Nvidia Stock Earnings Forecast: What Investors Should Watch For - Forbes

Update: With Nvidia's second quarter fiscal year 2024 earnings release days away, analysts are raising their earnings estimates and price targets. HSBC has an aggressively bullish view, with a new price target of $780 and a restated buy rating on the stock. KeyCorp also increased its price target from $550 to $620. Those targets equate to upside of 66% and 32%, respectively. For context, the consensus price target is a more modest $458.82. Nvidia stock jumped nearly 8.5% on Monday as a result to close at $469.67.

Fabless chipmaker Nvidia (NVDA) will report results for its second quarter of fiscal year 2024 on August 23. This is an earnings release Wall Street is watching closely. Read on for the specifics on what metrics to watch, how to access the release and what numbers analysts expect to see from Nvidia.

Nvidia Stock Key Metrics

Nvidia has had a challenging 2023 fiscal year 2023. A sudden drop in demand for gaming chips left the company with lower revenues, too much inventory and lower gross margins.

As detailed below, results in the first quarter of fiscal year 2024 did improve over the prior quarter. The upcoming second quarter earnings release will either extend that positive trend or end it. Most analysts do expect second quarter results to be positive—which would be a good sign for Nvidia and, more generally, for the artificial intelligence (AI) market.

Nvidia is the largest supplier of graphics processing units (GPUs) that power generative AI applications like ChatGPT and Google Bard. Nvidia’s data center segment (which includes its AI chips) has shown strength and momentum. If those trends continue, Nvidia could be the first large-cap to attribute marked growth to the AI revolution.

So, this earnings release could carry two big messages. First, it will signal whether Nvidia has resolved problems it faced in fiscal year 2023. And second, it could begin to characterize the economic value of AI.

Metrics to watch include the following.

Topline revenue: Nvidia had a flat revenue year in fiscal year 2023, largely due to softer demand for gaming chips.
Gross margin: Fell in the prior year and had begun to recover in the first quarter.
Data center revenue: Has been growing. Continued growth will quantify the momentum Nvidia has in the AI space.
Gaming revenue: Fell sharply in the second quarter of last year and the decline continued through fiscal year-end 2023.
Non-GAAP diluted EPS: Ultimately, analysts and investors want to see bottom-line profit growth.

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How Was Nvidia’s Previous Earnings?

In the first quarter of fiscal year 2024, Nvidia reported revenue of $7.19 billion, non-GAAP gross margin of 66.8% and non-GAAP diluted EPS of $1.09. This performance handily beat analyst estimates. Wall Street had expected revenue of $6.52 billion and non-GAAP diluted EPS of $0.92.

Relative to historic results, these high-level first-quarter metrics showed declines on a year-over-year basis but improvements from the previous quarter. Specifically:

First-quarter revenue was down 13% vs. the first quarter of 2023 but up 19% from the prior quarter.
First-quarter non-GAAP gross margin of 66.8% was down from the prior-year quarter result of 67.1% and up from the previous quarter's gross margin of 66.1%.
First-quarter non-GAAP EPS fell 20% from the same quarter of the prior year and increased 24% vs. the previous quarter.

Diving into the segment metrics, gaming revenue increased 22% from the prior quarter, but was down year over year.

In the data center business, strong demand for Nvidia’s AI chips pushed revenue 14% higher on a year-over-year basis to $4.28 billion. That was a consensus-beating result.

After the first-quarter earnings release, Nvidia shares rose 26% in extended trading.

What Day And Time Does Nvidia Report Earnings Next?

Nvidia will publish its earnings summary for the second quarter of fiscal year 2024 on Wednesday, August 23, 2023 at 4:20 p.m. ET. Access Nvidia's investor website at that time to read the earnings summary and CFO Colette Kress’ written commentary on the quarterly results.

At 5 p.m. ET, the company will host a webcast to read prepared remarks and respond to questions from analysts and institutional investors. The webcast will be accessible to the public in listen-only mode from the company's investor website.

NVDA Stock Earnings Forecast

Analysts expect Nvidia to report sizable growth in revenue and EPS. The consensus estimate for revenue is $11.1 billion, up from $6.7 billion in the year-ago quarter. That would translate to 65% year-over-year sales growth.

The consensus estimate for revenue is within the company’s second-quarter outlook reported in May. At that time, the company expected second-quarter revenues between $10.78 billion and $11.22 billion.

The consensus EPS estimate for the second quarter is $2.07, which would be a 305% increase over the second quarter 2023 EPS result of $0.51.

Note that the $0.51 result in last-year's quarter was something of a surprise—and not a good one. The consensus estimate for that quarter had been $1.25, but it fell to a mere $0.50. Two weeks before the official release, the company had warned Wall Street that revenue and EPS would fall short due to soft demand for gaming chips.

Despite those troubles, Nvidia is still a well-run company with a bright future, thanks in part to an early entry into the AI space. According to Allied Market Research, the global AI market will grow at a CAGR of 38% between 2021 and 2030.

The challenge, though, is Nvidia's valuation. The current share price and trailing 12 months of earnings equate to a P/E ratio of roughly 222. That's well above the company's five-year average P/E of 73. Investors are pricing in much stronger earnings going forward, but even the forward P/E ratio is more than 30% higher than Nvidia’s five-year average.

Those multiples seem to imply spiking demand and bulletproof dominance in AI chips. Both factors remain to be proven. The AI market opportunity certainly will attract more competitors. And those competitors could easily gain traction if Nvidia can’t keep up with demand. This may be one reason for long-term investors to hold out for a lower price on Nvidia.

Does NVDA Stock Usually Go Up After Earnings?

Nvidia stock has gone up after three of the last four earnings releases. The largest increase was after the first-quarter release in May. The smallest increase—about 4%—was one year ago when Nvidia produced $0.51 in EPS vs. an adjusted consensus of $0.50.

NVDA stock fell 1.47% after the company reported $0.58 for its third quarter of fiscal year 2023. Analysts had expected $0.70.

Note that these percentages describe the stock’s movements immediately following the earnings release. A broader view tells a different story. After peaking at $330 in November 2021, NVDA fell to below $110 in October 2022. Since then, the semiconductor stock has mostly been on the rise—driving that very high P/E ratio.

Here’s where that age-old mantra of investing applies: Past performance does not guarantee future results. While the stock often rises after its earnings releases, you shouldn’t translate that into a Nvidia stock forecast.

Bottom Line

Nvidia likely will produce a positive second quarter earnings report. Look past the high-level metrics into segment performance. Strong data center revenue, stable gaming revenue and stable gross margins will signal that the company is leaving its fiscal-year 2023 issues behind and leveraging its first-mover advantage in AI.

From there, keep a close eye on the company’s valuation. Nvidia has an exciting position in AI, but that space will get more competitive going forward. Make sure your investment is priced accordingly.

NVDA Stock Earnings FAQs

When does Nvidia report its next upcoming earnings?

Nvidia will report results for the second quarter of fiscal year 2024 on Wednesday, August 23, 2023. Highlights of the quarter plus written commentary will be available on the company’s investor website at 4:20 p.m. ET. The public can also listen to the webcast, which will include prepared remarks on the quarterly results plus a question-and-answer session with analysts and institutional investors. The webcast will begin at 5 p.m. ET.

Where does Nvidia release its earnings?

Nvidia publishes its earnings release and commentary on its investor website at investor.nvidia.com.

Can you listen or watch Nvidia’s earnings call?

Yes, you can listen to Nvidia’s earnings call. Only analysts and institutional investors are allowed to ask questions after the prepared remarks. The call will be accessible from Nvidia’s investor website at investor.nvidia.com.

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