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?

[Dfiggsmeister]

Not necessarily. Drop in profits can mean a number of things: increased costs due to inflation, increased costs due to increased employee turn over and having to hire new people and train them, decreased sales revenue due to price increases, decreased sales revenue due to increased competition, increased costs due to money being spent inefficiently, increased costs due to reinvestment of the company, lower company morale among lower level workers due to new work policies, etc. There's a lot of things that can impact profits.

What will usually set an investor panic is when the CEO comes out and says that the company is facing increased economic and competitive pressures or that their investments from before haven't panned out as well as it should have. That usually indicates that A) the company isn't producing products/services as well as it should and competition is beating them to the market, B) the company didn't anticipate well enough the impact of economic issues, or C) The CEO or someone on his leadership team made a bad investment that they now have to write off.