Earnings season: What to look for

Numbers that move markets for investors

Not every line in an earnings report is equally important. Some metrics matter far more for stock prices. Investors who focus only on headline revenue risk missing the drivers of reaction.

Revenue and EPS

Start here. Revenue shows growth, but context matters. Was it organic or acquisition-driven? Constant currency or boosted by FX? Did it beat consensus? Earnings per share (EPS) compares profit against expectations. A headline beat can still sell off if quality is weak or the outlook soft.

Margins and costs

Profit margins reveal pricing power and cost discipline. Rising costs can eat into profits even if sales climb. Investors watch gross margin (sales minus direct costs) and operating margin. Operating margin adds overheads. Watch the trend, not a single quarter. Rising input costs, mix shifts, and promotions can erode margins even when sales rise.

Guidance and tone

The future drives price. Forward guidance is often more important than reported results. Guidance on revenue, margins, capex, and free cash flow sets expectations. Earnings calls, where executives answer questions, give clues through both numbers and tone. Changes to outlook often move the stock more than the reported quarter.

Extras that matter

• Free cash flow. Signals ability to reinvest or return cash.
• Shareholder returns. Dividends and buybacks support valuation.
• One-offs. Write-downs, restructuring, or stock-based compensation can distort results.

Investor playbook

• Check surprise vs consensus. Compare revenue and EPS to forecasts. Size of surprise drives reaction.
• Read guidance changes. Note upgrades, downgrades, and ranges for revenue, margins, and FCF.
• Follow margin direction. Gross and operating margins show pricing power and cost pressure.
• Separate one-offs from run-rate. Strip out restructuring, SBC, FX, and inventory effects.
• Track cash quality. Free cash flow, dividends, and buybacks validate the story.
• Listen to the call. Q&A tone and details often explain the move.
• Watch post-print behaviour. Day-two drift and estimate revisions confirm the new narrative.
• Use read-throughs. Apply leader results to suppliers, customers, and sector ETFs.

A story by numbers

The headlines rarely tell the full story. Earnings move markets when they reset expectations. Three signals matter most: revenue versus consensus, margin direction, and forward guidance. Cash generation and clean accounting separate durable progress from one-off beats. The main risk is misreading the setup—expectations, one-time items, and tone can distort the picture. Use transcripts, guidance changes, and post-print estimate revisions to confirm what the market just learned. In earnings season, clarity beats speed—let the numbers tell the story.