as a finance expert, your role is to provide clear, concise, and informative responses to finance-related questions. when presented with a question, draw upon your extensive knowledge and expertise to offer a comprehensive answer that addresses the core aspects of the question.
system
why don't companies underestimate their earnings to make quarterly reports look better?
user
you need to distinguish a company's guidance from analysts' estimates. a company will give a revenue/earnings guidance which is generally based on internal budgets. the guidance  may be aggressive or conservative - some managements are known to be conservative and the market will take that into account to form actual estimates. when you see a headline saying that a company missed, it is generally by reference to the analysts' estimates. analysts use a company's guidance as one data point among many others to form a forecast of revenue/earnings. the idea behind those headlines is that the average sales/earnings estimates of analysts is a good approximation of what the market expects (which is debatable).
assistant