Can Nvidia Continue to Report Blowout Quarterly Earnings?

Nvidia (NVDA) will report its fiscal Q4 earnings results on Wednesday, which is likely to have a significant impact on tech stocks.  Nvidia is up +40% this year and is the best-performing stock in the S&P 500 after surging over +200% in 2023.  Nvidia now ranks as the fourth largest global company at $1.79 trillion.  Nvidia’s Q4 revenue is expected to more than triple for a second straight quarter, buoyed by demand in its data center business, which accounts for 80% of its sales.

Based on Nvidia’s forecast, the company is expected to report $59 billion in revenue for the fiscal year ended in January, more than double what it reported the previous year. According to data from S&P Global Market Intelligence, none of Nvidia’s peers, including Apple, Alphabet, Amazon.com, and Microsoft, ever expanded revenue that fast in a single year from a similar starting point.  Based on annual revenue, Nvidia is poised to surpass Intel to become the world’s second-largest chip company.

The hype surrounding artificial intelligence (AI) has led to the explosive rise in Nvidia, which five years ago drew most of its business from the niche market of gaming PCs.  Nvidia has rallied about +25% in the past month, which poses a risk heading into Wednesday’s earnings report. The current earnings season has been rough on technology companies that posted less-than-perfect results following big run-ups.  Bank of America said it wouldn’t be surprising to see a “notable but brief pullback” in Nvidia’s shares following earnings, given the “mix of fear and greed and indiscriminate investor chase for all things AI.”

Even if Nvidia delivers a better-than-expected earnings report, the question will be how long the boom can last.  Analysts will keenly focus on AI chip demand for this year and next.  Market expectations are for Nvidia to project $21.6 billion of revenue for Q1, a tripling compared to the same period last year. Also, analysts expect Nvidia to project revenue just under $92 billion for the current fiscal year ending in January 2025, a 56% jump from the just-ended fiscal year.

New products from Nvidia will be vital for the company to maintain its dominance in the AI chip market. Nvidia is set to unveil its next big AI system, called B100, which is expected to launch later this year. Morgan Stanley said in a report earlier this month that the B100 system is “a strong advancement of state of the art” based on some early leaks about the system.  Bank of America thinks Nvidia will be able to price its B100 products at least 10% to 30% higher than the company’s current H100 system, which should keep its revenue stream flowing.

On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.