Nvidia Corp. will report earnings on Wednesday afternoon. Will it once again amaze Wall Street?
Before reading the report, there are a few things to keep in mind. For example, Nvidia shares have gone up a fair amount since the last report, which is different from how many other chip stocks have done during that time. Also, investors seem to think that this quarter isn’t that important for Nvidia’s story because they’re more interested in the company’s new Blackwell chip’s wider rollout.
Before Nvidia’s fiscal third-quarter report, here are the five most important things you should know.
The price has been going up.
This year, Nvidia stock has gone through the roof, rising 194% so far in 2024.
Aside from that, the stock has done really well since the last earnings report. It’s up almost 16% since then, while the PHLX Semiconductor Index SOX -1.68% has gone down about 3%.
“The outperformance… of the stock sets a high bar for execution,” Christopher Rolland, a Susquehanna analyst, wrote not long ago.
Quotes and whisper numbers are two different types of numbers.
According to FactSet, Nvidia will make $33.1 billion in sales in the October quarter and $37.0 billion in sales in the January quarter.
But investors on the buy side might want more than that, especially when it comes to the forecasts. Jordan Klein, a desk-based analyst at Mizuho, says that buy-side “whisper” numbers for the January quarter add up to at least $39 billion to $40 billion.
He wrote that investors were let down by Nvidia’s most recent projections, which caused shares to drop 20% over the next few sessions after the report.
It is important to keep in mind that management gives advice with the goal of beating it down the road. Klein said that Nvidia’s $39.5 billion revenue forecast for the January quarter could mean that the company’s CFO actually expects $41.5 billion in sales, which “would probably comfort investors.” On the other hand, a range of $37 billion to $39 billion could mean that management thinks January will bring in between $39 billion and $41 billion.
Margins will get a lot of attention.
Gross margins at Nvidia are very high, but they’ve gone down a bit as the company works to get Blackwell up and running.
Based on his research, Ben Reitzes of Melius Research thinks that Nvidia will have an adjusted gross margin of 75.0% for the October quarter and 73.0% for the January quarter. In comparison, that’s down from 75.7% in the July quarter and 78.9% in the April quarter.
Nvidia needs to have faith in Blackwell.
The good news? Cantor Fitzgerald analyst C.J. Muse says that Nvidia’s Blackwell “will be one of the most robust product cycles the company (or maybe even the market) has ever seen.”
So, “the speed of the Blackwell ramp and the use of Grace Blackwell-based configurations will be the only things that matter,” he said.
But investors are also wondering if Blackwell is having tech problems that could slow down the initial ramp, which is tied in with Nvidia’s story. William Stein, an analyst at Truist Securities, brought up a recent story from The Information that talked about how Nvidia’s GB200 NVL72 systems might get too hot.
Stein wrote, “Conversations with our industry contacts don’t exactly back up this latest data point, but they do show supply chain problems around the production ramp.”
In a release, Nvidia said that the GB200 systems “are the most advanced computers ever made.” “We need to co-engineer with our customers to make sure they work in a wide range of data center environments.” While our competitors try to be the first to market, Nvidia works with top cloud service providers as an important part of our tech team and process. These changes in engineering are normal and expected.
Keep an eye on the bottom line for big numbers.
We expect Nvidia’s earnings per share to grow quickly, though not as quickly as in previous quarters.
According to the FactSet model, Nvidia made 75 cents in adjusted earnings per share, which is 86% more than the 40 cents it made the previous year.
The growth rate would slow down from the 152% growth in the July quarter to the 462% growth in the April quarter. Nvidia is up against tougher comparisons nowadays as its results are being compared to past periods that also benefited from the artificial-intelligence boom in graphics processing units.
