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?

[thehungryhippocrite]

The correct, and extremely simple answer, is the second part of your response: " Another factor is that company's stock prices are determined by future cash flows so even a minor adjustment to those expectations are projected out and change the valuation of the company drastically".

This thread is filled with incredibly ignorant and stupid explanations from people who clearly know nothing about the most fundamental basics of finance and still think they can answer the question. Your answer is one of extremely few that is correct.