Corporate profit

Corporate profits in Canada are projected to reach $326.9 billion in 2025, representing growth of 3.1% over the previous year. This modest increase reflects a stabilization of earnings following the sharp contraction experienced in 2024, when profits fell 6.1% to $317.0 billion as elevated interest rates, slowing consumer demand, and weakened business investment compressed margins across most sectors. The recovery in 2025 is being supported by Bank of Canada rate cuts that have reduced borrowing costs, improving financial performance for highly leveraged companies, though persistent trade uncertainty and labor market softness continue to constrain profitability gains.

Quarterly data through mid-2025 reveals ongoing challenges for Canadian businesses. Second quarter results showed operating profits declining as companies faced margin pressures from elevated input costs and subdued pricing power in an increasingly competitive environment. Business investment slumped notably during this period, falling alongside profits as companies adopted cautious capital allocation strategies in response to economic uncertainty. The Bank of Canada's Business Outlook Survey for the third quarter of 2025 confirms that business confidence remains weak, with trade policy volatility from the United States serving as the primary impediment to investment decisions.

The past five years have witnessed extraordinary volatility in corporate profitability, driven by pandemic-related disruptions and subsequent policy responses. Profits held relatively steady at $282.8 billion in 2020 despite widespread business closures, as government support programs including wage subsidies and pandemic relief measures cushioned the impact on corporate earnings. The following year saw an unprecedented surge, with profits exploding 30.0% to reach $367.5 billion as pent-up consumer demand, supply chain constraints that enabled aggressive pricing, and ongoing government supports created exceptionally favorable conditions for corporate margins.

The profit boom continued into 2022, climbing another 9.2% to an all-time peak of $401.4 billion as inflation remained elevated and companies successfully passed rising costs through to consumers while benefiting from robust demand conditions. This exceptional performance proved unsustainable as the Bank of Canada's aggressive monetary tightening campaign began to bite, triggering a sharp reversal in 2023 when profits plunged 15.9% to $337.4 billion—the steepest decline since the 2008-2009 financial crisis. The contraction reflected multiple headwinds including deteriorating consumer purchasing power, cooling housing markets that impacted construction-related sectors, and margin compression as input costs remained elevated while pricing power eroded.

Profitability declined further in 2024, falling another 6.1% to $317.0 billion, leaving corporate earnings 18.6% below the 2022 peak and only modestly above pre-pandemic levels. Financial sector profits faced particular pressure from higher provisions for credit losses as loan delinquencies rose, while goods-producing sectors struggled with weak export demand and non-financial service industries contended with elevated wage costs and softening consumer spending. Despite these challenges, Canada's largest publicly traded companies demonstrated relative resilience, with Scotiabank projecting that third quarter 2025 earnings for major firms may reach another record, driven primarily by strong performance in the financial and resource sectors.