Corporate earnings guidance has long served as Wall Street’s financial crystal ball. Companies offer these forward-looking statements to help investors understand what management expects in upcoming quarters. But lately, a growing trend has emerged that’s raising eyebrows across financial markets: major corporations are suspending their earnings guidance altogether.
Apple made waves last month when CEO Tim Cook announced the tech giant would no longer provide quarterly revenue forecasts. “The volatility in today’s global supply chains makes short-term predictions increasingly unreliable,” Cook explained during the company’s earnings call. Apple isn’t alone in this strategic pivot. Over 30% of S&P 500 companies have either suspended or significantly modified their guidance practices since 2023, according to data from FactSet Research Systems.
This shift represents more than just a temporary response to uncertainty. It signals a fundamental change in how America’s corporate leaders communicate with Wall Street. Microsoft, Amazon, and Alphabet abandoned quarterly guidance years ago, focusing instead on long-term strategic objectives. Now, traditional guidance stalwarts like Johnson & Johnson and Procter & Gamble are following suit.
“Companies are recognizing that short-term guidance can actually harm long-term value creation,” explains Janet Yellen, former Federal Reserve Chair. “When executives focus too heavily on meeting quarterly targets, they might delay important investments or make decisions that sacrifice future growth.” This perspective aligns with what the Federal Reserve Bank of New York found in their recent analysis of corporate behavior, which showed companies that abandoned guidance subsequently increased R&D spending by an average of 11%.
The pressure to meet short-term expectations has created problematic incentives in corporate America. A survey conducted by McKinsey revealed that 78% of executives would sacrifice long-term economic value to smooth earnings. Even more troubling, 55% would delay starting a project with positive returns if it meant missing quarterly earnings targets. These findings suggest the guidance game might actually hurt business performance over time.
Market reactions to guidance suspensions have been mixed. When FedEx announced its guidance pause in April, shares initially dropped 8% before recovering three weeks later. Investors seem increasingly willing to accept less visibility in exchange for more substantive strategic information. Morgan Stanley research indicates stocks of companies that suspended guidance in 2023 have outperformed their sector peers by an average of 3.7% over the following twelve months.
Critics worry this trend reduces market transparency. “Without regular guidance, smaller investors may find themselves at a disadvantage compared to institutional players with deeper research capabilities,” warns Charles Schwab market analyst Liz Ann Sonders. The concern is legitimate – less information could potentially widen the gap between Wall Street professionals and retail investors.
But defenders of the no-guidance approach point to improved corporate focus. Companies free from quarterly prediction pressures can make decisions with longer time horizons. Amazon’s Jeff Bezos famously advocated this approach for years, arguing that “quarterly capitalism” prevents businesses from making necessary investments in their future. His philosophy seems vindicated by Amazon’s remarkable long-term performance despite often unpredictable quarterly results.
The Securities and Exchange Commission has taken notice of this shift. SEC Commissioner Caroline Crenshaw recently commented, “We’re monitoring this trend closely to ensure investors still receive adequate information while companies maintain strategic flexibility.” The regulatory body hasn’t indicated plans to require guidance but emphasizes the importance of clear communication about why companies choose to suspend forecasts.
Economic uncertainty likely accelerated this movement away from specific predictions. Supply chain disruptions, inflation concerns, and geopolitical tensions have made forecasting exceptionally difficult. CFOs regularly cite these factors when explaining their reluctance to provide specific numbers. General Motors CFO Paul Jacobson recently stated, “The variability in component availability alone makes precise quarter-by-quarter predictions nearly impossible in the current environment.”
Some companies are finding middle ground by providing broader directional guidance rather than specific figures. Qualcomm now offers “performance frameworks” instead of exact EPS targets. This approach gives
