It's a miss if the market had already priced in expectations that it would be better than that; indicating that the market price is wrong and a correction could be expected imminently.
To the extent that we can assume equity prices mean anything, of course.
Undue attention is paid to short term blips. And it is indeed silly to get excited about exceeding analysts guess or falling short by a couple pennies a share.
About the 22% growth, that isn't being called a miss. They actually exceeded guesses on revenue. Net profit, while up, is what is being called a miss. Which net profit you want to use changes the increase but GAAP earnings were up 7%.
And yet in after-market trading the stock is down some 3%. I do think though it'd be cheaper for Google to find a way to diversify away from ads now that it's likely having more competition from the likes of Facebook and Snapchat but I'm no MBA nor an analyst so what do I know.
3% is a normal daily up and down for GOOG. In the past 15 minutes, it's regained 1/3rd of that loss in after-hours trading. The share price is still basically sitting at its all-time high. Your comment is potentially misleading, confusingly worded, and it's unclear what point you were trying to make. Some combination of those things should explain any downvotes.
Some data to back up the closing price (all but useless given the after-hours price and the apparent open for tomorrow being pretty much what it was today before earnings): I took the last 20 days of adjusted closing prices for GOOG from finance.yahoo.com, and a -2.18% change is 2.76 std-deviations away from the average fluctuation. Not significant but still a lot.
1. How did X do?
2. How did analysts think X would do?
Perfect analysts would predict Xs earnings every time, and the stock would be unaffected by announcements. But analysts aren't perfect. That's ok!
What's not ok is that the headlines are invariably "X misses expectations". No, the expectations were wrong.
I'm not saying a company can't do well or badly. Only that its job is not to match analyst expectations, and "X misses expectations" promotes that fiction.
Analysts aren't saying "I think GOOG will grow by X% because reasons," they're saying that based on all factors, if GOOG is run well and executes well, it will grow by X%. Growing by less, even when "less" is 20% and many billions of dollars, means that the analysts believe there is some inefficiency and GOOG, which is why a stock can drop after a company posts a 20% gain in revenue.
With the caveat below (i.e. maybe it's a term of art that I don't understand), I think that's precisely the misunderstanding I'm talking about.
Say I want to buy stock in a company. To decide which, I look at what analysts have to say about various companies, and pick one that they predict will do well. That's the job of analysts: to give prospective buyers (and sellers) an idea of where a company is heading so we can make buy/sell decisions.
That's very different from grading the "efficiency" of the company. In fact, the analyst's job is to take as many inefficiencies into account as they can. I don't care if this company under pristine circumstances can get 60% profit margins; if the analyst knows the current circumstances can only yield 20%, they had better give me an estimate of performance with 20% in it.
Seen in that light, analysts predicting something different from the company's actual output is clearly an analyst failure. But do notice that this doesn't mean the stock should ignore the error, since buy/sell decisions are made on the basis of analysts' expectations.
I'm not so sure. "Analysts Miss X Results" immediately makes you wonder "why", which is a fair question. "X Misses Expectations" instead makes you think X had a bad quarter. I think forcing people to make the conversion in their head every time is bad headlining.
Of course, there's something to be said for it being a "term of art". This may just be my layman's interpretation.
