Nvidia's value to shift by $300 billion after earnings

Nvidia Corp. is set to report an unusually complex quarterly earnings result, and as the world’s most valuable company, traders are preparing for a potentially massive swing in its stock price.

THIRD QUARTER

• Revenue estimate $33.25 billion (Bloomberg Consensus)
  • Data center revenue estimate $29.14 billion
  • Gaming revenue estimate $3.06 billion
  • Professional Visualization revenue estimate $477.7 million
  • Automotive revenue estimate $364.4 million
• Adjusted gross margin estimate 75%
• R&D expenses estimate $3.34 billion
• Adjusted operating expenses estimate $2.99 billion
• Adjusted operating income estimate $21.9 billion
• Adjusted EPS estimate 74c

FOURTH QUARTER

• Revenue estimate $37.1 billion
• Adjusted gross margin estimate 73.5%
• Adjusted operating expenses estimate $3.21 billion

As the leading brand in the artificial intelligence industry, Nvidia has been a highlight on the earnings calendar for over a year. However, for the chipmaker’s fiscal third quarter results, set to be released on Wednesday after the market closes, there is more uncertainty than usual regarding how the earnings and guidance will unfold.

This uncertainty arises from differing opinions on Wall Street about what to expect from the company’s newest product line, Blackwell. Nvidia has anticipated that the new chips will generate several billion dollars in revenue in the fiscal fourth quarter. Additionally, Chief Executive Officer Jensen Huang has described the demand for these chips as “insane.” However, production delays have complicated supply modeling, making it even more challenging to estimate outcomes accurately.

The questions surrounding Blackwell have resulted in a significant variation in analyst expectations for the fiscal fourth quarter, which concludes in January. The consensus estimate stands at $37.1 billion, but the difference between the highest and lowest projections exceeds $7 billion, according to estimates compiled by Bloomberg. Typically, Nvidia releases revenue guidance for the upcoming quarter along with its results.

Data compiled by Bloomberg indicates that the options-implied move for Nvidia shares the day after the earnings report is approximately 8% in either direction. This potential movement could translate to a nearly $300 billion change in market value, which is greater than the market capitalization of all but 25 companies in the S&P 500 Index. Meanwhile, strategists at Bank of America emphasize that this earnings report presents more risk to the market benchmark than the upcoming Federal Reserve meeting or inflation data.

One reason for the discrepancy in analyst forecasts is that some anticipate customers will postpone purchases of Blackwell’s predecessor products, known as Hopper, in expectation of the newer chips.

The chipmaker’s largest clients, including Microsoft Corp., Alphabet Inc., Amazon.com Inc., and Meta Platforms Inc., have all committed in their latest reports to increase capital spending in the coming year.

However, given Nvidia’s track record of significantly exceeding estimates, largely due to intense demand for its accelerator chips, the company may need to do more than simply reassure investors that the ramp-up of Blackwell remains on track. Over the past five quarters, Nvidia’s sales have outperformed consensus expectations by an average of approximately $1.8 billion, according to data from Bloomberg.

If Nvidia’s results fall short of this benchmark, it could pose a risk to the stock, which is currently trading near a record high after nearly tripling in value this year.

Prepared by Nour Hammoury, Chief Market Analyst at SquaredFinancial
Nour is an investor, independent market strategist, and financial advisor. He holds a BA in Finance and Banking Science from Al-Ahliyya Amman University and a CFTe in Economics from the International Federation of Technical Analysts. He has more than 15 years of experience in forex, stocks, and global economic developments, as well as central bank policies and intermarket analysis. He appears regularly on major international TV networks, such as BBC, Al-Jazeera, Al Hurra, CNBC, and Bloomberg, holding open discussions and sharing insights and readings of the markets and trends.

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