By Kathleen Brooks, research director at XTB
· Another monster report expected
· Huang to update on customer base and China visit
· Could Nvidia breach the $1 trillion revenue barrier?
· Will Nvidia make it easy for investors to pile back into the stock?
· Nvidia: the first $6 trillion company?
The Q1 earnings season reaches its peak after the US market closes this evening. Nvidia will release its much-anticipated Q1 earnigns report, and analysts expect the company to report revenues of $79.1bn, up 80% in a year, earnings per share of $1.77, and net income, or profit of $43.13bn, more than double compared to a year ago.
The market is expecting another monster report later tonight, however, the question is whether Nvidia can continue to beat expectations and if forward guidance will be enough to wow a market that is taking a breather after an epic rally. Ahead of Nvidia’s earnings report, there has been a pullback in tech stocks and the Nasdaq 100 is lower by nearly 1% in recent days. This suggests that the next leg of the AI trade, and the US stock market rally, could depend on tonight’s results.
Huang to update on customer base and China visit
As we lead up to this report, the market is already anticipating an earnings beat and for CEO Jensen Huang to raise forward guidance. This is becoming typical of Nvidia. The market expects forward guidance to land between $87bn and $91bn, which reflects the massive capital investments from the hyeprscalers like Meta, Microsoft, Google and Amazon. It is also worth noting that this forecast does not include revenue generated in China. Tonight’s earnings report will be a good opportunity for Huang to update the market on business in China, especially after he accompanied President Trump to Beijing last week.
Although Nvidia is facing growing competition, the chip maker still has an unparallelled infrastructure offering across software, developer tools and cloud computing, and Nvidia still holds about 70% market share of the AI market. This is expected to sustain the company’s revenue growth for the long term, as the AI market is expected to exceed $1.7 trillion by 2030.
Investors are looking for an update on capex spending. Nvidia and others have bene accused of circular funding, for example investing in other companies so that they use Nvidia chips. This has been controversial, but we expect Huang to push back on any criticism. Even so, Nvidia’s capex spending will also be scrutinized this evening.
Jensen Huang is becoming a celebrity in his own right, and like Steve Jobs was for Apple, Huang is Nvidia. His comments will be crucial to how the market reacts to this earnings report. Huang is expected to say that the transition from Blackwell architecture to the new Vera Rubin system is going well, and there could be a ramp up in production in the second half of 2026. This is important, since this new system is vital for strong future revenues for the chip maker.
Investors also want to see Nvidia broaden its customer base. In recent years, concerns have grown that the chip maker is too reliant on a small number of companies, including Microsoft, Meta and Google. Huang needs to get the market excited about new earnings opportunities and spell out the details of contracts with companies beyond the hyperscalers. If Huang can convince the market that Nvidia’s customer base is growing, then this could trigger another leg higher for the stock price.
Could Nvidia breach the $1 trillion revenue barrier?
The focus will also be any update to the company’s $1 trillion 2025-2027 revenue forecast. Will Huang increase this forecast? If yes, then this could unleash another wave higher in Nvidia’s share price. If Huang does not expect revenues to breach the psychologically important $1 trillion barrier, the question is whether this could ‘disappoint’ the market? Concerns are growing about the competitive threat from Google’s Tensor processing units and custom chips. However, if Huang suggests that revenues will breach the $1trillion barrier, then we expect the market to go wild for Nvidia once more.
So far this year, the stock price is higher by 18%, but stock price gains have ramped up in recent weeks. While Nvidia’s share price has been under pressure alongside the broader tech sector, it is still eking out a decent 9% gain for the past month. But it is still lagging its peers in the chip sector, ARM’s share price is higher by 33% in the past month, and AMD’s share price is higher by 48%. Depending on the outcome of today’s earnings report, Nvidia could play catch up.
Will Nvidia make it easy for investors to pile back into the stock?
Analysts are also hopeful that there could be some sweeteners for investors included in this report. Nvidia has a paltry dividend, with a yield of merely 0.2%. It has typically favoured buybacks rather than dividends, and last year it spent $100bn on buybacks. If analysts are correct and revenues are expected to surge even more later this year, then we could see the company’s buyback commitment rise to $150bn for this year. There is also pressure on Nvidia from some investors to dramatically lift its dividend. We would expect investors to cheer this move, if it happens.
The options market is predicting a 6.5% swing in either direction on the back of this earnings report. The average move in the 24 hours after an earnings report in the last 5 quarters is more than 3%, so the bias is to the upside for Nvidia’s share price.
Nvidia: the first $6 trillion company?
With an expected gross margin of 75%, talk of trillion-dollar revenues and the potential for Nvidia to broaden its customer base, there is a lot for investors to be excited about ahead of this report. After three days of losses, it is no wonder that the share price showed signs of stabilization in post-market trading late on Tuesday. If this earnings report triggers another rally in the stock price, then it could push Nvidia closer to a $6 trillion market capitalization, currently its market cap is $5.34 trillion.
This is set to be a monster earnings report, for a monster tech firm.
Chart 1: Nvidia’s share price has picked up from April’s lows
Source: XTB and Koyfin
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