It warns investors that the profit of the company in the coming quarter will significantly decline when compared with that of the same quarter of previous year, or the company may even make a loss.
For example, William Hill Bookmakers issued a profit warning on 23 March 2016 which they attributed to "a bad run of results and customers imposing betting limits on themselves".
[1] Company share prices often fall following a profit warning being issued.
[2] Sometimes, "profit warning" is considered to be a neutral term and it refers to "estimated results improvement".
The expression has been criticized for being misleading and obscure, because it means profits are lower than expected or previously announced rather than a loss.