Nvidia Stock Analysis: Top Things to Watch in its Q2 Earnings Release

Nvidia stock has pulled back sharply in the past few days, moving from this month’s high of $228 to the current $214. It remains about 30% above the lowest level this year. This article looks at some of the key things to watch when it publishes its financial results this week.

Nvidia Stock to React to Headline Figures

One of the important catalysts that will drive the NVDA stock will be the headline numbers. In the last earnings report, the company hinted that its second-quarter revenue will be $91 billion plus or minus 2%.

Historically, the company has always been highly conservative, meaning that its real numbers will be higher than its guidance. Indeed, the average estimate among analysts is $92 billion, up by 96% YoY. In reality, based on historical data, the average estimate is that its real revenue will be over $95 billion.

The company’s guidance is that its non-GAAP gross margins will be between 74.9% and 75%, a figure that will likely be higher than expected. Also, the estimate is that earnings per share will be $2.09, much higher than the $1.05 it made last year.

Guidance Will be Crucial

The other important catalyst for the NVDA stock price is its guidance. In most cases, the company normally guides its quarterly revenue, gross margins, and operating expenses.

Analysts are optimistic that the company’s guidance will be strong, thanks to the strong earnings by some of its top clients like Amazon, Microsoft, and Meta Platforms.

The average estimate is that its third-quarter earnings will show that its revenue jumped by 82% to $103 billion. Its full-year guidance is expected to be $395 billion, much higher than last year’s $215 billion.

A strong revenue and profitability guidance will be bullish for the NVDA stock price as it will signal that the AI boom is still here. On top of this, the company may decide to hike its buyback because of its cheap valuation.

Server and GPU Price Increases

Nvidia stock will also react to the rumored price increases of its GPUs and servers. According to Bloomberg, it has already sent notices to clients that it will hike prices by as much as 15% next year. Nvidia has justified the increases due to the ongoing tight conditions and the fact that memory prices have soared.

There are two potential implications for the company. First, there is a likelihood that customers will boost their purchases before the end of the year to take advantage of the current prices.

Second, there is a risk that its top clients will accelerate the ASIC trend. Google is already planning to boost its TPU production through the recent partnership with Marvell Technology. Microsoft and Amazon are also doing the same as they try to wean themselves off Nvidia.

China Business Growth

The other important catalyst for Nvidia stock is its China business. The company has already started shipping a limited number of H200 chips to its Chinese clients. As such, the upcoming results will provide more insights into its business and what to expect later this year.

China is an important market because of its potential, with companies like Alibaba, ByteDance, and Moonshot investing billions of dollars in the AI space this year. Signs that its Chinese business is growing will be highly bullish for NVDA stock.

Recent Investments in the AI Industry

Nvidia stock will also react to any comments on its investments in the AI industry. It has announced that it will back OpenAI’s chip plant in Ohio. Nvidia chips will power the project.

The company will also comment on its investments in companies such as Nebius, CoreWeave, Lumentum, and Intel. Also, it has announced a plan to help AI companies raise $500 billion from large financiers like BlackRock, Blackstone, and Goldman Sachs.