GLOSSARY // Fundamentals
Guidance
Guidance is management's own forecast for upcoming revenue, earnings, or margins, usually issued with quarterly results. The reported quarter is history; guidance is the number the stock actually trades on.
Companies guide to manage expectations, and the game has known moves. Guiding conservatively sets up a beat next quarter. Cutting full-year guidance is the strongest bearish signal a company can send about its own business. Withdrawing guidance entirely, as hundreds of companies did in early 2020, signals management cannot see its own next quarter.
A company reports Q2 EPS of $1.12 against a $1.05 consensus, a 7% beat. On the same release it guides Q3 revenue to $2.0-2.1B versus the $2.3B analysts expected. The stock drops 12% at the open. The beat was priced in; the guide was new information.
Related terms
Educational only — not financial advice. Definitions simplified for clarity; markets are messier than definitions.