Analyst consensus is the combined average of the forecasts made by sell-side analysts who cover a company, most commonly for metrics such as revenue and earnings per share, and it represents the market's expectation against which actual results are judged.
When multiple analysts cover a company, each publishes estimates for its future results. The consensus is the average, or sometimes the median, of those individual forecasts. Consensus figures exist for various metrics, but revenue and earnings per share are the most watched.
Consensus matters because a stock often reacts not to results in absolute terms but to results relative to expectations. A company can grow earnings and still see its stock fall if it came in below consensus, and a company can post a loss yet rise if the loss was smaller than expected. This is the origin of the familiar language of beating, meeting, or missing estimates. The consensus is the bar, and the surprise, the gap between actual and expected, drives much of the immediate share-price reaction.
For smaller companies, consensus works differently than it does for large ones. A company with only one or two analysts has a thin, fragile consensus that a single revised estimate can swing, and a company with no coverage has no formal consensus at all. In those cases, expectations are set more informally by investor conversations, management's own commentary, and any guidance the company provides.
This is one reason communication with the market matters. When expectations are set clearly and realistically, results are interpreted more accurately and the stock reacts to genuine performance rather than to a misunderstanding. Managing expectations well, within disclosure rules, is part of sound investor relations.