQQ. It entered in November of 2024 when it replaced Dollar Tree which was removed when it dropped below a weight of 0.10% for two consecutive months. Since entering QQQ, AppLovin’s stock has returned over 141% (11/18/24 – 9/30/25). During the most recent quarter, the company’s stock returned 105%. One of the factors that helped drive the company’s stock’s performance was favorable earnings announcements. In their most recent earnings announcement, AppLovin’ announced $2.39 adjusted earnings-per-share³ which represented 168% year-over-year growth. Revenue was announced at $1.26 billion, growing 16.5% year-over-year. With operating expenses declining, gross margin has expanded as well.

AppLovin’s stock was also included in the S&P 500 during September, which was another contributor to performance. The announcement of inclusion came on September 5^th, and the company’s stock rose over 46.5% between the 5^th and the end of the month.

Palantir Technologies Inc. continued to be a top contributor to QQQ’s outperformance vs. the S&P 500 due to its overweight position in QQQ. The company’s 33.8% return in Q3 helped its year-to-date return reach 141% at the end of September. Palantir has been one of the primary software developers in the market who has been able to apply artificial intelligence to help companies increase efficiency. The company announced earnings on August 4^th and beat both adjusted earnings per share and revenue expectations. Adjusted earnings per share came in at $0.16 vs. the estimate of $0.14 while revenue was $1.0 billion vs. the estimate of $939.3 million. Palantir also raised full year revenue guidance from $3.9 billion to $4.14 billion. If achieved, it would represent revenue growth of 45% year-over-year.

Outside of strong financial results, Palantir has also secured several large contracts with companies and governments who are implementing their software. The most recent that was announced was a contract with the United Kingdom Ministry of Defense to implement artificial intelligence into military operations. The contract was valued at £750 million. Other major contracts Palantir has are with Boeing, the U.S. Army and the U.S. Space Force.

All companies within QQQ had announced earnings for Q2 2025 by the end of September, with QQQ companies in aggregate reporting very strong results. 93 out of the 100 companies met or exceeded expectations with 57 companies exceeding. We saw analysts’ estimates for QQQ earnings over the next 12 months rise 2.4% over the last three months. This estimate has risen 23.4% since September 2024. Compare this to the estimates of the S&P 500 over the same time periods of 0.09% and 11.19%.

Single Stock Performance

The best-performing stocks in QQQ for Q3 were AppLovin’ Corp. (+105.25%), Warner Bros. Discovery Inc. (+70.42%) and Intel Corp. (+49.78%). The worst performers for the quarter were Charter Communications Inc. (-32.71%), The Trade Desk Inc. (-31.92%) and Lululemon Athletica Inc. (-25.11%). 

Market Drivers During Q3

The macroeconomic environment during the quarter provided a backdrop for equities to continue their move upwards. In July, many investors were focused on tariffs and potential trade deals as the 90-day suspension of the Liberation Day tariffs was coming to an end. During the month, trade deals were announced between the U.S. and Canada, Mexico, Japan, Korea, the European Union and several others. The U.S. collected approximately $92.6 billion in net tariff revenue during Q3 and was a large jump from the same period last year which was around $26.4 billion. As of the end of Q3, the average rate the U.S. was charging on goods coming into the U.S. was a range between 16% to 20%.

Although a tariff agreement with China was announced in June, specifics to the deal still needed to be coordinated. In August, the Trump administration announced that they were going to extend the pause on the higher tariffs on goods from China for an additional 90 days, through November 10^th, to allow for more time for negotiations. Many investors took this as positive news and eased worries of a reescalation.

Many investors continued to pay close attention to the inflation readings released as concerns were raised that tariffs would be passed to consumers. Despite the increase in tariffs, the three Consumer Price Index (CPI)⁴ readings during the quarter did not show a significant increase in year-over-year inflation. The readings released in both June and July showed a year-over-year increase of 2.7% while the reading released in August showed 2.9%. The U.S. Personal Consumption Expenditures Index (PCE)⁵, the Federal Open Market Committee’s (FOMC)⁶ preferred gauge, showed a similar story as CPI. The readings released in June and July were the same at 2.6% with the last reading of the quarter ticking up to 2.7%. With the inflation readings not clearly showing the increase in tariffs, members of the FOMC surmised that the “pass through” of those costs to consumers may show in future readings.

The FOMC had several opportunities throughout the quarter to provide guidance on the path of future rate hikes. The committee held three meetings during the quarter as well as a meeting during the annual Jackson Hole Economic Policy Symposium⁷. As the quarter progressed, the emerging topic that presented itself was that the balance of risk between inflation and U.S. employment had started to tilt more towards the potential of a weakening employment picture.

Weaknesses emerged during the quarter with weekly initial jobless claims moving up through June and July before falling in September. Readings from ADP also showed slowness in U.S. job growth throughout the quarter with the last reading being negative. There was also a large negative revision done by the Bureau of Labor Statistics that removed 911k jobs from the U.S. economy from March 2024 through March 2025.

This weakness that appeared was a primary catalyst for the FOMC cutting the target rate by 0.25% at the September meeting. This cut rate was the only cut to the target rate that occurred during Q3. The FOMC also released a new Summary of Economic Projections⁸ which showed a drop in the median target rate estimate for the end of 2025 from 3.87% to 3.63%. This could imply that there is potential for two more 0.25% cuts to the target rate to occur in the two remaining FOMC meetings.

Outlook

As 2025 wraps up in Q4, there are several areas that investors typically watch to gain insight into the future direction of markets. The U.S. government entered Q4 without resolving the budget and did not pass a continuing resolution which led to “shut down” with around 750k government employees furloughed and not receiving pay. With much politics surrounding the budget, investors will be watching to see how the members of congress arrive at a conclusion to end the shutdown.

As the FOMC indicated, the jobs market has become more volatile with the potential for unemployment to rise increasing over the next quarter. Many investors will be watching the release of initial jobless claims and continuing claims to see if more people are filing for unemployment benefits as well as staying on benefits. Employment reports released by ADP may take a more prominent role, while the government is still shut down and the Bureau of Labor Statistics is not releasing reports.

As always, earnings releases for QQQ companies are scrutinized very closely. Not only are the business results important, but revenue and earnings guidance along with commentary about future outlook can have outsized effects on stock price performance. Many investors will also be paying close attention to future expectations around capital expenditures for artificial intelligence related projects. Amongst the QQQ heavyweights, Netflix and Tesla will announce the week of October 20^th with Alphabet, Meta Platforms, Microsoft, Apple and Amazon announcing the week of October 27th. Palantir will announce on November 7^th with Nvidia announcing on November 19^th. Broadcom is one of last to release the quarterly results, which will occur on December 12^th.