DEFINITION of 'Profit Warning'

When a company advises its earnings will not meet analyst expectations. The profit warning is made prior to the public announcement of the company's earnings.

BREAKING DOWN 'Profit Warning'

A profit warning is usually done two or more weeks before an earnings announcement. Companies do this to soften the blow to investors. This gives the investors and the market more time to adjust accordingly before the public release, ideally taking some of the sting out of the expected price adjustment. If no profit warning is released, the earnings announcement is called a negative earnings surprise.

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