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NVIDIA (NVDA) to Report Q2 Earnings: What's in the Cards?

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NVIDIA Corporation (NVDA - Free Report) is scheduled to report second-quarter fiscal 2019 results on Aug 16.

Notably, the company has a stellar earnings surprise history. In the trailing four quarters, the company’s earnings surpassed the Zacks Consensus Estimate, delivering an average positive earnings surprise of 40.1%.

In the last reported quarter, the company’s non-GAAP earnings came in at $2.05 per share compared with 85 cents posted in the year-ago quarter. Earnings also surpassed the Zacks Consensus Estimate of $1.65.

Revenues not only surged 66% year over year to $3.21 billion but also comfortably surpassed the Zacks Consensus Estimate of $2.91 billion.

For the fiscal second quarter, NVIDIA expects revenues of $3.10 billion (+/-2%). The Zacks Consensus Estimate is pegged at $3.11 billion. For earnings, the Zacks Consensus Estimate is pegged at $1.83 per share, indicating year-over-year growth of 81.2%.

Let’s see how things are shaping up for the upcoming announcement.

Factors at Play

NVIDIA has been registering year-over-year top- as well as bottom-line growth, primarily stemming from growth across all platforms — GPUs for gaming, Professional Visualization, datacenter and Tegra automotive.

Further, NVIDIA continues to gain traction in the artificial intelligence (AI) space, which is driving revenues. NVIDIA is already a dominant player in the datacenter market. The company enjoys a first-mover advantage in the AI field and its expanding product portfolio is capable enough to leverage the growing adoption of AI in various industries.

We believe NVIDIA’s innovative product pipeline and strength in gaming and high-end notebook GPUs keep it well positioned. Higher adoption of NVIDIA’s Volta processors is also expected to act as a catalyst.

For the current quarter, NVIDIA predicts crypto-specific revenues to take a hit and be about one-third of the first-quarter level. However, higher-than-anticipated demand for its gaming chips is expected to drive results. Notably, sales generated from cryptocurrency miners were 9% of total revenues in the first quarter compared with gaming revenues, which contributed nearly 54%.

Moreover, NVIDIA’s operating expenses, as a percentage of revenues, have shown a declining trend in the last three fiscals. NVIDIA’s platform model has helped in reducing overall costs, thereby enhancing its operational efficiency. Improving gross margin and lower operating expenses are expected to drive the company’s operating margin in the fiscal second quarter.

NVIDIA Corporation Price and EPS Surprise

NVIDIA Corporation Price and EPS Surprise | NVIDIA Corporation Quote

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. Zacks Rank #4 (Sell) or #5 (Strong Sell) stocks are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

NVIDIA has an Earnings ESP of +0.48% and carries a Zacks Rank #3, which indicates a likely positive surprise.

Other Key Picks

Here are some other stocks, which you may also consider as our model shows that these have the right combination of elements to post an earnings beat in their upcoming releases:

Splunk Inc. with an Earnings ESP of +6.25% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Hewlett Packard Enterprise Company (HPE - Free Report) with an Earnings ESP of +3.65% and a Zacks Rank #3.

Cisco Systems (CSCO - Free Report) with an Earnings ESP of +0.07% and a Zacks Rank #3.

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