Nvidia Earnings Expectations: Can NVDA Beat Estimates Yet Again?

Despite being a short one, this week promises to be action-packed, and we have a good number of earnings due out - including from the Street's artificial intelligence (AI) favorite, Nvidia (NVDA). The chip designer will release its earnings tomorrow after the bell, and the report will come at a time when the stock has already gained 39% in 2024, as the AI euphoria looks far from over.

Here's what Wall Street expects from Nvidia’s earnings, and a look at whether the company can beat consensus estimates yet again, as it has done for the last several quarters.

Nvidia Earnings Expectations

Analysts expect Nvidia to report revenues of $20.5 billion in the fiscal fourth quarter of 2024, which implies a YoY increase of 205%. If analysts’ estimates turn out to be accurate, it would be the third consecutive quarter where Nvidia reports a YoY rise of more than 200% in its revenues.

During its fiscal Q3 earnings report, Nvidia forecast revenues at $20 billion for Q4 at the midpoint, while guiding for adjusted gross margin to arrive between 75%-76%. Analysts expect Nvidia’s fiscal Q4 earnings per share (EPS) to rise a mammoth 546% to $4.20. The company has been hitting record-high revenues and EPS over the last couple of quarters, and - looking at the estimates - it should stretch that winning streak to fiscal Q4, also.

www.barchart.comWill Nvidia Beat Earnings Estimates in Fiscal Q4?

Nvidia has a long track record of surpassing consensus estimates. The Jensen Huang-led company has beaten earnings estimates in 19 out of the last 20 quarters, while its revenues have outpaced Wall Street estimates for 18 consecutive quarters. However, the stock has risen only 14 times, and fell on six occasions, after its last 20 earnings reports. Notably, after Nvidia’s fiscal Q3 and Q2 earnings, the stock fell despite beating on both the top line and bottom line.

Like most other companies, Nvidia tends to provide conservative guidance. Furthermore, there is nothing to suggest that the demand for the company’s AI chips slowed down during the last quarter. It therefore looks quite likely that Nvidia will beat earnings estimates in fiscal Q4, also.

That said, after the breathtaking rally over the last year - which has put Nvidia within striking distance of becoming the next $2 trillion company, an elite club that counts Apple (AAPL) and Microsoft (MSFT) as its only current members - markets no doubt expect a lot more than just an “earnings beat” from Nvidia.

What Should Investors Watch in NVDA’s Earnings Report?

Along with the usual earnings metrics, there are several other aspects I would watch for in Nvidia’s fiscal Q4 earnings call, including the guidance for fiscal Q1 2025. Nvidia’s forward guidance will become especially crucial in the coming quarter, as fiscal Q1 of 2024 was the first quarter when it benefited from the strong demand for AI chips in a big way, and soon after that earnings call, Nvidia joined the ranks of $1 trillion companies. In the coming quarters, though, Nvidia won’t have the luxury of a low base effect as it has had for the last few quarters.

Along with the guidance for the current quarter, I would also watch out for commentary on the revenue trajectory for the fiscal year. At least a section of the market seems to believe that as hyper scalers like Amazon (AMZN), Microsoft, and Alphabet (GOOG) develop their custom AI chips, and other chipmakers like Intel(INTC) and Advanced Micro Devices (AMD) come up with competing products, Nvidia’s “home run” advantage will eventually evaporate.

Finally, I will watch out for comments on the inventory situation in AI chips, as well as any color on the products that Nvidia is developing for the Chinese market in response to the U.S. ban on the export of high-end chips to the Communist country.

Nvidia Stock Forecast Ahead of Earnings

Even if Wall Street wasn’t already bullish on Nvidia, bulls got yet another shot in the arm when Loop Capital initiated coverage on Nvidia ahead of the Q4 report with a “buy” rating and $1,200 target price – which happens to be a new Street-high target price for the stock. Multiple other brokerages also reiterated their bullish bias for Nvidia, and Oppenheimer said that it expects the company's Q4 earnings to top estimates.

Nvidia has a “Strong Buy” rating from 34 of the 39 analysts covering the stock, while 2 more rate it as a “Moderate Buy.” Only 3 analysts rate it as a “Hold,” and unsurprisingly, no brokerages currently rate NVDA stock as a “sell.”

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Some analysts have started to get a bit apprehensive about the runaway gains in NVDA stock, though, and Cathie Wood of ARK Invest – who is perhaps best known for being hyper-bullish on Tesla(TSLA) – has been selling the shares.

All things considered, it should be yet another battle royale between bulls and bears when Nvidia reports earnings tomorrow. Bulls will look for signs of justification for the rally, while bears will search for indications that the stock has run ahead of its fundamentals - or, as Wood best summed up the bearish thesis in a Wall Street Journal interview, “The expectation levels just get so high that they cannot be met.”

On the date of publication, Mohit Oberoi had a position in: NVDA , AAPL , AMZN , MSFT , TSLA , INTC . All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.