NVIDIA Q2 earnings preview: Key expectations | How is the stock expected to move after results?

Chipmaking giant and ‘Magnificent Seven’ favourite Nvidia is scheduled to announce its financial performance for the June-ending quarter today, 26 August, with the earnings coming at a time when the company's share price has faced pressure on Wall Street.

The chip giant is set to announce its numbers after-market hours, and, as usual, Wall Street's expectations are running high. The stakes are particularly high as investors look for clearer signs of whether the soaring valuations across the artificial intelligence (AI) space are justified.

Expectations have also been raised by the better-than-expected numbers delivered by Nvidia's peers during the June quarter.

Moreover, Nvidia's long track record of repeatedly beating expectations has conditioned investors to expect another strong performance.

Over the past year, the company has beaten expectations across most key topline metrics, with the second quarter of last year being the lone exception.

Nvidia's earnings expectations

Nvidia is expected to report adjusted earnings per share (EPS) of $2.09 for the second quarter on revenue of $92 billion, according to Bloomberg analyst consensus estimates.

That would mark a 96% year-on-year jump in overall revenue and continued quarter-on-quarter growth.

Overall revenue growth continues to be driven by optimism surrounding the strength of Nvidia's data centre segment. However, investors will also be looking for clarity on the outlook for Nvidia's newer platforms, Blackwell and Rubin, which are designed to significantly reduce energy consumption and costs for customers.

Data centre revenue is anticipated to top $85.4 billion, up 107% from a year earlier. Hyperscaler revenue is expected to reach $43.5 billion, while AI Clouds, Industrial, and Enterprise (ACIE) sales are projected to reach $41.7 billion.

In the first quarter, the company updated its reporting framework, breaking down data centre revenue into sales from hyperscale and ACIE.

However, some of Nvidia's largest customers, including hyperscalers such as Amazon, Google and Microsoft, are increasingly developing their own chips to reduce their dependence on Nvidia. These companies are also expanding their chip offerings to third-party customers, creating a potential long-term headwind for the company.

Investors will also closely watch what Chief Executive Officer Jensen Huang has to say about capital spending by Nvidia's biggest customers, future demand and a series of new financing deals involving the company.

Earlier this month, Nvidia said it was partnering with Wall Street firms, including Goldman Sachs Group Inc., BlackRock Inc. and Apollo Global Management Inc., to provide $500 billion in financing for AI infrastructure. Nvidia also agreed to spend as much as $105 billion to back a data centre campus in Ohio that will be leased by OpenAI.

Nvidia shares set for volatility after earnings

In terms of trading on the earnings, Nvidia shares have not performed particularly well following their results over the last few quarters, a trend investor will be watching closely this time around.

The options market is pricing in a roughly 5% move in either direction following the earnings announcement. Options traders are pricing in a $280 billion swing in Nvidia's market value following the results.

The chipmaker's options imply a 5.4% move in either direction on Thursday, below the 6.5% move implied ahead of its May earnings report, Reuters reported. The implied move translates into about $280 billion in market capitalisation—more than the market value of around 90% of S&P 500 companies.

(With inputs from Bloomberg and Reuters)

Disclaimer: We advise investors to check with certified experts before making any investment decisions.