Before NVIDIA’s Earnings: A Note of Caution

With no major stock-moving news from NVIDIA’s conference call, we’re ending today’s live blog.

NVIDIA is currently up about 4.3%, a slight decline from where it was when the call started.

The big takeaway from today’s earnings is that despite NVIDIA guiding slightly lighter than anticipated next quarter, Wall Street is impressed with where NVIDIA’s sales would have been if not for new export controls.

As we noted at the beginning of today’s live blog: this was an extremely messy quarter thanks to geopolitical issues like tarrifs and new GPU controls. Whether or not NVIDIA would rise tomorrow required significant nuance.

So while NVIDIA missed on guidance, the nuance that its non-China business appears stronger than expected is what Wall Street is focusing on. We’ll have more analysis on NVIDIA’s earnings tomorrow on 24/7 Wall St.

Thank you for joining us for today’s earnings live blog.

We’ve been listening to all of NVIDIA’s call and the reality is there just hasn’t been a lot of material news.

Several Wall Street questions poked at the imapct of lost revenue in China. It’s clear that NVIDIA’s guide that next quarter would see about $45 billion in revenue after a reduction of $8 billion in sales to China provided the ‘wow’ factor that’s driving the stock up 5% after-hours.

NVIDIA just said that Microsoft has seen a 5-fold jump in token usage year-over-year.

In our live blog this morning we highlighted a Morgan Stanley research note which said token usage was exploding across all hyperscalers and they were scrambling for GPUs. Despite fears around hyperscalers slowing down, their demand continues to rise, which is great news for NVIDIA.

NVIDIA’s conference call has begun and its stock is now up nearly 6%. 

We’re listening to the call and will provide continuing updates.

NVIDIA’s conference call starts in two minutes, you can listen in at this link.

We’ll likely provide three or four updates during the call and then a summary of today’s earnings before ending this live blog.

We thank anyone who has followed along. Make sure to search ’24/7 Wall St’ whenever major earnings are happening as we provide live blogs on all the market’s major stocks.

NVIDIA is up 4% after-hours following its earnings release, but its rivals are also seeing strong gains.

• Broadcom: Is up 1.8% after-hours after rising 1.6% in today’s trading. NVIDIA’s stellar growth in its ‘Networking’ segment and callout in their CFO commentary that ‘continued adoption of Ethernet for AI’  are both great news for Broadcom. The company is the leading alternative to NVIDIA in networking and specializes in Ethernet.
• Marvell: Up 3.7% after-hours following a 1.2% jump today.
• Advanced Micro Devices: Up 1.6% after-hours.

NVIDIA shares are up 4% slightly before 4:50 p.m. ET. 

We’ll continue tearing into the major storylines during the company’s conference call.

It’s looking very likely that NVIDIA bulls will have reason to celebrate when the stock opens tomorrow. However, let’s see what the conference call holds before popping any champagne bottles.

NVIDIA’s all-important ‘Data Center’ segment actually slightly missed Wall Street targets. That’s largely due to weaker-than-expected results from ‘compute’ (AI processors). However, as we noted above, networking was extremely strong and the company also saw other segments outperform. NVIDIA’s ‘Gaming’ Revenue shot up 48% from last quarter thanks to the launch of new chips and its automotive segment continues to grow at a 72% rate.

Overall, every segment from NVIDIA grew with rates ranging from 19% growth to 73% growth.

Another area that NVIDIA investors will be celebrating tomorrow is the company’s networking segment. In recent quarters, networking has been inconsistent with growth far below the company’s larger ‘Data Center’ segment that includes its processors. However, this quarter networking surged to 64% quarter-over-quarter growth (its processing chips had 5% quarter-over-quarter growth).

The company said in recent conference calls that networking’s middling growth was a timing issue and they weren’t worried about any competitive dynamics. It looks like that’s exactly the case. Beyond networking being a valuable business at a ~$20 billion run rate, its also an important part of NVIDIA’s ‘competitive moat’ alongside CUDA.

NVIDIA spelled out exactly how much new export controls (announced on April 9th) hurt the company. NVIDIA said in booked $4.6 billion worth of H20 sales for the quarter, but was unable to deliver $2.5 billion before the announcement of restrictions exporting the chips.

In total, NVIDIA will see $8 billion in lost revenue from export controls on its H20 chips.

That’s a big number, and shows how impressive still guiding to $45 billion in sales next quarter is.

Without taking a charge for H20 chips it was unable to sell, NVIDIA would have recorded an EPS of $.96 this quarter (versus its report of adjusted EPS of $.81).

Last quarter NVIDIA dropped 8.5% the day following its earnings release despite ‘beating’ earnings expectations by about 5%.

One of the key factors that weighed on NVIDIA’s stock after that release was worries how low its gross margins would slip as it ramped new Blackwell chips. Last quarter, the company delivered 71.3% gross margins after excluding charges to it needed to liquidate H20 chips that were banned for export to China.

Next quarter the company is projecting 72% margins.

It appears that – at least for now – one of the key ‘risks’ Wall Street has been worrying about is trending in the right direction. This could be contributing to the initial move upward in NVIDIA’s stock.

The revenue forecast for next quarter is $45 billion, which is below Wall Street estimates of ~$45.2 billion.

So far, this light forecast hasn’t led to a sell-off. Investors may be breathing a sigh of relief that numbers aren’t worse with NVIDIA seeing signficant headwinds from export controls that have reduced its Chinese business significantly.

However, as we’ve noted last quarter (and the coming quarter) are very messy due to China export restrictions and the ongoing trade war. Nuance will be required in analyzing why Wall Street cheers or is disappointed in numbers from the company, and NVIDIA’s commentary on its conference call could cause significant movements to the company’s stock.

For now, the stock is holding onto gains, up 2.1% as of 4:27 p.m. ET.

Here’s the flash numbers:

•  Adjusted EPS of $.81 (Wall Street expected $.75)
• Revenue of $44.1 Billion (Wall Street expected $43.3B)

The stock immediately shoots up 3% on the earnings beat.

More analysis to come…

NVIDIA’s earnings are due in 5 minutes.

We’ll post their EPS, revenue, and other important figures the moment they’re released, so if this page isn’t automatically updating, remember to ‘refresh’ your browser after 4:20 p.m. ET.

After the initial numbers drop, we’ll continue providing analysis. I’ve (24/7 Analyst Eric Bleeker) been following NVIDIA for more than 15 years including naming it my ‘top stock’ as far back as 2009 on the promise of future growth in artificial intelligence. So, you’re in good hands getting the long-term perspective from 24/7 Wall Street.

NVIDIA is expected to report $.75 in adjusted EPS when its earnings are released in about 10 minutes (at 4:20 p.m. ET).

How much has NVIDIA beaten earnings by in recent reports?

• Last quarter: 4.71%
• Q3: 8%
• Q2: 6.25%
• Q1: 8.93%

If NVIDIA beat earnings by about 5% tonight, that would yield an EPS of $.79.

A note of caution: NVIDIA dropped 8.5% the day after its last earnings report despite ‘beating’ earnings by 4.71%. Once again, the company’s guidance, and commentary in key areas (margins, outlook in China, commentary on AI demand, and progress scaling Blackwell) will be far more impactful where its share price ends tomorrow.

The market has now closed for the day and NVIDIA closed down .51%.

If you missed our recent update, this sharp decline into the close has little to do with ‘earnings leaking’ or anything of the sort. Instead, NVIDIA (and many other semiconductor stocks) fell after news broke that the Trump Administration would be limiting the export of critical semicondcutor design software to China.

The move points to continued export controls of AI technology to China that could further hurt NVIDIA’s ability to sell into the country in the years to come.

If you’re on this blog wondering why NVIDIA’s share price is falling in late trading, it’s not that earnings have ‘leaked early.’ Instead the drop is likely related to the news that the Trump Administration will limit the export of Electronic Design Automation software to China. While that move won’t directly impact NVIDIA, it continues to raise the prospects of a severing between U.S. and Chinese tech ecosystems, which would limit access to an important market for NVIDIA in the years to come.

As a reminder, in our coverage below we highlighted how EPS estimates for NVIDIA’s upcoming quarter have fallen from $.93 two months ago to $.75 headed into earnings. The reason for that reduced earnings outlook is largely a fall off in sales to China after the Trump Administration barred export of NVIDIA’s H20 chips to China.

Once the clock strikes four, don’t expect NVIDIA earnings to be released immediately. Their earnings are expected to release at 4:20 p.m. ET, followed by a conference call at 5 p.m.

Stay on this page as we’ll be providing updates as soon as earnings are released. 

Less than an hour before Synopsys – a leader in the software used to create semiconductors – reported earnings, news broke that the Trump Administration would be limiting the export of semiconductor software design & services to China.

Leading companies in the space including Synopsys (Nasdaq: SNPS) and Cadence (Nasdaq: CDNS) are down 13% and 11%, respectively. It’s likely that NVIDIA’s business in China will be an area of extreme scrutiny when the company reports earnings. In our write-up below, we detailed how Wall Street expectations for NVIDIA’s EPS this quarter have sunk from $.93 two months ago down to $.75 today, largely due to export controls that will limit sales to China.

NVIDIA is up .80% in late trading, which is better than broad market averages.

The company isn’t alone, however. Broadcom (Nasdaq: AVGO) is up 1.8% and Marvell (Nasdaq: MRVL) is up 2.24%.