What is earnings season in the stock market?

What is earnings season, and why should you care?

Ever heard the saying “I’m yearning for earnings season”? No? Well, that’s probably because I just made it up. But earnings season is definitely one of those periods that savvy traders and investors will look forward to with giddy pleasure. Here we’ll take a look at what it is, and why you should mark it up on your calendar.

What is earnings season? 🤔

An earnings season is a period when most public companies (i.e those listed on a stock exchange) release their earnings reports. These reports detail some key figures that give an idea of how a company’s performing, such as revenue, earnings per share (EPS) and net sales.

🤓 Nerd moment - earnings per share is calculated by dividing the total amount of profit generated in a period, by the number of shares that the company has listed on the stock market. It indicates how much money a company makes for each of its shares, and is widely used as a measure of a company’s profitability. The higher a company's EPS, the more profitable it’s considered to be.
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Example: let’s say you want to buy shares of XYZ Corp, which currently has a total net income of £1,000,000. If the company has 50,000 shares in circulation, this would give XYZ Corp an EPS of £20 (£1,000,000/50,000).

For more on earnings-per-share, visit our article on 3 ratios that help you buy and sell shares.

US companies are required to produce earnings reports every quarter, but UK companies have no such obligation. However, many UK companies choose to take part in earnings seasons due to the increasingly global nature of many sectors.

When is earnings season? 🤷

Stock market earning season dates - January, April, July, October

There are four earnings seasons each year, and these typically fall in January, April, July and October. This is because they’re just a few weeks after the final month of each financial quarter – Q4 ends in December, Q1 in March, Q2 in June and Q3 in September. So this just gives companies a bit of time after each quarter ends to pull together their earnings reports.

Not all public companies release their reports during these periods, as not all companies stick to the same financial quarters. However, most big companies tend to keep pretty close to that schedule.

How long does earnings season last?

Earnings season usually lasts for a period of six weeks. So, for example, Q1 earnings season kicks off in early January and ends around the middle of February. Companies intentionally try to space out the release of their reports, so investors and analysts can handle the volume of news. 

Investors navigating earning season

Here’s when some popular stocks are expected to release their Q1 earnings reports*:

19th Jan: NFLX
24th Jan: MSFT
25th Jan: TSLA
26th Jan: AAPL
1st Feb: META
2nd Feb: AMZN
8th Feb: UBER

*No dates formally announced

Earnings announcements are usually made outside of market hours so the reports reach as many people as possible and don’t interrupt the trading day. This means they’re either released early in the morning before the market opens, or in the afternoon after the market closes. This gives investors plenty of time to sift through the news and choose how to respond.

Why should you care about it? 📈📉

Simply put, the financial results included in an earnings report can make a huge difference to a stock’s price, as they can significantly influence how people feel about a company’s prospects. The figures will inform analyst recommendations, which often play a big role in whether people decide to buy or sell the stock. This means that quarterly earnings reports can actively change the direction of a stock’s price.

The figures themselves aren’t always that important. What investors are looking for is how close the figures are to analysts’ expectations. The simple logic being that if the numbers are above expectations, the stock could rise, but if the figures are below expectations, the stock could fall.

Example of earnings affecting a stock’s price

Apple is one stock that regularly responds to earnings announcements. If we look at its earnings report from January 2022, the company largely exceeded analyst expectations:

  • Revenue: $123.95 billion vs $119.05 billion expected

  • EPS: $2.10 vs $1.90 per share expected

  • iPhone: $71.6 billion vs $67.7 billion expected

  • iPad: $7.2 billion vs $8.1 billion expected

  • Mac: $10.8 billion vs $9.5 billion expected

Apple's stock jumped more than 1% immediately after the announcement. However, when the company fell below expectations on several key categories in October 2022’s earnings report, the stock dropped by highs of 3%.

  • Revenue: $90.15 billion actual vs $88.64 billion expected

  • EPS: $1.29 actual vs $1.26 expected

  • iPhone: $42.63 billion actual vs $42.67 billion expected

  • iPad: $7.17 billion actual vs $7.81 billion expected

  • Services: $19.19 billion actual vs $19.97 billion expected

While the beats on revenue and EPS were encouraging, the miss on Apple’s big-ticket products and services was clearly a concern for investors.

We should note that earnings reports are just one piece of the complex machinery that makes stock prices move. And just because a stock’s behaved one way after past earnings announcements doesn’t guarantee it’ll do the same thing in future. For instance, Apple stock has also fallen after positive earnings reports, and vice versa. 

But by understanding what earnings reports are – and how they can influence prices – will only help you become a more informed investor.

For more on stocks and shares, visit our articles on when is the best time to buy and sell stocks?

So, are you now yearning for earnings season? Or are you just happy to be learning about earnings season? Download the Shares app to let us know and make sure to follow us on our socials 👇

As with all investing, your capital is at risk. Past performance does not guarantee future results.

Meet the authors

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James Ashoo

Senior Content Writer

James has been investing for over five years. His aim is to explain the hard stuff, easily! When he's not chewing your ear off about stocks and crypto, he'll most likely be telling bad jokes.

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Harjas Singh

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Harry Harrison

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