NVDA Earnings: Consensus is not enough

Today could be a good time to lay out $NVIDIA Corp(NVDA)$ ahead of earnings.NVIDIA plunged 3.26% on Friday's pullback in tech stocks.

But woe betide the company, as The information broke a sudden revelation over the weekend that Blackwell processors face overheating issues when installed in high-capacity server racks, raising concerns among customers like Google, Meta, and Microsoft that could impact layout deadlines.

If it jumps the gun again and large-scale deployments are pushed back another quarter, it's something that could affect investor expectations.

This week is NVIDIA's FY25Q3 earnings report, one of the most important earnings reports of the year, market analysts also appear some differences.

Market expectations

Given that previous quarters have been big beaters, you certainly can't use the current quarter's Consensus Estimate as a benchmark, not only is it mixed with outdated analysts' expectations that aren't up-to-date, but also investments are known to beat expectations, so expectations are inflated.

Therefore, it is important to see "how much higher" actual expectations are than the Consensus.

Revenue: the last few quarters have been beating expectations by about 2B, so the Q3 Consensus of 33.2B is actually equal to 35.2B.

Also, it depends on next quarter's guidance.The current Consensus for Q4 is 37.05B, which means guidance below 39B would be disappointing to investors.

Considering that different analysts have different influence, the three analysts from UBS/GS/MS (referred to as the HAM combo) currently have slightly different views:

1. All think Q3 revenue won't reach 35B

2. MS doesn't think Q4 will reach 39B, GS/UBS thinks it will

   

Profit Margin

The current market consensus expects Q3 gross profit margin of 75.02%, Q4 gross profit margin of 73.55%, both compared to the high point of 78.9% in Q1 this year have been adjusted back, mainly because of the difference in the cost of Blackwell and Hopper, of course, which is also mixed with some of the impact of the yield rate.

Profitability-wise, NVIDIA hasn't come in below expectations at all these past few quarters either, so it's bound to be quite a blow if it comes in below expectations or is revised downward.

Blackwell expectations

Considering that executives have previously done a little roadshow on Blackwell sales, let's just say it's in the single-digit "Billion", the market is expecting around 2-3B, and if it's over 5B, it's an over-expectation.