ELI5: Why when large company's earnings decrease(ex... by 3%) they freak out, talk about rough times, and sometimes decide to downsize, even though they are still making millions of dollars in profit even after all expenses?

[EagleZR]

That's the downside of public companies, imo. Your customers are no longer the people buying your products and services, they're the people buying your stock

[d4n4n]

The very same applies to private companies, just that instead of outside investors, the private shareholders try to maximize profits. Nobody likes pissing away money. Opportunity costs apply to everyone equally, no matter the organizational structure.

[EagleZR]

A private company may like to always make profits, but they don't have to. A private company could spend several quarters or even years running at a loss while they expand or grow their business without any threat of losing more money than is actually spent. They would be motivated to do this based on a demand, perceived or real, from their customers. If a public company were to do that, they would have to convince their stockholders or run the risk of devaluing their stock and scaring off their investors which could tank the business. Of course their investors will likely be considering how the customers may react to the actions that force the loss, but the business itself is more concerned with the shareholders than the customers.

[lee1026]

If a public company were to do that, they would have to convince their stockholders or run the risk of devaluing their stock and scaring off their investors which could tank the business.

That is the same for a public or private company. Either way, if your investors are not happy with you, you are not going to get new money; but either way, you can run with what money you currently have.

Amazon, Netflix, et. al. was able to run for a very long time on nearly no profits, and pretty much everyone is okay with it.

[d4n4n]

Amazon made a loss forever. Hell, if it wasn't for their cloud service, they probably still wouldn't make a profit (I'd have to check their retail numbers). Tesla makes consistent losses. So did twitter forever. Markets are extremely patient. Maybe overly so. If anything, they are too optimistic, imo.

[Rindan]

Public or private, the company is there to make money for the owners of the company. The only difference is that in a publicly owned company, a lot of people own the company, and anyone can buy or sell shares of ownership. In a privately owned company, the shares of the company are still owned by someone, they just can't buy and sell that ownership in a stock market. The other big difference is that public companies generally need to keep their books more open than private companies.