AUG · ISSUE 33 · August 14, 2026
CONCEPTWhat earnings season really is
Four times a year companies report their books, and a stock can rise or fall 10% in a single day.
FREQUENCY
4/yr
one per quarter
EVERY
~90 days
one quarter
REACTION
minutes
the market won't wait
THE IDEA
4
times a year every company reports
Each quarter, thousands of companies report what they earned and what they expect next. In a few weeks, the information that moves the market for the rest of the quarter gets packed in. Understanding the reaction saves you the beginner's mistake.
THE IDEA
SIMPLE RULE4
4
▲ one season every ~90 days
Think of four exams a year. The grade isn't all that matters: what matters is whether it beats expectations and what you say you'll do next quarter.
Four reports a year, one per quarter. Much of the market's year plays out in those four weeks.
- EPS
- — Earnings per share: profit split across each share.
- SURPRISE
- — The gap between the actual result and the expected one.
RULE
TO GET ITBeat earnings and still fall
“The market doesn't buy today's profit: it buys tomorrow's guidance. A company can beat and still slump if its outlook disappoints.”
It sounds absurd, but it happens every season: consensus was already in the price; what still had to be priced was the guidance.
- GUIDANCE
- — The company's own forecast for its future.
- PRICED IN
- — When the price already reflects a known expectation.
EXAMPLE
BY SECTORHow much a stock moves on report day
Tech moves twice as much as utilities: it's valued on its future, and the future is exactly what gets revised at earnings.
Illustrative average move on earnings day, by sector. The more 'growth', the wilder the reaction.
- GROWTH
- — Companies valued on future growth, not the present.
- DEFENSIVE
- — A stable sector (utilities, health) that moves little.
WHAT TO WATCH
3 KEYSThree things the market watches in earnings
PROFIT vs EXPECTED
The absolute number doesn't count, whether it beats consensus does. Beating by a hair may not be enough.
THE FORWARD GUIDANCE
What the company promises for next quarter. It usually weighs more than the result it just posted.
THE SURPRISE, NOT THE FIGURE
The market already had an expectation in the price. What moves the stock is the gap between actual and expected.
It isn't a single number. The market reads three layers before deciding to buy or sell.
- BEAT
- — To top the figure analysts expected.
- EXPECTATION
- — What the market already assumed before the number.
COMPOSITION
WHAT MOVES THE STOCKWhat really drives the reaction
What it promises for next quarter
How much it beats or misses consensus
How the leadership team sounds
Whether the day helps or not
Guidance weighs more than the profit already posted, which is why a company can beat and still fall.
An illustrative split of what determines a stock's move after reporting. Indicative.
- MANAGEMENT
- — The executive team running the company.
- TONE
- — How optimistic or cautious the company's message sounds.
TO SEE IT
5 EXAMPLE ETFsFive ETFs to follow the season
| XLK | ~255 | ▲ +0.5% | Technology. The sector that moves the most at earnings. |
| SMH | ~300 | ▲ +0.8% | Chips. Often set the tone for the rest of tech. |
| XLY | ~215 | → +0.2% | Consumer discretionary. Very sensitive to spending guidance. |
| XLV | ~150 | → +0.1% | Health. More defensive: softer reactions. |
| SPY | ~776 | ▲ +0.3% | The whole index. Sums up the season's net result. |
Not recommendations: baskets that help you see how each block of the market reacts at earnings. Approximate prices.
- ETF
- — A listed basket grouping many companies in a sector.
- DISCRETIONARY
- — Non-essential spending: leisure, fashion, consumer tech.
WRAP-UP
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- EARNINGS
- — A company's quarterly report of its books.
- GUIDANCE
- — The company's forecast for its future.