We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Should You Buy NVIDIA After Impressive Q1 2027 Earnings and Guidance?
Read MoreHide Full Article
Key Takeaways
NVIDIA posted Q1 fiscal 2027 revenues of $81.62B, with data center sales surging 92% year over year.
NVIDIA expects Q2 fiscal 2027 revenues of about $91B, above the current consensus estimate.
NVIDIA raised buyback authorization to $80B and increased its quarterly dividend to $0.25 per share.
NVIDIA Corp. (NVDA - Free Report) — the undisputed global leader of generative artificial intelligence (AI)-powered graphical processing units (GPUs) — reported solid first-quarter fiscal 2027 earnings results.
Adjusted earnings per share came in at $1.87, surpassing the Zacks Consensus Estimate of $1.77 and the year-ago figure of $0.81. Revenues came in at $81.62 billion, outpacing the Zacks Consensus Estimate by 3.63% and the year-ago figure of $44.06 billion. Adjusted gross margin remained strong at around 75%.
The chart below shows the price performance of NVDA year to date.
Image Source: Zacks Investment Research
Data Center Revenues Maintain Momentum
Data center revenues reached $75.2 billion, surged 92% year over year. NVDA reported 50% of these revenues came from hyperscalers. This segment will continue its northward journey as four AI hyperscalers — Meta Platforms Inc. (META - Free Report) , Alphabet Inc. (GOOGL - Free Report) , Microsoft Corp. (MSFT - Free Report) and Amazon.com Inc. (AMZN - Free Report) — raised their AI capex budget to $725 billion in 2026 from $670 billion estimated earlier.
The most important fact is that the remaining 50% of data center revenues came from various other sources like AI Clouds, industrial, enterprise, and sovereign customers. This indicates that NVDA is strategically diversifying its customer base as AI tools are gradually being adopted in mainstream business operations.
Transformation From AI GPU to AI CPU
Beside being the generative-AI-powered GPU leader, NVIDIA is aiming to become a leading supplier of AI CPUs (Central Processing Units). The so long dormant AI CPU space has charged up with the advent of agentic AI tools.
In this regard, NVDA’s new AI superchip — Vera Rubin — may become a game-changer. This innovative rack-scale system will deliver 10 times more performance per watt than its predecessor, Grace Blackwell.
The Vera Rubin system comprises 1.3 million components, including 72 Rubin GPUs and 36 Vera CPUs. NVIDIA will start the shipment of Vera Rubin in the second half of 2026. It had earlier announced the roadmap for Rubin Ultra, likely to be introduced in late 2027, and Feynman AI chips to be launched in 2028.
CEO Jensen Huang said, “agentic AI has arrived” and the factory buildout is “accelerating at extraordinary speed.” Huang also said that Vera Rubin, will be “even more successful than Grace Blackwell.” Chief Financial Officer Colette Kress said the new Vera CPU “opens a brand new $200 billion tab for NVIDIA.”ama
The move highlights how NVIDIA is transitioning from just a GPU company to a full infrastructure powerhouse.
Near-Term Challenges Ahead for NVDA
NVIDIA’s major hyperscaler customers like Meta, Alphabet, Amazon and Microsoft are currently developing their proprietary custom ASICs. Meta introduced four AI chips in March to be manufactured by Taiwan Semiconductor Manufacturing Co.
Alphabet has been developing its silicon-dubbed AI-powered tensor processing units (TPUs). Management has intended to create a new AI infrastructure for this. Amazon said that its chip business currently generates $20 billion per annum.
Moreover, on yesterday’s earnings call, management said that the company has “largely conceded” China’s AI chip market to Huawei. This means that NVDA is no longer considering China, which was once a major growth market for its innovative generative-AI chips, a meaningful revenue contributor for the future.
Additionally, management said that the lingering U.S. war with Iran in the Middle East will have a negative material impact. A supply-constrained environment for memory chips and foundry capacity will have a significant adverse impact on input costs.
Much Needed Organizational Restructuring
In order to address a new business environment and challenges, NVIDIA has made organizational restructuring with two primary reporting segments. The legacy Data Center segment will include hyperscalers and AI clouds, industrial, and enterprise sources.
The Edge Computing segment comprises devices or agentic and physical AI, like PCs, game consoles, workstations, AI-RAN base stations, robotics and automotive. Huang emphasized that physical AI will be “the next wave.” In this regard, NVDA’s CUDA software platform will give the company an edge in the autonomous vehicles and robotics space.
Strong Guidance and Shareholders’ Returns
NVIDIA projected its fiscal second-quarter 2027 revenues to be around $91 billion (+/-2%). The Zacks Consensus Estimate currently stands at $84.1 billion. The non-GAAP gross margin should be approximately 75% (+/-0.5%). Operating expenses forecast at $4 billion for GAAP and $2.8 billion for non-GAAP.
In the last reported quarter, NVDA bought back $19.3 billion of its own stock and paid another $243 million in dividends. For the second quarter, management raised its repurchase authorization to $80 billion and its quarterly dividend from $0.01 to $0.25 a share.
Solid Estimate Revisions
For fiscal 2027 (ending January 2027), the Zacks Consensus Estimate currently shows revenues of $360.29 billion, suggesting an improvement of 66.9% year over year and earnings per share of $8.16, indicating an increase of 71.1% year over year. The Zacks Consensus Estimate for the current year has improved 0.4% in the last seven days.
For fiscal 2028 (ending January 2028), the Zacks Consensus Estimate currently shows revenues of $472.88 billion, suggesting an improvement of 31.3% year over year and earnings per share of $10.90, indicating an increase of 33.6% year over year. The Zacks Consensus Estimate for next year has improved 0.6% in the last seven days.
NVDA currently has a long-term (3-5 years) EPS growth rate of 40.8%, significantly above the S&P 500’s long-term EPS growth rate of 16.6%.
Image Source: Zacks Investment Research
Excellent Upside Potential for NVDA Stock
NVIDIA has a return on equity (ROE) of 97.37% compared with the S&P 500’s ROE of 17.26% and the industry’s ROE of a mere 4.3%. NVDA has a forward P/E (price/earnings) of 27.05% compared with the industry’s P/E of 56.17% and the S&P 500’s P/E of 17.95%.
The short-term average price target of brokerage firms for the stock represents an increase of 23.3% from the last closing price of $223.47. The brokerage target price is currently in the range of $140-$380. This indicates a maximum upside of 70% and a downside of 37.4%. The risk/reward ratio is a favorable 1.87.
NVIDIA represents a rare opportunity to invest in a company with proven execution and substantial unrealized potential in the AI revolution. Astonishing growth potential of the global AI infrastructure market and NVDA’s strong guidance and business visibility despite revenue loss in China are noteworthy.
As a result, the average target price of brokerage firms is expected to witness a solid near-term upside. At this stage, it will be prudent to buy NVDA on every dip. Hold this stock for the long term as the company’s strong execution of the last several quarters and robust projections should generate more value.
Image Source: Zacks Investment Research
Zacks' 7 Best Strong Buy Stocks (New Research Report)
Valued at $99, click below to receive our just-released report
predicting the 7 stocks that will soar highest in the coming month.
View the Zacks #1 Rank List
Image: Bigstock
Should You Buy NVIDIA After Impressive Q1 2027 Earnings and Guidance?
Key Takeaways
NVIDIA Corp. (NVDA - Free Report) — the undisputed global leader of generative artificial intelligence (AI)-powered graphical processing units (GPUs) — reported solid first-quarter fiscal 2027 earnings results.
Adjusted earnings per share came in at $1.87, surpassing the Zacks Consensus Estimate of $1.77 and the year-ago figure of $0.81. Revenues came in at $81.62 billion, outpacing the Zacks Consensus Estimate by 3.63% and the year-ago figure of $44.06 billion. Adjusted gross margin remained strong at around 75%.
The chart below shows the price performance of NVDA year to date.
Image Source: Zacks Investment Research
Data Center Revenues Maintain Momentum
Data center revenues reached $75.2 billion, surged 92% year over year. NVDA reported 50% of these revenues came from hyperscalers. This segment will continue its northward journey as four AI hyperscalers — Meta Platforms Inc. (META - Free Report) , Alphabet Inc. (GOOGL - Free Report) , Microsoft Corp. (MSFT - Free Report) and Amazon.com Inc. (AMZN - Free Report) — raised their AI capex budget to $725 billion in 2026 from $670 billion estimated earlier.
The most important fact is that the remaining 50% of data center revenues came from various other sources like AI Clouds, industrial, enterprise, and sovereign customers. This indicates that NVDA is strategically diversifying its customer base as AI tools are gradually being adopted in mainstream business operations.
Transformation From AI GPU to AI CPU
Beside being the generative-AI-powered GPU leader, NVIDIA is aiming to become a leading supplier of AI CPUs (Central Processing Units). The so long dormant AI CPU space has charged up with the advent of agentic AI tools.
In this regard, NVDA’s new AI superchip — Vera Rubin — may become a game-changer. This innovative rack-scale system will deliver 10 times more performance per watt than its predecessor, Grace Blackwell.
The Vera Rubin system comprises 1.3 million components, including 72 Rubin GPUs and 36 Vera CPUs. NVIDIA will start the shipment of Vera Rubin in the second half of 2026. It had earlier announced the roadmap for Rubin Ultra, likely to be introduced in late 2027, and Feynman AI chips to be launched in 2028.
CEO Jensen Huang said, “agentic AI has arrived” and the factory buildout is “accelerating at extraordinary speed.” Huang also said that Vera Rubin, will be “even more successful than Grace Blackwell.” Chief Financial Officer Colette Kress said the new Vera CPU “opens a brand new $200 billion tab for NVIDIA.”ama
The move highlights how NVIDIA is transitioning from just a GPU company to a full infrastructure powerhouse.
Near-Term Challenges Ahead for NVDA
NVIDIA’s major hyperscaler customers like Meta, Alphabet, Amazon and Microsoft are currently developing their proprietary custom ASICs. Meta introduced four AI chips in March to be manufactured by Taiwan Semiconductor Manufacturing Co.
Alphabet has been developing its silicon-dubbed AI-powered tensor processing units (TPUs). Management has intended to create a new AI infrastructure for this. Amazon said that its chip business currently generates $20 billion per annum.
Moreover, on yesterday’s earnings call, management said that the company has “largely conceded” China’s AI chip market to Huawei. This means that NVDA is no longer considering China, which was once a major growth market for its innovative generative-AI chips, a meaningful revenue contributor for the future.
Additionally, management said that the lingering U.S. war with Iran in the Middle East will have a negative material impact. A supply-constrained environment for memory chips and foundry capacity will have a significant adverse impact on input costs.
Much Needed Organizational Restructuring
In order to address a new business environment and challenges, NVIDIA has made organizational restructuring with two primary reporting segments. The legacy Data Center segment will include hyperscalers and AI clouds, industrial, and enterprise sources.
The Edge Computing segment comprises devices or agentic and physical AI, like PCs, game consoles, workstations, AI-RAN base stations, robotics and automotive. Huang emphasized that physical AI will be “the next wave.” In this regard, NVDA’s CUDA software platform will give the company an edge in the autonomous vehicles and robotics space.
Strong Guidance and Shareholders’ Returns
NVIDIA projected its fiscal second-quarter 2027 revenues to be around $91 billion (+/-2%). The Zacks Consensus Estimate currently stands at $84.1 billion. The non-GAAP gross margin should be approximately 75% (+/-0.5%). Operating expenses forecast at $4 billion for GAAP and $2.8 billion for non-GAAP.
In the last reported quarter, NVDA bought back $19.3 billion of its own stock and paid another $243 million in dividends. For the second quarter, management raised its repurchase authorization to $80 billion and its quarterly dividend from $0.01 to $0.25 a share.
Solid Estimate Revisions
For fiscal 2027 (ending January 2027), the Zacks Consensus Estimate currently shows revenues of $360.29 billion, suggesting an improvement of 66.9% year over year and earnings per share of $8.16, indicating an increase of 71.1% year over year. The Zacks Consensus Estimate for the current year has improved 0.4% in the last seven days.
For fiscal 2028 (ending January 2028), the Zacks Consensus Estimate currently shows revenues of $472.88 billion, suggesting an improvement of 31.3% year over year and earnings per share of $10.90, indicating an increase of 33.6% year over year. The Zacks Consensus Estimate for next year has improved 0.6% in the last seven days.
NVDA currently has a long-term (3-5 years) EPS growth rate of 40.8%, significantly above the S&P 500’s long-term EPS growth rate of 16.6%.
Image Source: Zacks Investment Research
Excellent Upside Potential for NVDA Stock
NVIDIA has a return on equity (ROE) of 97.37% compared with the S&P 500’s ROE of 17.26% and the industry’s ROE of a mere 4.3%. NVDA has a forward P/E (price/earnings) of 27.05% compared with the industry’s P/E of 56.17% and the S&P 500’s P/E of 17.95%.
The short-term average price target of brokerage firms for the stock represents an increase of 23.3% from the last closing price of $223.47. The brokerage target price is currently in the range of $140-$380. This indicates a maximum upside of 70% and a downside of 37.4%. The risk/reward ratio is a favorable 1.87.
Investment Thesis for NVDA Shares
NVIDIA currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
NVIDIA represents a rare opportunity to invest in a company with proven execution and substantial unrealized potential in the AI revolution. Astonishing growth potential of the global AI infrastructure market and NVDA’s strong guidance and business visibility despite revenue loss in China are noteworthy.
As a result, the average target price of brokerage firms is expected to witness a solid near-term upside. At this stage, it will be prudent to buy NVDA on every dip. Hold this stock for the long term as the company’s strong execution of the last several quarters and robust projections should generate more value.
Image Source: Zacks Investment Research