Nvidia Earnings Will Put The 'AI Bubble' To Test — Check Revenue, Net Income Estimates
Analysts see Nvidia's revenue to rise 56%, which is still far-off from the triple-digit growth the company registered for many preceding quarters.
Nvidia Corp. earnings are looming over the Wall Street. The financial results of one of the largest chip makers in the world will likely prove to be a make or break for the heavily debated 'AI bubble' and all the AI bets.
The 'AI bubble' essentially refers to the possibility of the AI boom having outrun the fundamentals, where the stock valuations of AI-linked tech companies are seen as inflated as compared to their profits and revenue.
Also, circular deals where the money keeps flowing between two or more inter-connected companies, and one company helps lift the other's revenue, add to the 'bubble' anxiety.
Nonetheless, all eyes are set on the tech giant and investors want to know how big AI deals such as Nvidia's $100 billion investment in OpenAI, along with $5 billion worth of ownership in chipmaker Intel Corp. will impact its balance sheet.
However, regardless of the anxiety surrounding the AI bubble, demand for Nvidia's chips remains strong among cloud giants, with the likes of Microsoft Corp. making billions of dollar of investment in AI data centers.
Here is a rundown of what analysts expect out of Nvidia's third quarter, according to a Reuters report, based on data compiled by LSEG:
Revenue surge: Analysts estimate the chipmaker's revenue to grow more than 56% year-on-year to $54.92 billion for the August-October quarter. While the jump seems significant, it is still far off from the triple-digit growth the company registered for many preceding quarters.
Margins narrow: Adjusted gross margins will likely narrow by nearly 2 percentage points to 73.6% in the third quarter, compared to the year-ago period, as per LSEG data.
Even as demand for chips remains intact, Nvidia may be struggling to supply chips, with pressure mounting on its margins, analysts suggest. The company has reportedly began rolling out more complex machinery and software to compete with rivals like TSMC, along with updating existing software like its famous Blackwell chips.
Net Income: In line with the revenue jump, net income is estimated to see a 53% spike to $29.54 billion.
After the US markets opened, Nvidia's stock surged 3.5% to $187.16, ahead of the earnings announcement.
