Earnings Report

Companies whose shares are traded on the stock market must disclose their figures on a regular basis. That is exactly what an earnings report is: a kind of report card covering the last three or twelve months. It states how much money came in, how much of it remained after all costs were deducted, and how individual business segments have developed. Such a report usually appears four times a year, which is why people also speak of quarterly results. Almost always, a conference call follows, in which company leadership answers questions from analysts. These professionals make it their job to examine how companies are doing economically.

The date when stock prices jump

The price of a stock depends less on the past than on expectations for the future. Before every report, analysts have estimated which figures they consider likely. These estimates are already priced into the stock. What becomes interesting, therefore, is only the deviation: does the result come in above or below expectations?

This leads to an effect that regularly confuses beginners. A company can report a record profit and the stock still falls by ten percent. The reason is usually that an even higher profit was expected. Conversely, a loss can push the price up if it turns out smaller than feared.

For technology and AI companies, these dates are especially charged. Nvidia, for instance, supplies the specialized chips used to train AI models. When Nvidia reports, many read from it whether the entire AI boom is continuing. A single report can thus move the stock prices of an entire industry.

Revenue, profit, and the outlook

Two figures are always at the center of attention. Revenue is everything that comes in through sales. Profit is what remains after salaries, materials, rent, and taxes. Profit is often also given per share, so that companies of different sizes can be compared.

The third figure is often the most important one, and it is not stated in the past tense. The outlook, or guidance, is the company’s own forecast for the coming months. If a company lowers its outlook, the stock market often reacts more strongly than it does to weak past figures. Past results are already known; the future is not.

A recurring point of contention is adjusted figures. Companies exclude individual items from the calculation, for example costs from a company acquisition, because they consider them one-off. This can be factually justified, but it almost always makes the result look better. Anyone reading reports should therefore check which version is currently being shown.

Earnings season in the news

Four times a year, the major corporations report within just a few weeks. This phase is called earnings season and usually begins a few weeks after the end of the quarter. During this time, business news fills up with headlines such as “Apple beats expectations” or “Revenue disappoints”.

The reports themselves are publicly accessible and available free of charge on the companies' websites. Anyone can also listen in on the conference calls. You don’t need a brokerage account for that, just a bit of patience for reading.

For the topic of AI, these dates have become a kind of fever thermometer. Microsoft, Alphabet, Amazon, and Meta state in them how many billions they are investing in data centers. From these figures, observers gauge whether the industry continues to believe in AI or is becoming more cautious. A single sentence in such a call can therefore dominate coverage for days.