Giant Artificial Intelligence (AI). Nvidia (NASDAQ: NVDA) is scheduled to report results for the second quarter of fiscal 2025 (ending July 28, 2024) on Wednesday, August 28, after the market closes.
Nvidia’s upcoming earnings release is considered the most anticipated of this quarterly earnings season. That’s because the company is viewed as a bellwether, or indicator, for the AI ​​space and the market as a whole.
Nvidia is rapidly dominating the AI ​​chip market. If it produces stronger-than-expected results — especially in the AI-driven data center business — that suggests the broad AI market may be even stronger than believed.
Nvidia’s stock performance has also been an indicator of possible overall market strength. Nvidia is the second largest stock in the S&P 500 index (at the end Apple) and has been skyrocketing since early 2023, becoming a huge driver of the overall performance of the index.
Both predictions are that (1) Nvidia will beat Wall Street’s earnings estimates, and (2) it will do so by at least 10%. We’ll get to where the 10% comes from.
Nvidia’s Q2 guidance and Wall Street estimates
|
Metric |
Fiscal Results Q2 2024 |
Nvidia Q2 Fiscal 2025 Guidance |
Nvidia Projected Growth |
Wall Street’s Q2 2025 Fiscal Consensus Estimate |
Wall Street Growth Projections |
|---|---|---|---|---|---|
|
results |
$13.51 billion |
$28 billion |
107% |
$28.68 billion |
112% |
|
Adjusted earnings per share (EPS) |
$0.27* |
$0.622** |
130% |
$0.64 |
137% |
Data source: Nvidia and Yahoo! Finance. Fiscal Q2 2025 ends July 28, 2024. * Reflects a 10-to-1 stock split in June 2024. ** Reflects a 10-to-1 stock split; calculation by the author based on metrics that management provides guidance.
Nvidia has an incredible track record of beating Wall Street’s earnings estimates, so its chances of doing so on Wednesday seem high.
How strong is the track record?
Nvidia’s earnings beat/miss track record
I looked at Nvidia’s quarterly results over the past four years, spanning 16 quarters. This data goes back to the second quarter of fiscal 2021, which ended at the end of July 2020. Below is a summary.
|
Period |
Period Description |
Earnings* Results Relative to Wall Street Consensus Estimates |
Magnitude of Earning Beat (Average) |
Magnitude of Earning Beat (Range) |
|---|---|---|---|---|
|
Most recently reported 16 quarters |
Complete data set |
14/16 beats = 88% |
12% |
5% to 32% |
|
11 quarters, starting six quarters ago and back |
The period of data sets before generative AI is said to be the main growth driver |
9/11 beats = 82% |
8% |
5% to 14% |
|
The latest reported five quarters |
A period in which generative AI has become a key driver of growth |
5/5 hits = 100% |
18% |
10% to 32% |
Data source: Nvidia. Calculations by the author. *Earnings in the form of adjusted earnings per share (EPS). AI = artificial intelligence.
Let’s go home in five quarters when generative AI (the technology behind Open AI’s ChatGPT and other chatbots) is the main driver of growth. Stock price movements are also included.
|
a quarter |
Last Period |
Magnitude of Earning Beat/(Miss) |
Share Price Changes The Day After Earnings Release |
|---|---|---|---|
|
Q1 Fiscal 2025 |
End of April 2024 |
10% |
9.3% |
|
Q4 Fiscal 2024 |
End of January 2024 |
12% |
16.4% |
|
Q3 Fiscal 2024 |
End of October 2023 |
19% |
(2.5%) |
|
Q2 Fiscal 2024 |
End of July 2023 |
32% |
0.1% |
|
Q1 Fiscal 2024 |
End of April 2023 |
18% |
24.4% |
Data sources: Nvidia earnings reports, Yahoo! Finance, and YCharts.
Key takeaways:
-
Nvidia has topped Wall Street’s earnings estimates in every quarter since generative AI became a key growth driver.
-
Nvidia’s revenue, on average, has become greater, let’s call it, the era of generative AI.
Prediction: Nvidia to beat Wall Street earnings estimates by at least 10%
Last quarter, Nvidia beat the Street’s revenue estimates by 10%. In the last five quarters — the era of generative AI — the company’s earnings beat has generally decreased in size: 10% (most recent), 12%, 19%, 32%, and 18%. So, I used the smallest income beat as my prediction. I use the smallest and not, say, the average because of the trend in the data.
The bigger picture: Nvidia stock may not be as expensive as it seems
Since generative AI entered the scene, Nvidia’s earnings have been bigger (by 18% on average). I think this trend will continue.
The data in this article undermines such an argument: “Nvidia shares are overvalued because the forward price-to-earnings (P/E) ratio is X.” (Forward P/E is 46.2, on August 26.) A forward P/E uses an estimate for the value of earnings, generally Wall Street. And the estimate may be too low, which causes the P/E to go forward.
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Beth McKenna has a position in Nvidia. The Motley Fool has positions and recommends Apple and Nvidia. The Motley Fool has a disclosure policy.
Prediction: Nvidia Will Beat Wall Street’s Earnings Estimates by 10% or More on Wednesday was originally published by The Motley Fool
