A quarterly financial disclosure in which a publicly listed company reports revenue, profit, and forward guidance - the most market-moving event for individual stocks.
Publicly listed companies in major markets (US, UK, EU, Australia) are required to report financial results quarterly (US) or semi-annually (many non-US markets). The earnings report includes the income statement (revenue, gross profit, operating income, net income, EPS), balance sheet snapshot, cash flow statement, and management's commentary including forward guidance on expected revenues and earnings for the next quarter or full year.
The stock market's reaction to an earnings report is almost entirely a function of the surprise - how results compare to analyst consensus estimates and management's prior guidance. A company can report record profits and see its stock fall 10% if those profits were below expectations; conversely, a loss-making company can rally if its loss was smaller than feared. The 'buy the rumour, sell the news' dynamic often sees stocks drift up into earnings as optimists position, then sell off on the actual print regardless of quality.
Earnings calls - live audio presentations where management discusses results and takes analyst questions - often move stocks as much as the headline numbers, because management guidance tone and specific commentary on key metrics (gross margins, subscriber numbers, same-store sales) provide colour beyond the reported figures. Earnings whisper numbers, implied volatility in options (the straddle price reflects market expectations of the post-earnings move), and analyst pre-earnings revision trends are the primary tools used by earnings traders to assess risk/reward.
Worked Example
Stock closes at USD 100 the day before earnings. The options market implies a ±8% move (the at-the-money straddle costs USD 8). Company reports: EPS USD 1.50 vs USD 1.35 estimate (11% beat). Revenue USD 5.2B vs USD 5.0B estimate (4% beat). Full-year guidance raised 5%. Stock gaps up 12% to USD 112 at the open - above the implied move, making the straddle buyer profitable.