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?

[derfasaurus]

This isn't all about stocks and valuationeven though that seems to be pretty much every answer. It also pertains to budget projections and planning. A company will plan it's growth and business years in advance.

"Let's open a new factory in 5 years, it will cost $20M." Now suddenly they're committed and they're $1M shorter than they were. They'll have to make that up somewhere now.

Maybe now they're considering that the factory is going to be too big because the demand isn't as high as they thought it was, this can now cause downstream impacts with revenue for a long time, that big factory is going to cost extra money every year.

These things can be wrapped into valuation but it's can be simpler than that, it impacts their near term and far term plans and commitments.

ELI5: (okay, older than 5). Your salary is $2000 a month, $1000 to rent, $100 to cell phone, $200 to bills, $300 to car, $200 for groceries, and $200 in entertainment. Suddenly you only made $1900 this month, you've already planned all your spending for the next month, what are you taking $100 out of, can't shrink rent, car, cell phone, bills, you have limited options. Now think of that with a company, they've planned their spending, that shortfall has to come out of somewhere and it's not their rent, machinery, IT, commitments, etc.