Can Nvidia Corp. again wow Wall Street when it reports earnings on Wednesday afternoon?
There are various factors to keep in mind heading into the report, including a decent rally in Nvidia shares $(NVDA)$ since the last report, which stands at odds with action among many other chip stocks over that period. Plus, there's the sensation that this quarter itself isn't so important for the Nvidia narrative, as investors look ahead to the broader ramp of the company's new Blackwell chip.
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Here are the five biggest things to know ahead of Nvidia's fiscal third-quarter report.
The stock's been on a run
Nvidia shares have surged this year, rising 194% so far in 2024.
And the stock has had a nice relative run just since the last earnings report: It's up almost 16% since then, while the PHLX Semiconductor Index SOX has dropped about 3%.
"The outperformance ... of the stock indicates a high bar for execution," Susquehanna analyst Christopher Rolland wrote recently.
There are the estimates, and then there are the whisper numbers
The FactSet consensus calls for $33.1 billion in revenue for Nvidia's October quarter, as well as $37.0 billion in revenue for the company's January quarter.
But buy-side investors may be looking for more than that, especially when it comes to the guidance. Mizuho desk-based analyst Jordan Klein says buy-side "whisper" numbers for the January quarter amount to at least $39 billion to $40 billion.
He wrote that Nvidia's last guidance disappointed investors, leading shares to drop 20% over the next several sessions following the report.
One thing to note is that management sets guidance with the intent of beating it down the road. Klein said a $39.5 billion outlook for Nvidia's January quarter might suggest the company's chief financial officer actually expects $41.5 billion in revenue, which "would probably comfort investors." On the other hand, guidance of $37 billion to $39 billion could suggest management expects something like $39 billion to $41 billion for the January period.
Margins will be a big focus
Nvidia has enviable gross margins, but they've come down a bit as the company works to get Blackwell ramped up.
Melius Research analyst Ben Reitzes expects Nvidia to see a 75.0% adjusted gross margin for the October quarter and a 73.0% adjusted gross margin for the January quarter. Those would compare with 75.7% and 78.9% for the July and April quarters, respectively.
Nvidia needs to instill confidence in Blackwell
The good news? Nvidia's Blackwell "will be one of the most robust product cycles the company (or perhaps even the market) has ever seen," according to Cantor Fitzgerald analyst C.J. Muse.
In that sense, "all focus will be on the pace of the Blackwell ramp and adoption of Grace Blackwell-based configurations," he continued.
But Nvidia's report also comes as investors wonder whether Blackwell is facing technological challenges that could hinder the initial ramp. Truist Securities analyst William Stein flagged a recent report from The Information saying discussing potential overheating with Nvidia's GB200 NVL72 systems.
"Conversations with our industry contacts don't precisely corroborate this latest data point, but they do reflect supply chain challenges around the production ramp," Stein wrote.
Nvidia's GB200 systems "are the most advanced computers ever created," the company said in a statement. "Integrating them into a diverse range of data center environments requires co-engineering with our customers. While our customers race to be first to market, Nvidia is working with leading [cloud-service providers] as an integral part of our engineering team and process. The engineering iterations are normal and expected."
Expect big numbers on the bottom line
Nvidia is expected to show rapid growth in earnings per share, but admittedly at a slower pace than in past quarters.
Analysts tracked by FactSet model 75 cents in adjusted earnings per share, up 86% from the 40 cents Nvidia posted a year earlier.
That would mark a sequential slowdown from the 152% growth seen in the July quarter and the 462% growth seen in the April quarter. Nvidia is up against tougher comparisons nowadays as its results are being compared to past periods that also benefited from the artificial-intelligence boom in graphics processing units.
