How earnings markets work
How earnings contracts work: why "beat" depends on which consensus and which EPS measure a contract names, and what actually settles it.
Updated November 10, 2026 · Lumina Markets
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An earnings market asks whether a company's reported results clear a stated threshold, or whether it reports by a stated date. Held to resolution, the contract pays $1 if the stated condition is met and nothing if it isn't.
A beat is a comparison: a reported figure against a threshold. Both sides of that comparison are terms the contract sets, and a single earnings release usually contains more than one candidate for each.
What the contract asks
Most earnings contracts take one of three shapes:
Will a stated measure come in above a stated level? The level can be an absolute figure or a consensus estimate.
Will the reported figure land inside a stated band?
Will the company report by a stated date? A different question entirely, about the calendar rather than the results.
Each is binary: yes or no, paying $1 or nothing. A 34¢ quote is conventionally read as an implied probability of roughly 34%.
Why "beat" is a contract term
A single earnings release contains several numbers that could each reasonably be called earnings per share.
Under the SEC's Regulation G (opens in new tab), a company presenting a non-GAAP measure ("adjusted" EPS, typically excluding items it considers non-representative) must also present the most directly comparable GAAP measure and reconcile the two. For adjusted EPS, the comparable measure is GAAP diluted EPS, and the GAAP figure has to appear with equal or greater prominence.
So a release will generally carry both. They are both authoritative, they are usually different, and a contract naming one doesn't settle on the other. Whether a company "beat" can therefore be true on one measure and false on the other, from the same document.
The threshold has the same problem. A beat is measured against a consensus estimate, and consensus is a compilation: different providers survey different analysts, update on different schedules, and can publish different numbers for the same quarter. A contract has to name whose consensus, as of when.
So a beat generally rests on four terms as much as on the results themselves:
GAAP diluted EPS, adjusted EPS, revenue, or an operating metric a company reports alongside them. Subscriber or user counts are the common case: for some companies those figures move the stock more than EPS does, and a contract can reference them the same way.
An absolute figure, or a named consensus as of a named time
Where the settling figure is read from
Which report, and what happens if it's rescheduled
The resolution source is where those live.
Reporting-date contracts
A contract on when a company reports is a calendar question and behaves differently from a results question. Companies typically announce a date in advance and usually keep it, but dates move, and a contract with a deadline near a scheduled date is a contract about the schedule rather than the business.
Worth keeping distinct from a beat-or-miss contract: the two can sit next to each other on a market page and have almost nothing in common analytically.
Results arrive outside trading hours
Most US companies report before the open or after the close. Two consequences, described generally:
- The contract's timestamp may not match the reaction. Results land, the equity reprices in extended hours, and when the contract settles depends on its own terms, not on when the market absorbed the news.
- A revision is possible, if uncommon. Filed figures can be restated later. Whether a restatement affects a settled contract depends on the terms, which is the same vintage question that economic-data markets face with payroll and CPI revisions.
- In advanceReporting date announced
Companies usually keep it, but dates move.
- Outside trading hoursResults released
Most US companies report before the open or after the close.
- Extended hoursThe equity reprices
- SettlementThe contract settles on its own terms
Not on when the market absorbed the news.
- Possibly laterFiled figures restated
What to pay attention to
The examples below are illustrative: hypothetical situations rather than descriptions of any company or contract.
| Gap | An illustration of how it arises |
|---|---|
| Measure mismatch | Adjusted EPS clears the threshold; GAAP diluted EPS doesn't, and the contract named GAAP. |
| Consensus mismatch | Two providers publish different consensus figures; the reported number lands between them. |
| Stale consensus | The contract fixes consensus as of a date, and estimates move afterwards, so the settling threshold isn't the one on screen at report time. |
| Revenue vs earnings | Revenue beats and earnings miss in the same release; which one settles is a term. |
| Operating metric | A contract references subscriber or user additions rather than EPS, and those move independently of the earnings lines. |
| Date moves | A reporting-date contract's deadline is set against a schedule the company then changes. |
| Restatement | Figures are revised after settlement, and the contract's terms rather than the later filing govern. |
Reading the measure, the threshold and the source together is what makes these visible in advance.
A quote reflects supply and demand for the contract. Lumina publishes no estimate of any company's results and takes no view on any company's performance.
Trading event contracts involves substantial risk of loss. A contract that resolves against you pays zero. Reading a company's quarter correctly is not sufficient on its own: a position can be right about the results and still resolve against you, if the measure or the consensus the contract names differs from the one assumed.
Lumina Markets Inc. is a CFTC-registered Introducing Broker and Member NFA (NFA ID: 0576536). Trading event contracts involves substantial risk of loss and is not appropriate for all.
FAQ
How do earnings prediction markets work?
Each is typically a binary contract on whether a stated measure from a company's results clears a stated threshold, or on whether the company reports by a stated date. It pays $1 if the condition is met and nothing if it isn't, and settles on the measure and source the contract names.
What counts as beating?
Whatever the contract defines as beating. A release generally contains both GAAP diluted EPS and an adjusted figure (Regulation G requires the comparable GAAP measure alongside any non-GAAP one), and the threshold is usually a named consensus compilation as of a named time. Some contracts reference revenue or an operating metric such as subscriber additions instead. A beat can be true on one measure and false on another from the same document.
Why does it matter which consensus a contract names?
Consensus is compiled, not published centrally: providers survey different analysts and update on different schedules, so figures for the same quarter can differ. The contract names one, and that one sets the threshold.
Is a reporting-date contract the same thing?
No. It asks whether the company reports by a date, which is a question about the schedule rather than the results. The two shapes can appear side by side and share almost no analysis.