Nvidia earnings will likely provide the final springtime test of the market's surprising May rally as investors look to the last of the so-called Magnificent 7 tech giants to deliver outsized revenue gains and record quarterly profit.
Nvidia (NVDA) , the undisputed leader in AI chip production, is expected to post net income of $13.2 billion, or $5.63 a share, for the three months ending in April, the group's fiscal first quarter. That's a fivefold increase from the same period last year.
Group revenues, meanwhile, are estimated at $24.6 billion, triple last year's tally, with quarterly sales expected to top the $30 billion mark by the end of its current financial year in January.
Below are five key issues investors are likely to focus on heading into, and crucially out of, Nvidia's earnings report, slated for after the close of trading on Wednesday.
1. Revenue guidance and AI outlook
Nvidia's stunning second quarter revenue forecast last year fired the starting gun on the AI-chipmaking revolution and set the stock on a record-setting rally that ultimately added more than $1.5 trillion in market value.
Analysts will be glued to Nvidia's post-earnings conference call again this year to see whether the consensus revenue forecasts — $26.67 billion for the second quarter and $113 billion for the full fiscal year — remain intact.
Key to the outlook, both for this quarter and the back half of the year, will be the ramp in production of the current H100 Hopper chips and the near-term launch of the Blackwell GB 200 Superchip, which Nvidia also plans to sell as part of a larger and more expensive stacked tower system.
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KeyBanc Capital Markets analyst John Vinh said the "GB200/Blackwell could potentially drive over $200 billion in data-center revenues in 2025."
Gene Munster of Deepwater, however, notes that a second-half Blackwell launch could damp near-term sales as customers wait for the newer and hotter product.
"Nvidia is doing what it can to manage the product transition without a blow up," he said. "That said, preannouncing a major product 6 months before it comes out will likely have consequences in the form of some revenue disappointments in the next two quarters."
2. Profit margins and capital spending
Nvidia's staggering revenue gains have also come amid an impressive widening of gross-profit margins, which hit 76.7% over the three months ended in January.
That tally is likely to expand further, to around 77% over the first quarter, before narrowing modestly into the second half of the year as capital spending on new product rollouts accelerates.
Nvidia's fourth-quarter operating expenses were up 25% from a year earlier to $2.21 billion, and those costs could close in on $3 billion by the final three months of the current financial year, which ends in January.
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"We believe Nvidia's content growth story has more room to go, driven by ongoing shift toward AI servers, early days for [central-processing-unit] expansion, and addressable market upside tied to new software applications/greater focus on energy efficiency/[total cost of ownership] benefits," said CFRA analyst Angelo Zino. He carries a buy rating and $1,100 price target on Nvidia stock.
"Concerns that seem unwarranted include order softness ahead of Blackwell, peak gross margins, competitive pressures, and potentially more China restrictions," he added.
3. Capacity constraints
The largest likely headwind to Nvidia's near- and longer-term outlook will stem from capacity constraints at its two key supply-chain partners: Taiwan Semiconductor Manufacturing (TSM) and SK Hynix.
TSMC has kept its 2024 capital spending plans in place and trimmed its full-year sales forecast to just under 10% in U.S. dollar terms, amid what it thinks could be a bottleneck in overall production.
TSMC's spending plans form a key element for Nvidia's revenue potential as the market leader in so-called chip-on-wafer-on-substrate, often called CoWoS.
The high-end packing technology enables better performance on a smaller form factor and is a crucial component in the rollout of AI-focused processors.
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TSMC has warned its clients that CoWoS demand has far outpaced supply and it expects that imbalance to continue well into next year.
South Korea-based SK Hynix, which makes high bandwidth memory chips that boost AI performance, said last month that all its HBM chips are effectively sold for this year and nearly sold out for the whole of 2025.
Micron Technology (MU) , however, has lifted its capital-spending forecast to around $8 billion from $7.5 billion, as it ramps up production of key HBM3E chips that will be found in Nvidia's H200 processors.
4. China demand and risk of sanctions
Nvidia lost a big chunk of its near-term revenue potential last year when the Biden administration unveiled new sanctions on the sale of high-tech chips to China, including the H100 Hopper and its A100 predecessor.
Since then, Nvidia has worked to develop two sanctions-compliant alternatives, the HGX H20 and the L20, which feature reduced computing power.
However, Reuters reported last month that at least 10 China-based companies have been able to acquire higher-end chips through servers purchased from resellers, suggesting that tighter restrictions could be needed.
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At the same time, the ongoing trade war between Washington and Beijing could also trigger reprisal tariffs and sanctions from China, just as big tech spending from domestic hyperscalers — the big cloud-services and -storage companies, like Alphabet, Amazon and Microsoft — is forecast to accelerate over the back half of the year.
5. Stock-price volatility
Nvidia's importance to the tech market, and indeed U.S. stocks more broadly, can hardly be overstated.
It's been the best performing stock on the S&P 500 for the better part of 10 years, and this year's 88% gain puts it just behind Super Micro Computer (SMCI) and Vistra Corp (VST) .
And with Wall Street so tightly focused on both its first quarter earnings and near-term outlook, it's no surprise that traders are bracing for big stock price swings on the back of the release.
"Nvidia's earnings release this week remains much awaited given its potential to inform near-term prospects for the wider AI space," Bank of America analysts noted.
"However, despite uniform conviction on the fundamentals and increasingly frequent bouts of single stock 'fragility,' the [volatility] market's sanguine 8.6% implied move is smaller than 3 out of the last 5 earnings moves and call skew looks unusually flat."
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A separate report from Reuters noted that even a muted — in historical terms — 8.7% move for Nvidia stock would trigger price swings of as much as $200 billion. That value is larger than 90% of companies currently listed on the S&P 500.
"Since Nvidia is my largest holding in managed accounts, I am rooting for another nice earnings surprise and positive guidance, but the stock is priced for perfection with heavy call-option premiums," said Louis Navellier of Navellier Calculated Investing.
"When there is heavy call-option writing, sometimes the 'tail wags the dog' and profit-taking ensues, so I for one will be watching Wall Street’s reaction to Nvidia’s quarterly results and guidance," he added.
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