Technology giant NVIDIA Corporation (NASDAQ:NVDA) could serve as a barometer for market strength and multiple sectors when the company reports second-quarter financial results after market close Wednesday.
Here are the earnings estimates from analysts, what experts are saying ahead of the report and the key items to watch.
Earnings Estimates
Analysts expect Nvidia to report second-quarter revenue of $45.89 billion, up from $30.04 billion in last year’s second quarter, according to data from Benzinga Pro.
The company has beaten analyst estimates for revenue in 11 straight quarters.
The estimated revenue would set a new company record, surpassing the first-quarter total of $44.06 billion.
Analysts expect Nvidia to report second-quarter earnings per share of $1.00, up from 68 cents per share in last year’s second quarter.
The company has beaten analyst estimates for earnings per share in 11 straight quarters.
Previous guidance from the company called for second-quarter revenue of $45.0 billion, +/- 2%, which includes the loss of $8.0 billion in H20 revenue due to the controls on exports to China.
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What Experts Are Saying
Analysts have been raising their price targets on Nvidia stock ahead of the earnings report.
Nvidia stock could move around 7% based on historical reactions, Freedom Capital Markets Chief Market Strategist Jay Woods said in a weekly newsletter.
“Saying this is the most important stock in the world is an understatement. The stock’s average move after an earnings release is +/- 7.4%, so just an average move will make an impact on the entire market,” Wood said.
In the newsletter, Woods breaks down the high weighting for Nvidia in top stock market indexes and ETFs.
“Given that it is the largest market capitalized firm in the world with a valuation of $4.34 trillion, it holds the highest weighting of any stock.”
In the SPDR S&P 500 ETF Trust (NYSE:SPY), Nvidia is the top holding at 8.0% of assets.
In the Invesco QQQ Trust (NASDAQ:QQQ), Nvidia is the top holding at 10.1% of assets.
In the SPDR Dow Jones Industrial Average (NYSE:DIA), Nvidia is the 19th largest holding at 2.4% of assets.
While it has a smaller weighting in the Dow Jones Industrial Average, Nvidia is one of the rare stocks included in that index, along with the S&P 500, and is a member of the Magnificent 7, which covers some of the most closely watched stock groups.
Woods shares that Nvidia is also a top holding in the VanEck Semiconductor ETF (NASDAQ:SMH) and the SPDR Technology Select ETF (NYSE:XLK) at around 22% and 16% respectively.
“As Nvidia goes, so go most of the semiconductor stocks and AI plays. They are the dominant player in the space and positive forward guidance combined with continued strong demand will likely lift the sector. Any surprising slowdown and the negative impact could be dramatic.”
Wedbush analyst Dan Ives expects strong earnings from Nvidia, the company he says is powering AI infrastructure on a global scale.
“The Street continues to estimate the demand curve for the AI Revolution being led by Nvidia,” Ives recently tweeted. “This week’s earnings will be another flex the muscles moment for Nvidia and the AI Revolution bull thesis.”
Gene Munster of Deepwater Asset Management said investors are too focused on the short-term numbers for Nvidia and missing the future growth.
“For the next two years, we’re still early in the AI data center buildout,” Munster said.
Munster said physical AI will be the growth engine after data center growth drops, adding that robotics could become the next growth market.
Key Items to Watch
The earnings and guidance from Nvidia will take center stage on Wednesday, with the stock likely to react immediately to the headline numbers.
Diving deeper into the results and commentary, China is likely to become a significant topic that could impact the movement of the stock. Nvidia has missed out on revenue due to restrictions on exports to China.
With the Trump administration attempting to capture a portion of revenue from exports to China, and China counterattacking with red flags against U.S. chipmakers, the battle over whether Nvidia will experience revenue growth in the Chinese market continues.
The Data Center segment is the company’s largest, and the segment saw 73% year-over-year growth in the first quarter, the highest of the four main reporting segments. Revenue for the segment was up only 10% quarter-over-quarter, showing slowing growth for the company.
Investors and analysts will likely look to the year-over-year and quarter-over-quarter percentages to determine the stage of growth Nvidia finds itself in.
Gaming & AI PC and Automotive segment revenue was up 42% year-over-year and up 72% year-over-year respectively in the first quarter. These are other sectors analysts and investors will be watching.
NVDA Price Action
Nvidia stock is up 1.3% to $86.63 on Tuesday versus a 52-week trading range of $86.63 to $184.48. Nvidia stock is up 31.7% year-to-date.
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