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Here's What to Expect from Nvidia's (NVDA) Q3 Earnings

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Nvidia (NVDA - Free Report) stock slipped 1% during regular trading hours Wednesday just one day before the company is set to report its quarterly financial results. NVDA’s dip is part of a larger selloff since the chip power reached its all-time high in October.


Nvidia has been a graphics chip powerhouse for years, and its recently launched GPUs based on its new Turing architecture are expected to be a game-changer in the gaming industry. Meanwhile, Nvidia is set to benefit from the growth of cloud computing, AI, and machine learning.

Plus, Nvidia announced Monday that its new T4 GPU “received the fastest adoption of any server GPU.” Hewlett Packard Enterprise (HPE - Free Report) , IBM (IBM - Free Report) , Lenovo, and other giants have featured the T4. On top of that, Google (GOOGL - Free Report) Cloud Platform just became the first major cloud vendor to offer availability for the T4 GPU.

Clearly, Nvidia seems to have much to look forward to. But NVDA stock has plummeted roughly 32% since it touched an all-time high of $292.76 per share on October 2. Nvidia stock closed regular trading at $197.19 per share on Wednesday. We should also note that shares of AMD (AMD - Free Report) , Micron (MU - Free Report) , and Texas Instruments (TXN - Free Report) have all fallen during this same stretch.


Q3 Outlook

Moving on, our current Zacks Consensus Estimate is calling for Nvidia’s Q3 revenues to jump by 22.9% to hit $3.24 billion. Investors should note that the firm’s Q1 revenues soared 66% and Q2 revenues climbed 40%.

Nvidia’s key gaming unit is projected to jump roughly 20% from $1.56 billion to $1.88 billion, based on our NFM estimates. On top of that, Nvidia’s datacenter business is projected to surge 63% to hit $816.36 million.

At the bottom end of the income statement, Nvidia is expected to see its adjusted quarterly earnings climb 43.6% to reach $1.91 per share. Now we need to know if the company is expected to top our quarterly earnings estimates. Luckily, we can turn to our exclusive Earnings ESP figure to do so.

The Zacks Earnings ESP (Expected Surprise Prediction) compares the Most Accurate Estimate to the Zacks Consensus Estimate for the quarter. The Most Accurate Estimate is a version of the Zacks Consensus whose definition is related to change.

This is done because, generally speaking, when an analyst posts an estimate right before an earnings release, it means that they have fresh information which could potentially be more accurate than what analysts thought about a company two or three months ago.

A positive Earnings ESP paired with a Zacks Rank #3 (Hold) or better ranking helps us feel confident about the potential for an earnings beat. In fact, our 10-year backtest has revealed that this methodology has accurately produced a positive surprise 70% of the time.


Nvidia is currently a Zacks Rank #3 (Hold) that sports an Earnings ESP of -4.71%. Unfortunately, this means that our model is inconclusive. But it is worth pointing out that Nvidia’s earnings estimate revisions have all trended in the wrong direction over the last 30 days.

Nvidia is scheduled to release its Q3 financial results after the closing bell Thursday. So, make sure to come back to Zacks for our complete analysis of Nvidia’s actual results.

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