Goldman Sachs maintains its Buy rating on NVIDIA, anticipating a combination of "earnings beat and guidance raise" for its first fiscal quarter. However, analysts also note that simply meeting earnings beats is no longer sufficient to drive significant stock outperformance. Investors are primarily focused on the potential incremental growth opportunities beyond the $1 trillion data center revenue guidance provided at the GTC conference.
According to the report, Goldman Sachs has raised its CY26/27 earnings per share (EPS) estimates for NVIDIA by an average of approximately 12%. These estimates are now 14% and 34% above the current market consensus for CY26 and CY27, respectively. Goldman Sachs expects NVIDIA's Q1 revenue to exceed market expectations by about $20 billion and maintains a 12-month price target of $250, implying roughly 20% upside from the current price of $207.83.
Goldman Sachs identifies three key catalysts for a potential valuation re-rating: improved profitability among hyperscale cloud providers, accelerated enterprise adoption of Agentic AI, and increased visibility into deployment timelines for non-traditional customers. The report notes that NVIDIA's current valuation shows a significant discount to its three-year median P/E ratio. Confirmation of the aforementioned signals could lead to substantial valuation recovery.
**Earnings Outlook: High Probability of a Beat, but the "Surprise Bar" is Raised** Goldman Sachs states that supply-side data (e.g., TSMC, SK Hynix earnings) and demand-side signals (e.g., U.S. hyperscalers raising 2026 capex guidance, optimistic 2027 commentary) both point to a high likelihood of NVIDIA exceeding expectations this quarter. However, analysts caution that market expectations are already elevated, limiting the potential stock price impact from a simple earnings beat alone.
Specifically, Goldman Sachs forecasts NVIDIA's Q1 FY27 total revenue at $800.46 billion, about 2% above consensus, with EPS of $1.86, 7% above expectations. For Q2 FY27, revenue is projected at $876.84 billion, 3% above consensus, with EPS of $2.05, 8% above expectations. The Data Center segment remains the core driver, with Q1 revenue estimated at $746.67 billion, expected to rise further to $821.34 billion in Q2.
Regarding gross margins, Goldman Sachs forecasts Q1 and Q2 gross margins (ex-SBC) at 74.8% and 74.9%, respectively, slightly below market expectations, reflecting some pressure from rising component costs.
**Key Focus Area 1: Upside Potential to the $1 Trillion Guidance** Goldman Sachs believes the most closely watched topic on the earnings call will be whether there is room to raise the $1 trillion cumulative revenue guidance (spanning 2025-2027 and covering the Blackwell, Blackwell Ultra, and Rubin platforms) provided at GTC 2026.
The report notes this guidance excludes several potential incremental sources, including: Rubin Ultra launching in 2027, Vera CPU-only racks in 2026 and beyond, and configurations optimized for inference like Rubin-CPX and Groq 3 LPX. Analysts expect investors to heavily question management on the outlook for these product lines. Any positive commentary exceeding the current guidance framework could serve as a catalyst for valuation re-rating.
Goldman Sachs raised its FY2027 total revenue forecast for NVIDIA to $3965.73 billion (from $3936.32 billion), 9% above consensus. Its FY2028 forecast is further raised to $6094.49 billion, 26% above consensus, and the FY2029 forecast stands at $7509 billion, 33% above consensus.
**Key Focus Area 2: Agentic AI Driving New Opportunities in CPU Business** Goldman Sachs views the rise of Agentic AI as a significant incremental opportunity for NVIDIA's Data Center CPU business. The report states that as Agentic AI workloads rapidly increase demand for CPU compute, NVIDIA's CPU-only rack products are expected to begin shipping in the second half of 2026. This new category could open a separate growth curve independent of GPU accelerators.
Analysts state the market will closely watch management's latest assessment of the Agentic AI adoption curve and the potential impact of CPU rack systems on NVIDIA's overall accelerator market share. Goldman Sachs believes more explicit mid-term market size forecasts from management would help boost investor confidence in this business line.
**Key Focus Area 3: Competitive Landscape and Margin Pressure** On competition, Goldman Sachs expects management to address the competitive landscape regarding custom XPUs (specialized processors). Currently, most hyperscale cloud providers are increasing reliance on in-house chips to cover a broader range of workloads. Goldman Sachs expects NVIDIA to emphasize its leadership in inference costs, citing the Blackwell platform's approximately 10x generational cost improvement over the prior generation as evidence.
Gross margin trajectory is another key market focus. Goldman Sachs expects NVIDIA's gross margins to face some pressure from rising component costs and the ramp of the Rubin platform in the second half. However, management is expected to reiterate its guidance for full-year 2026 gross margins to remain in the mid-70% range.
**Valuation: Significant Discount, Re-rating Depends on Three Signals** From a valuation perspective, Goldman Sachs notes NVIDIA's current forward P/E ratio shows a significant discount to its three-year median of 32x. Furthermore, its valuation premium relative to peer chip design companies like AVGO, AMD, and MRVL has narrowed considerably from historical levels.
Goldman Sachs believes a valuation recovery requires confirmation of three conditions: 1) Improvement in hyperscale cloud provider profitability metrics, supporting sustained capex growth; 2) Accelerated penetration of Agentic AI, signaling broader enterprise adoption; and 3) Increased visibility into deployment progress from non-traditional buyers like OpenAI, Anthropic, and sovereign AI clients.
Based on a valuation framework using a normalized EPS of $8.25 and a 30x P/E multiple, Goldman Sachs maintains its $250 price target and reiterates its Buy rating. Key downside risks include: a slowdown in AI infrastructure spending, market share loss due to increased competition, margin erosion from competitive pressures, and supply chain constraints.
Comments