TLDR
- Nvidia’s Q4 earnings report is due Wednesday with expected 63% YoY earnings growth and 72% sales growth
- Investor concerns include potential sales gap during transition to Blackwell systems, production challenges, and impact from China’s DeepSeek
- Nvidia stock fell 2.8% to close at $126.63 ahead of earnings
- Analysts remain divided: some predict a “beat-and-raise special” while others believe good results won’t matter in the current market environment
- Historical data shows Nvidia typically yields 3-4% returns in the short term after earnings but much larger gains (112%) over the following year
Nvidia is set to release its fiscal fourth-quarter earnings report after market close on Wednesday, with Wall Street and investors showing mixed sentiments about the AI chipmaker’s prospects. The company’s stock has been under pressure in recent days, dropping 2.8% to close at $126.63 on Monday.
Analysts expect Nvidia to report adjusted earnings of 85 cents per share, representing a 63% increase year-over-year. Revenue is projected to reach $38.1 billion, up 72% from the same period last year. While these numbers reflect strong growth, they mark a noticeable slowdown compared to the company’s explosive performance throughout 2024.
For the current quarter (fiscal Q1), Wall Street is forecasting earnings of 91 cents per share, up 49%, with sales of $42.07 billion, representing a 62% increase. These projections continue to show strong growth but at a reduced pace compared to previous quarters.
Truist Securities analyst William Stein has outlined “three big concerns” that investors are grappling with ahead of the earnings announcement. First is the possibility of an “air pocket” in sales as customers transition from Hopper systems to the newer Blackwell systems. Second, production challenges could limit the availability of Blackwell processors. Third, hyperscale cloud computing services might reconsider their capital expenditure plans after China’s DeepSeek demonstrated that AI systems can be built at lower costs.
Despite these concerns, Stein maintains a buy rating on Nvidia stock with a price target of $204, noting that other data points suggest continued robust sales and demand for Nvidia chips.
The stock’s recent decline isn’t happening in isolation. On Monday, Nvidia shares dropped 3.1% alongside peers Broadcom and Marvell Technology following a disputed report that Microsoft was scaling back its data center expansion plans. This news rippled through the tech sector, contributing to negative sentiment.
Wedbush Securities analyst Daniel Ives remains optimistic about Nvidia’s upcoming report. “The market is heavily skewed negative right now around tech sentiment with any whisper of worries/concern from DeepSeek to Microsoft capex causing a brutal ripple impact across the tech ecosystem,” Ives said in a client note Tuesday. He expects “another robust performance and clear beat-and-raise special from Nvidia that should calm the nerves of investors.”
However, not all analysts share this positive outlook. Jordan Klein, a trading desk analyst with Mizuho Securities, believes that even a strong report from Nvidia won’t significantly impact investor sentiment. “Nvidia earnings will not matter all that much, nor change the current unwind, de-risk trade underway,” Klein stated in a client note Tuesday.
Morgan Stanley analyst Joseph Moore has reiterated his overweight (buy) rating on Nvidia stock with a price target of $152. Moore noted that while the quarter and outlook have improved over the last 60 days, the possibility of further U.S. export controls on semiconductors to China continues to weigh on the company. He expects Nvidia to provide an in-line guidance for the current quarter due to this export uncertainty.
Looking at historical performance, Nvidia has a strong track record following earnings announcements. Analysis by Yahoo Finance of Nvidia’s post-earnings stock movements over the past decade shows that buying Nvidia stock just before earnings reports has yielded median returns of 3% to 4% on one-day, one-week, and one-month timeframes. The gains increase to nearly 18% when holding for three months.
Initial reactions to earnings don’t always align with longer-term trends
Most impressive are the long-term results, with one-year holds after earnings announcements showing median returns of 112%. This pattern highlights an important aspect of Nvidia’s stock behavior: initial reactions to earnings may not always align with longer-term trends.
While Nvidia continues to be central to the AI investment theme, some market participants are questioning whether the focus of AI investing is shifting. Lee Munson, president and chief investment officer of Portfolio Wealth Advisors, noted in a recent “Stocks in Translation” episode that the expected energy trade linked to AI hasn’t played out as anticipated, leading him to exit that thesis.
Munson suggests that software companies capable of providing “bolt-on AI productivity tools” may present better opportunities going forward. He specifically mentioned companies like Salesforce and SAP as potentially attractive investments in this space, predicting that the timeline for the AI software trade is accelerating: “We thought it was going to be late 2026. But guess what — by the end of 2025, we’re going to be able to provide your enterprise a bolt-on AI doohickey.”
Meanwhile, Salesforce is also scheduled to report its quarterly results on Wednesday, though it remains somewhat overshadowed by Nvidia’s highly anticipated announcement.
As the market awaits Nvidia’s earnings report, investors will be closely watching not just the headline numbers but also any guidance or commentary about the company’s production capabilities, customer demand, and potential impacts from regulatory changes or competitive pressures.
The stock’s performance in the coming days may provide insights into whether the current market concerns are justified or if Nvidia can continue its position as a leading beneficiary of the ongoing AI boom.
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