Guidance.
In plain English
An earnings report has two parts: what happened last quarter, and what the company expects next. That second part is guidance. It matters more to the stock price than the results do, because the results are already known and estimated, while the guidance is new information. When a company beats its last quarter but guides future expectations lower, the stock often falls, because investors trade on the forecast, not the history. Guidance is a forecast, not a promise, and companies revise it.
01Why it matters
When a stock moves hard on an earnings day, the reason is usually the guidance, not the quarter. A beat that comes with a weak forecast can send a stock down, and a miss with a strong forecast can send it up.
02The math, step by step
A company beats last quarter's earnings but tells investors it expects slower growth next quarter. The stock falls, because the market already expected the good quarter and now has to reprice for the weaker forecast.
03What this is NOT
Guidance is a forecast, not a promise. It reflects what management expects at the time, and companies raise, lower, or withdraw it as conditions change.
04Receipts
Every figure on this page is sourced to a primary document. Tap to open the original.
Plain-English answers from our glossary. Receipts included. Never advice.
Educational tool. Answers come only from ClearMoneySchool's published glossary and are not advice. Why we never give advice