Nvidia (NASDAQ: NVDA) is the most influential stock of 2024. The rising demand for artificial intelligence (AI) has driven tremendous revenue and profit growth for the company, and the business momentum has translated into incredible valuation gains.
The processing leader’s stock price has soared 161% this year alone, and its incredible performance has been a bullish catalyst for the market as a whole and other individual players in the AI space. Now, Nvidia stock is poised for its next big test.
After the market closes on Wednesday, August 28, the company will report results for the second quarter of fiscal 2025 (ended July 28). Management will also host a conference call to provide investors with more insight into the business and its prospects.
The earnings release is likely to be one of the biggest stock market events of the year, and expectations are high on Wall Street. There’s a lot of speculation about whether Nvidia will beat earnings estimates, and I predict the AI giant will beat most targets by a wide margin. But buckle up, because this could get wild.
Nvidia appears poised to exceed sales and profit targets
In its fiscal 2025 Q1 update, Nvidia’s management forecast approximately $28 billion in sales in the second quarter. If the company hits that target, that would mean 107% annual revenue growth. Management also expects Nvidia’s gross margin to grow to 74.8%. Those numbers are nothing to sneeze at.
Wall Street is even more bullish, with the average analyst estimate predicting that the AI leader will post revenue of $28.6 billion in the period. The company has put together an impressive run of outperformance thus far. Check out the table below, which compares Nvidia’s revenue to Wall Street expectations for the company’s last four reported quarters.
|
Fiscal quarter |
Wall Street consensus revenue target |
Actual turnover |
Percentage beat |
|---|---|---|---|
|
Q2 2024 |
$11.22 billion |
$13.51 billion |
20.4% |
|
Q3 2024 |
$16.18 billion |
$18.12 billion |
12% |
|
Q4 2024 |
$20.62 billion |
$22.1 billion |
7.2% |
|
Q1 2025 |
$24.65 billion |
$26.04 billion |
5.6% |
Data sources: Nvidia and CNBC.
While the company has posted fantastic margins, sales outperformance has also led to the company’s earnings beating Wall Street expectations. Over the past year, the company’s quarterly non-GAAP (adjusted) earnings have beaten the midpoint Wall Street target by an average of 17.3%.
Technology sector capital spending is sending signals
There’s a good chance that Nvidia will manage to beat its own targets and average Wall Street estimates with its upcoming quarterly report. Here’s why.
With its latest quarterly report, Microsoft announced $19 billion in capital expenditures (capex) — with nearly all of the spending going toward improving the company’s cloud and AI infrastructure. Capex increased 35% from the previous quarter, and management also said that spending will continue to increase in the coming year. Microsoft is widely considered Nvidia’s largest customer, and increased spending on AI infrastructure is a clear positive indicator.
The software giant wasn’t the only one to deliver encouraging capex news recently. Meta platformsAnother major Nvidia customer also raised its capital spending forecast when it reported second-quarter results late last month.
Overall, the sentiment among many leading tech companies seems to be that it’s better to invest heavily in AI now than risk falling behind or falling behind competitors. Coupled with promising capex data from tech giants, that bodes well for Nvidia — and I think the company will beat both top and bottom line expectations in Q2.
But there’s a catch.
Image source: Getty Images.
Nvidia shares need more than strong Q2 results for post-earnings gains
While the average Wall Street audience expects Nvidia to report second-quarter revenue of $28.6 billion, some Analysts have raised the target significantly. For example, HSBC expects the company to report revenue of $30 billion in the period.
Beating the average Wall Street target is often enough to trigger bullish valuation momentum for a company, but that’s not always the case. Popular stocks in particular are often held to a higher standard — with investors looking for a company to deliver results that match or exceed lofty expectations. It’s also worth noting that Wall Street analysts have become more careful in modeling a company’s performance over the past year of reporting, with Nvidia’s quarterly revenue growth rising from 20.4% in the second quarter of last year to 5.6% in the first quarter of this year.
Even if Nvidia manages to comfortably beat Wall Street’s average targets, there are other catalysts that could lead to volatile trading after earnings. Investors will also be scrutinizing the company’s guidance for the current quarter and its future roadmap, and there have been reports that the AI leader may delay the release of its next-generation Blackwell processors. Depending on what Blackwell news Nvidia has to share, the stock could see big moves in either direction.
So even with signs that the AI luminary will deliver strong Q2 results, investors should understand that the stage could be set for post-earnings valuation volatility. Rather than trying to time short-term buying and selling moves around what the company’s stock price will do shortly after earnings, it makes more sense to approach an investment in Nvidia with the company’s long-term prospects in mind. Things still look promising on that front overall.
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HSBC Holdings is an advertising partner of The Ascent, a Motley Fool company. Randi Zuckerberg, former chief market development officer and spokeswoman for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Meta Platforms, Microsoft and Nvidia. The Motley Fool recommends HSBC Holdings and recommends the following options: long Jan 2026 $395 calls on Microsoft and short Jan 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
