What is "guidance" in an earnings report?

Guidance is the part of an earnings report where the company tells you what it expects next. Alongside the numbers for the quarter just finished, management gives a forecast, typically a range, for the coming quarter or the full year: revenue of $4.1 to $4.3 billion, earnings per share of $1.20 to $1.30, that kind of thing.

It matters because the stock price is a bet on the future, and guidance is the best available information about that future from the people who run the business. A company can report a strong quarter and "guide down," lowering its forecast, and the stock will fall. It can report a weak quarter and "raise guidance," and the stock will rise. The forecast frequently outweighs the result.

Companies manage guidance carefully. Most set it a little conservative so they can beat it later, which is why a "beat" is routine and a "miss" is news. When a company that usually guides cautiously suddenly guides high, that is a signal.

Not every company gives guidance; some, including Berkshire Hathaway and a number of big tech firms, refuse on principle. For those, analysts’ estimates fill the gap. You will find the guidance in the press release and discussed at length on the earnings call.