What Is Guidance and How Should Investors React?

During a wintry week in January 2026, Intel (INTC) shareholders received an icy surprise. The company's earnings impressed, easily topping analysts' estimates. But shares cratered by double digits due to disappointing guidance, pushing the good quarterly earnings news to the back pages.

It's a rare investor who hasn't felt the whiplash of poor guidance upending a strong quarterly earnings report. Just days after Intel's snowstorm, Microsoft (MSFT) slid more than 10% despite exceeding consensus estimates. In Microsoft's case, investors were spooked by the company's projected spen/learn/topic/company-earningsding plans, which were revealed as part of the company's guidance for coming quarters.

While investors may not always like the impact of guidance on their portfolios, they often appreciate the long-term insight.

Unlike earnings—which survey the past—guidance looks ahead, providing a roadmap for investors. Since a stock's price is based on expectations of future profit growth, guidance—and the market's reaction to it—can often tell investors if a stock is too highly valued or not valued highly enough.

Still, guidance—like any prediction—isn't perfect, and not all companies provide it. In times of overwhelming uncertainty, like the COVID-19 pandemic, many companies will suspend guidance.

Though formats vary by company, guidance typically consists of target ranges for the coming quarter or sometimes for the full year ahead.

Guidance often includes:

• Specific business targets, such as vehicle deliveries for an automaker, data subscribership for a software firm, or net interest income for a bank.
• Capital expenditure forecasts, which is notably critical for data center "hyperscalers." If spending is judged too high, shares can suffer—a lesson Amazon (AMZN) shareholders recently learned.
• Product sales forecasts, such as specific targets for pharmaceutical sales or international versus domestic sales growth projections for companies with heavy overseas presence.

Though guidance usually appears near the bottom of a company's earnings release, it can often be the top factor in determining near-term share price.

For instance, until Intel's January report, investors may not have completely understood the company's challenges. Executives clarified that soft revenue guidance wasn't due to weak demand, but rather manufacturing constraints that prevented them from filling customer orders. Shares had rallied 54% the month heading into Intel's report, speaking to high expectations that were possibly dashed by this less-than-stellar guidance, leading to a profit-taking sell-off.

"We're working aggressively to grow supply to meet strong customer demand…and fully capitalize on the vast opportunity AI presents across all of our businesses," Intel CEO Lip-Bu Tan said at the time.

Still, some investors and analysts reacted negatively, saying Intel should've been better prepared to meet growing demand before these issues affected its revenue outlook. In other words, the guidance alone may not be all that affects shares. What guidance says about a company's ability to visualize and quickly address potential problem areas can also influence shareholder sentiment.

High-profile growth companies often face unofficial "whisper numbers" from Wall Street that can differ from analyst estimates. Even if a company raises its official guidance, shares may still be punished for missing the "whisper number."

A company may also miss guidance due to unforeseen circumstances, such as natural disasters, sudden troubles like a plant fire, geopolitical shifts, or regulatory issues (like a recall that hits a pharmaceutical or automobile firm). Investors are often more forgiving of these isolated incidents, but the impact of issues like these often surfaces first in a company's guidance.

"When the economy contracts, it can also be a common element in below-consensus guidance," said Nathan Peterson, director of derivatives research and strategy at the Schwab Center for Financial Research (SCFR). "Yes, the analyst community is tapped into the economic indicators and should be modifying their EPS estimates as a result, but often the economy can be weaker, or contract faster, than either the company or analysts anticipated."

That said, any company that regularly retracts guidance or simply can't live up to it waves a red flag that investors shouldn't ignore, because it may indicate poor management performance.

Considering the risk of a stock drop on disappointing guidance, some might wonder why companies bother sharing it. Reasons, according to a recent MIT study, include:

• Satisfying analyst and investor demand for information
• Managing market expectations
• Reducing stock volatility by giving the market a better sense of what to expect
• Reducing the likelihood of shareholder activism
• Lowering borrowing costs by offering transparency

Not every company provides guidance, and it's not legally required. However, there is the 2000 law that does require U.S. companies to provide guidance publicly if they deliver it privately.

"Generally, there tends to be a negative lean on companies that withdraw or refuse to issue guidance. Often, the interpretation from investors is that it could be due to underlying weakness in the company's fundamentals or higher uncertainty about the future," Peterson said.

Some companies have simply opted to reduce what they share with investors. For instance, Netflix (NFLX) used to provide estimates for paid membership numbers but stopped doing that in 2023.

"In our early days, when we had little revenue or profit, membership growth was a strong indicator of our future potential. But now we're generating very substantial profit and free cash flow," Netflix said in its April 2024 earnings release.

Some potentially adverse consequences of giving guidance include:

• Making investors and analysts focus too heavily on short-term results
• Disappointing shareholders and analysts when a company misses guidance
• Becoming vulnerable to shareholder litigation by failing to meet guidance
• Using substantial resources to respond to guidance-related inquiries from the investment community
• Providing proprietary information to competitors
• Influencing management to make decisions that prioritize short-term targets over long-run value
• Forecasting inaccuracies that may arise in periods of economic or geopolitical uncertainty

These concerns, mostly listed in the MIT survey, may have grown substantially over the past 20 years in part due to global turbulence. The number of S&P 500^® Index (SPX) companies providing quarterly earnings guidance reached a high of 50% in 2004 and fell to a low of 19% in 2024, according to the Harvard Law School Forum on Corporate Guidance.

However, Harvard Law School added that 112 S&P 500 companies issued earnings per share (EPS) guidance for the third quarter of 2025, and 264 S&P 500 companies issued EPS guidance for the fiscal year.

One well-known investor who's seen his share of company earnings and guidance over the decades stands firmly against the practice—Warren Buffett.

"I like to get those quarterly reports," Warren Buffett told CNBC in 2018. "I do not like guidance. I think the guidance leads to a lot of bad things, and I've seen it lead to a lot of bad things."

That same year, JPMorgan Chase (JPM) CEO Jamie Dimon told CNBC that providing guidance pressures corporate executives to drive the business toward meeting those public expectations.

"[Issuing a guidance] can often put a company in a position where management from the CEO down feels obligated to deliver earnings and therefore may do things that they wouldn't otherwise have done," Dimon explained.

That said, JPMorgan does share its annual outlook for net interest income, an important metric at banks, in its quarterly earnings materials. It also shares an outlook on annual expenses and expected net charge-off, a figure that estimates card-related debt the company likely can't collect. This guidance is in what JPMorgan calls its "earnings supplement," released along with earnings.

If a company doesn't put the guidance in the release itself, investors might find it in associated materials or might have to wait for the company's earnings call to find out. Usually, the call takes place the same day as earnings or the morning after if earnings come out after the close.

However, in some cases, investors might have to wait longer for an outlook. For instance, in February 2026, Constellation Energy (CEG) reported earnings but held off on issuing guidance until a planned call with investors scheduled at the end of the following month.

Keeping in mind Dimon and Buffett's misgivings, investors can benefit from company guidance in several ways. If a company regularly provides guidance, it can be an important road sign and shouldn't be ignored.

To examine guidance effectively, consider these questions:

• Consistency: How many quarters in a row has a company topped estimates?
• Momentum: Is the margin of the earnings "beat" increasing or decreasing from quarter to quarter?
• Technicals: Does the stock's chart validate the fundamentals?

Investors should remember some caveats when examining guidance, as companies may intentionally undershoot, hoping to see their shares gain when they exceed the numbers. And analysts, often guided by companies' guidance, tend to make conservative EPS and revenue estimates for the stocks they cover. This is among the factors leading to about 75% of companies exceeding analysts' EPS consensus each quarter, according to data from FactSet.

The lesson here is that companies are naturally conservative in their guidance, not wanting to disappoint market participants. That means underlying business trends could be better than the guidance indicates.

"Keeping tabs on a company's guidance, along with analyst estimates and whether they evolve over time, and the market's post-earnings reactions can help investors determine the health of a company's fundamentals," Peterson said. "It's also important for evaluating leadership competence, understanding challenges a business might face, and assessing valuations."