Nvidia (NASDAQ: NVDA) stock has been a phenomenal investment recently. Year to date, it’s up almost 200%. Can the rally continue? Well, we’re about to find out. Because on Wednesday (20 November), Nvidia will be posting its Q3 earnings and the numbers, and forward-looking guidance, are likely to have a huge impact on its share price.
Q3 earnings are coming up
Nvidia will post its earnings on Wednesday after the US market closes (just after 9pm for UK-based investors). These will be for the quarter ended 31 October. It’s fair to say that expectations are high. Since early September, the stock has rallied nearly 40%.
What are investors expecting?
Taking a closer look at forecasts, analysts currently expect the chip powerhouse to report earnings per share (EPS) of $0.74 on revenue of $33.2bn.
Given that for Q3 last year, EPS and revenue came in at $0.37 and $18.1bn respectively, the level of growth expected is pretty incredible.
Zooming in on the revenue figure, Nvidia’s Data Center segment – its largest business – is expected to bring in $29bn. That would be a 100% increase versus the $14.5bn the company reported in Q3 last year.
Guidance will be crucial
The Q3 numbers will only be part of the story though. Q4 guidance is likely to be more important.
In recent quarters, Nvidia has raised its quarterly guidance significantly. So, there will be a lot of focus on its forecasts for the current quarter.
Right now, analysts are expecting Nvidia to announce Q4 revenue guidance of $37bn. If the company doesn’t raise its guidance, the stock could take a hit.
Blackwell details
Looking beyond the numbers, investors are going to be looking for more information about Nvidia’s ‘Blackwell’ AI chips. People will want to know if there are any supply constraints here (this is a risk in the near term).
They’ll also want to know what demand is like. Recently, CEO Jensen Huang said that demand for these chips was “insane” (a slowing of demand is another risk).
Expect volatility
I think one thing that we can almost be sure of is that Nvidia’s share price will swing around wildly after the results are published. It could rise or fall 10%-15% after the numbers come out.
Even if the earnings are excellent, the stock could still fall. Last quarter, the share price dropped 6% after earnings despite the fact that the company produced a ‘beat and raise’ (beating estimates and raising guidance).
How I’m playing it
Now, I’m a long-term investor in Nvidia. I plan to hold the stock for years to come as I see it as one of the best ways to play the artificial intelligence boom.
So, I’m not too fussed about what the company reports or says on Wednesday night. I’m focusing on the next five to 10 years here, not just one quarter.
Of course, if the stock takes a big hit after earnings, I’ll be frustrated. It’s never fun to see one’s financial gains disappear.
I could potentially use the share price weakness to buy more shares though. While it’s one of my largest holdings today, I feel that I could own a few more shares, as I’m very bullish on the company.