Nvidia's Role in the AI Revolution
Nvidia has positioned itself at the center of the artificial intelligence (AI) revolution, primarily due to its powerful data center chips designed for AI development. These chips are in high demand, surpassing the supply, which is a key driver for Nvidia's increasing revenue and earnings.
Anticipation Ahead of Q2 Financial Results
Today, after the market closes, Nvidia is set to release its financial results for the second quarter of fiscal 2025, which ended on July 31. This report is eagerly anticipated as it will provide a detailed look at Nvidia's sales performance and future expectations.
Wall Street predictions are optimistic, suggesting a substantial revenue increase. Nvidia's own guidance indicates a target of $28 billion in total revenue for Q2, representing a 107% increase compared to the same period last year. However, the consensus estimate from Wall Street is slightly higher, at $28.7 billion.
Impressive First Quarter Performance
In the first quarter, ending April 28, Nvidia achieved $26 billion in revenue. Analysts expect a similar or possibly better performance in Q2, particularly from the data center segment, which contributed $22.6 billion in Q1. Estimates for Q2 range from $24.5 billion to $25.2 billion for this segment alone.
Major Tech Investments
Tech giants such as Microsoft, Alphabet, and Meta Platforms are investing billions in AI data center infrastructure, a large portion of which benefits Nvidia through GPU sales, including the popular H100 and the newer H200 models.
Innovation with Blackwell GPUs
Nvidia recently announced its new GPU architecture, Blackwell, designed for large language models (LLMs) with trillion parameters. Shipments for the Blackwell GPUs were expected to start in Q2, with sales expected to increase as the year progresses. Investors will be keen to hear updates on Blackwell's sales and Nvidia's guidance for the rest of fiscal 2025.
Stock Performance and Future Outlook
Since the beginning of 2023, Nvidia's stock has skyrocketed by 765%, making it a $3.1 trillion company. Even minor stock movements can significantly impact its valuation. Following its Q1 earnings report on May 22, Nvidia's stock saw a 9.3% jump the next day.
Currently, Nvidia's stock trades 7% below its all-time high due to a recent market correction. If Nvidia's Q2 results fall short of expectations, it could lead to a more significant stock decline.
Earnings Per Share and Valuation
Wall Street expects Nvidia to report $0.64 in earnings per share for Q2, leading to a trailing 12-month earnings figure of $2.17, which corresponds to a price-to-earnings (P/E) ratio of 58.3. Analysts predict an increase to $3.81 per share by fiscal 2026, suggesting a more favorable forward P/E ratio of 33.2.
In summary, as long as Nvidia avoids negative surprises in its Q2 report, its stock remains an attractive investment for those willing to maintain their positions over the coming years.
