Nvidia (NVDA), the titan of the tech world by market capitalization is poised to unveil its third-quarter earnings post-market close next Wednesday, providing a comprehensive update on the AI sector’s vigor. As of Friday, Nvidia’s shares have soared 187% year to date, significantly outstripping its competitors. Advanced Micro Devices (AMD), its nearest rival, has experienced a decline of nearly 9%, while Intel (INTC) has seen a drastic fall of 51% amid its turnaround challenges.
The expectations for Nvidia’s Q3 performance are set high, with Bloomberg analysts forecasting an earnings per share of $0.74 on revenues of $33.2 billion, marking an 83% increase year-over-year from an EPS of $0.40 and revenue of $22.1 billion in the same period last year. The Data Center segment, Nvidia’s cash cow, is anticipated to generate a staggering $29 billion, doubling from last year’s $14.5 billion. This segment’s growth underscores Nvidia’s dominant position in powering AI technologies, from training to deployment.
Gaming revenue, although less monumental, is still expected to grow, reaching $3 billion, a 7% rise from the $2.8 billion reported last year. This reflects a continued, albeit slower, growth in the gaming sector, buoyed by Nvidia’s high-performance graphics solutions.
With gross margins projected at 75%, Nvidia’s financial health appears robust. However, the real focus for investors will be on whether Nvidia can not only meet but exceed these expectations and if it will adjust its guidance upwards for the fourth quarter. Analysts are looking for a Q4 revenue forecast of $37 billion, which would indicate sustained momentum.
Despite these optimistic projections, Nvidia’s stock could face volatility post-earnings. The company’s last quarter demonstrated this when, despite exceeding forecasts, shares dropped over 4% to $120. This could reflect investor reactions to slower growth rates compared to previous quarters, where revenue and EPS growth were at 200% and nearly 600% respectively, or simply profit-taking on earlier gains.
Investors are also keenly interested in any updates regarding Nvidia’s next-generation Blackwell AI chips. CEO Jensen Huang’s comments on the production scale-up and revenue expectations from Blackwell, previously set to contribute several billions in Q4, will be crucial. These chips are not just about maintaining Nvidia’s lead in AI – the company currently controls between 80% and 95% of the AI chip market – but expanding it into new applications and markets.
In summary, Nvidia’s forthcoming earnings report will not just be a financial statement but a barometer for the AI industry’s health and Nvidia’s role within it. The outcomes could influence investor sentiment not only towards Nvidia but across the tech sector, particularly in how companies are leveraging AI for growth in a competitive landscape.
Price Action: As of writing, Nvidia shares are down $4.82, or 3.26%, to $142. The company, with a market cap of $3.6 trillion, trades at 41x forward 12-month P/E estimates, with trailing 12-month EPS at 2.13. Nvidia’s 52-week trading range spans from $45.01 to $149.77.
Reference: YH
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