Nvidia (NVDA), a leading player in the AI sector, is set to release its second-quarter earnings report after the market close on Wednesday. This highly anticipated announcement is expected to have significant implications for the tech sector, as investors are keenly watching for signs that the AI trade will sustain its momentum into the latter half of the year.
Nvidia’s stock has surged more than 163% year-to-date and 60% over the past six months. In contrast, its rival AMD (AMD) has seen a 9% increase year-to-date but a 14% decline over the past six months. Intel (INTC) has faced a dramatic 57% drop since the start of the year and a 53% decrease in the last six months, struggling amid a major turnaround effort.
For the upcoming quarter, Nvidia is projected to report adjusted earnings per share (EPS) of $0.65 on revenue of $28.7 billion. This represents a substantial 139% increase in EPS and a 113% rise in revenue compared to the same period last year, when Nvidia posted EPS of $0.27 and revenue of $13.5 billion.
As the leading force in AI chip design and software, Nvidia commands between 80% and 95% of the market, according to Reuters. The company is also set to unveil its next-generation Blackwell line of chips. Although there have been reports of a potential delay in Blackwell shipments, analysts from Goldman Sachs, KeyBanc, and Loop Capital are not overly concerned about the short-term impact.
Loop Capital’s managing director, Ananda Baruah, noted that while the Blackwell rollout might be delayed by about 120 days instead of 90, this may have minimal impact. He pointed out that improved yields from Nvidia’s existing Hopper chips and increased Hopper production could offset the delay.
Nvidia’s data center business is expected to generate $24 billion in revenue for the quarter, reflecting a 142% increase from $10.3 billion in the same quarter last year. However, this growth is a slowdown compared to the previous quarter’s 426% increase and 408% growth in Q4 last year. Analysts predict that Nvidia will beat its Q2 expectations and potentially raise its guidance for Q3, supported by a recent earnings beat from TSMC, Nvidia’s chip supplier.
Looking ahead to Q3, data center revenue is projected to reach $27.7 billion, marking a 91% year-over-year increase. Stifel’s managing director, Ruben Roy, anticipates Nvidia could approach $30 billion in data center revenue by October, though growth may be tempered by the “law of large numbers.”
AMD is also making strategic moves, recently announcing its acquisition of ZT Systems for $4.9 billion to enhance its AI server capabilities. While this could boost AMD’s market position, it is not expected to significantly challenge Nvidia’s dominance in the AI sector.
Nvidia’s earnings report will also include gaming revenue, expected to be around $2.7 billion. Although gaming has become a smaller segment of Nvidia’s overall business, it remains a substantial revenue source compared to other areas like professional visualization and automotive.
