Prediction: Nvidia Will Beat Wall Street’s Earnings Estimate by 10% or More on Wednesday

Synthetic intelligence (AI) large Nvidia (NASDAQ: NVDA) is slated to report its outcomes for the second quarter of fiscal 2025 (ended July 28, 2024) on Wednesday, Aug. 28, after the market shut.

Nvidia’s upcoming earnings launch is broadly thought of probably the most anticipated of this quarterly earnings season. That is as a result of the corporate is seen as a bellwether, or indicator, for the AI house and the general market.

Nvidia dominates the quickly rising AI chip market. If it delivers stronger-than-expected outcomes — significantly in its AI-driven information heart enterprise — that implies the broad AI market might be extra strong than broadly believed.

Nvidia inventory’s efficiency has additionally turn out to be an indicator of the probably energy of the general market. Nvidia is the second-largest inventory on the S&P 500 index (behind Apple) and has been skyrocketing since early 2023, so it has been an enormous driver of the index’s total efficiency.

My two-part prediction is that (1) Nvidia will beat Wall Avenue’s earnings estimate, and (2) it is going to accomplish that by at the least 10%. We’ll get to the place the ten% got here from.

Nvidia’s Q2 steering and Wall Avenue’s estimates

Knowledge sources: Nvidia and Yahoo! Finance. Fiscal Q2 2025 ended July 28, 2024. *Displays 10-for-1 inventory cut up in June 2024. **Displays the 10-for-1 inventory cut up; calculation by the creator based mostly on the metrics for which administration supplied steering.

Nvidia has a incredible observe document of exceeding Wall Avenue’s earnings estimates, so the chance that it’s going to accomplish that on Wednesday appears excessive.

How robust is that observe document?

Nvidia’s earnings beat/miss observe document

I reviewed Nvidia’s quarterly outcomes for the final 4 years, so 16 quarters. This information goes again to the second quarter of fiscal 2021, which led to late July 2020. Under is the abstract.

Knowledge supply: Nvidia. Calculations by creator. *Earnings within the type of adjusted earnings per share (EPS). AI = synthetic intelligence.

Story continues

Let’s residence in on the five-quarter interval by which generative AI (the tech behind Open AI’s ChatGPT and different chatbots) grew to become a significant development driver. Inventory value actions are additionally included.

Knowledge sources: Nvidia’s earnings reviews, Yahoo! Finance, and YCharts.

Key takeaways:

Nvidia has exceeded Wall Avenue’s earnings estimate in each quarter since generative AI grew to become a significant development driver.

Nvidia’s earnings beats, on common, have turn out to be bigger in, let’s name it, the generative AI period.

Prediction: Nvidia will surpass Wall Avenue’s earnings estimate by at the least 10%

Final quarter, Nvidia beat the Avenue’s earnings estimate by 10%. Within the final 5 quarters — the generative AI period — the corporate’s earnings beat has usually decreased in measurement: 10% (most up-to-date), 12%, 19%, 32%, and 18%. So, I am utilizing the smallest earnings beat as my prediction. I am utilizing the smallest and never, say, the typical due to the pattern within the information.

The larger image: Nvidia inventory is probably going not as expensive because it might sound

Since generative AI entered the scene, Nvidia’s earnings beats have turn out to be notably greater (averaging 18%). I feel this pattern will proceed.

The information on this article weakens the argument that goes one thing like: “Nvidia inventory is overvalued as a result of its ahead price-to-earnings (P/E) ratio is X.” (The ahead P/E is 46.2, as of Aug. 26.) A ahead P/E makes use of an estimate for the earnings worth, usually Wall Avenue’s. And people estimates are probably notably too low, which inflates the ahead P/E.

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Beth McKenna has positions in Nvidia. The Motley Idiot has positions in and recommends Apple and Nvidia. The Motley Idiot has a disclosure coverage.

Prediction: Nvidia Will Beat Wall Avenue’s Earnings Estimate by 10% or Extra on Wednesday was initially printed by The Motley Idiot