Nvidia Earnings: Is it Possible to Beat & Rise Given the Market Divergence?

$NVIDIA(NVDA)$ will release its earnings after market hours tomorrow. However, following the news of $Microsoft(MSFT)$ cutting two AI data centers, Nvidia's stock has dropped to a critical $130 level before earnings.

Currently, there is significant divergence in market expectations for Nvidia’s earnings. What impact does the sharp drop before earnings have on Nvidia’s stock movement?

1. Does AI Capex Impact Nvidia More Positively or Negatively?

The market may have overestimated the potential decrease in capex ahead of earnings. However, aside from Microsoft's negative factor that might impact future quarters, capex from major tech giants in both China and the US will continue to support Nvidia’s performance in the next two quarters.

Bullish:

• Meta, Microsoft, and other hyperscale customers are expected to spend $32.5 billion on AI-related capital expenditures in 2025 (an increase of $10 billion YoY), with Meta planning to spend $6-6.5 billion (up 65% YoY), which will support Nvidia’s long-term order visibility.

  

• Surge in demand from China: Tencent, Alibaba, ByteDance, and others are significantly increasing orders for H20 chips due to DeepSeek model demand.

Bearish: Microsoft canceled data center leases for hundreds of megawatts, and its intelligent cloud segment's revenue growth slowed (Q2 YoY +19%, vs. expected +20%), which could indicate a short-term adjustment in computing capacity deployment or a local supply glut.

2. How Do Analysts Expect Blackwell Demand and Revenue?

The Blackwell ecosystem remains solid, and it should help boost profit margins. However, the demand for Blackwell has likely already been priced in after its surge earlier in the year.

Wedbush indicates that demand for Blackwell far exceeds supply. Shipments to key customers began in Q4, and once mass production starts in Q1, it will drive revenue growth as supply chain delays ease.

Q4 gross margin is expected to be 73.5% (down 0.5% QoQ), and in Q1, due to high production costs of new products, it may decline further. It is expected to return to the mid-70s by 2H25.

Bloomberg analysts are bullish on Nvidia’s revenue:

We envision little chance of an earnings disappointment, as the rate of growth is much more an equity value concern than a credit fear. Nvidia is on track for record-high revenue of $130 billion in fiscal 2025, which could rise another 50% in fiscal 2026, bolstering financial flexibility.

3. If This Quarter is All Positive, Can Nvidia Beat and Rise?

Over the last 7 quarters, Nvidia has consistently exceeded revenue expectations by $200 million and raised next-quarter guidance by $400-500 million.

Even if the earnings report meets consensus ($3.81 billion revenue, $0.85 EPS), if it doesn’t significantly exceed expectations (e.g., if revenue is below $4 billion or the guidance doesn’t surpass $4.3 billion), it will be seen as “disappointing,” triggering a sell-off.

Past quarters of large beats and price increases mean Nvidia needs to consistently exceed expectations to support the stock price. Last quarter, even after beating EPS by 10%, the stock still dropped 6% on the day.

Currently, the growth rate has slowed, and super-high expectations are likely to be unfulfilled. Even if there is a large beat, the stock might drop after the release, as the $150 resistance level is still in play.

However, Nvidia's drop before earnings does increase the possibility of a rise after the earnings release. But how long it can rise will depend on the extent of the earnings beat and guidance on core metrics.

Overall, the only scenario for a "beat and rise for the long term" would be if Nvidia significantly beats analysts’ consensus (by $200 million or more) and raises next-quarter guidance by $400-500 million.

How Do You View Nvidia’s Earnings This Time?

Since Nvidia has already dropped significantly before earnings, will it beat and rise on the day?

If the earnings beat is small, will it be like Q3, where the company beat but the stock still dropped?

Do you think Nvidia’s management will provide an optimistic outlook?

Is it a good buying opportunity below $130 for Nvidia?

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