The Most Important Figures in a Company’s Earnings Release

Microsoft’s stock jumped almost 8% and Meta Platforms closed higher more than 4% after the companies reported their earnings on May 1, 2025. Experienced traders closely watch earnings releases to take advantage of such stock movements. Since all listed companies report their results over the span of about a month, earnings releases have the power to significantly move stock indices. 

While the earnings season is an exciting time for the stock market, beginner traders may feel confused amid all the jargon and plethora of figures accompanying the releases. Here’s how you can cut through the noise and focus on potentially the most market moving announcements.

What is the Earnings Season?

This is when all listed companies release their earnings reports, which gives an insight into their financial health. Public companies publish their financial reports once every quarter. During this time, they tend to release projections for the ongoing quarter and the year. Sometimes, they make announcements about their near- and long-term plans. So, if you’re trading stocks, it’s important to know what to watch. 

What Impacts Market Sentiment During an Earnings Release?

Strong quarterly reports should send a stock higher and weak results should exert pressure on share prices, right? This is not the case. A company reporting billions of dollars in profits and sales is not enough to drive bullish sentiment. 

There are two parameters that impact market sentiment around a company’s earnings release:

The company’s performance versus expectations: Nvidia reported a profit of $72.9 billion for its fiscal year ending January 2025. This was more than the profits of the previous 10 years combined. Yet, the stock fell.

The market reacts to how the actual numbers compare to expectations. If a company outperforms estimates, even if these were very low, its stock tends to rise. If a company’s results are below estimates, even if they are very high, its stock tends to move lower. This is what happened to Nvidia. Even after reporting excellent growth, the stock declined because the market’s high expectations were not met. 

This is why it’s important to be aware of the consensus estimates (the average of estimates provided by different analysts) going into the earnings season.

The company’s performance versus a prior period: Amazon reported its revenues for the first quarter of 2025 much higher than expectations. Yet its stock declined.

A company’s results are viewed through the lens of “quarter-on-quarter” (compared to the previous quarter) and “year-on-year” (compared to the same quarter in the previous year) performance. Accelerating growth supports market sentiment, while investors tend to abandon companies that report decelerating growth or declines.

The 4 Most Important Figures in an Earnings Release

Here are four figures that seasoned investors and traders watch closely.

Revenue: This is the total amount of money generated by a company from the sale of goods or services before deducting any expenses. This highlights the total demand for the company’s products or services.

Also called – Total sales and top-line figure

Earnings: The total amount remaining after deducting all expenses from revenue. The figure that is commonly reported is net profits, which is the amount after deducting interest and taxes. This figure is so important that the entire financial report is known as an earnings release, although there are different figures announced. 

Also called – Net income, profits or bottom-line figure

Margin: This is the ultimate measure of a company’s profitability. This is the total profits of a company as a percentage of its revenue. They reflect a company’s profitability, efficiency in managing operations, sustainability of its growth as well as ability to pay dividends to shareholders, weather economic downturns and withstand competition. 

High margins indicate a strong and well-managed business that has the potential for future growth and shareholder returns. While there are gross and net margins, investors typically focus on the operating margin, whichshows the profitability of a company’s core operations.

EPS: Earnings per share is the amount of net profits attributable to each share of a company’s stock. This is by far the most watched figure by traders and investors, as it is a key metric for comparing a company’s profitability over time, between peers and against analyst expectations.

Company Outlook

While reporting results, a company provides what is known as “guidance.” This refers to projections for the ongoing quarter and full year. A company typically issues projections for only revenues and earnings, although it may include capital spending plans.

Upbeat guidance supports bullish sentiment, while a cautious outlook exerts pressure on the stock. Guidance is also contrasted with market estimates. Higher-than-expected guidance tends to support the stock, while softer-than-anticipated management projections trigger bearish sentiment.

What else to watch?At times, companies make other important announcements during their earnings call. This could be around mergers and acquisitions, divestitures, new product launches, management changes, or stock buybacks. It’s equally important to monitor the earnings releases of competitors and their management’s projections. Whether you’re trading CFDs of stock or indices, the earnings season can offer attractive opportunities.

To Sum Up 

• The earnings season is when all listed companies report their financial results. 
• Markets do not move based on strong or weak results. Stocks are sent higher or lower by the performance of companies versus expectations as well as versus their previous performance.
• The 4 most important figures in an earnings release are revenues, earnings, margin and EPS. 
• A company’s projections for the ongoing quarter and full year are also important to watch.
• Monitor other announcements made by the company and the financial reports of competitors. 

Disclaimer:  

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