Guidance is what management expects for the periods ahead. The quarter just reported is history and largely anticipated; guidance changes every estimate for the future at once, which is why it often has the larger effect.
Alongside results, most companies publish their own expectations for revenue, profit or other measures over the coming quarter or year — usually a range rather than a single figure.
It is a forecast made by the people with the most information about the business, which is what gives it weight.
Analyst models are built on assumptions about the future. When guidance changes, those assumptions are revised together, and every future period in the model moves at once.
A single quarter's result affects one line. A change in guidance affects all of them, which is why the reaction is often larger.
A widened range usually signals less certainty. A narrowed one, later in a year, usually signals more.
Where a company lands within its own previous range is informative too — arriving at the bottom of guidance is a different message from arriving at the top, even though both are technically in line.
It is management's estimate, made under assumptions about demand, costs and conditions that may not hold. Companies revise guidance during a year, in both directions.
Treating it as a commitment rather than an expectation is a common way to be surprised by a revision that was always possible.
One question, no account: what did you come here for, and did you find it? A person reads these, and they shape what gets written next.
From StockMotive — the honest why behind every market move. Educational information only, not investment advice.