Nvidia tipped to deliver strong growth in Q3, markets focus on outlook for chip demand
Nvidia will deliver its fiscal Q3, 2025 results after Wall Street’s closing bell on November 20, 2024.
Looking back: Q2 results show curse of high expectations
NVIDIA delivered exceptional Q2 FY25 results, reporting $30 billion in revenue, a 122% year-over-year increase. Data Center revenue led the growth, rising 154% due to strong demand for Hopper GPUs and AI infrastructure. GAAP EPS reached $0.67, a 168% increase from the previous year, while non-GAAP EPS rose 152% to $0.68, highlighting strong operational leverage. Gross margins expanded, reflecting efficient execution amid booming demand. NVIDIA projected Q3 FY25 revenue of $32.5 billion, signalling sustained growth momentum. CEO Jensen Huang emphasised the company’s leadership in AI and accelerated computing, underscoring NVIDIA’s central role in driving next-generation technology advancements.
(Source: Nvidia)
Analysts expect strong but moderating growth from Nvidia
Wall Street expects another strong performance fueled by robust demand for AI and data centre products. Consensus estimates project revenue at $33.06 billion, marking an 82% year-over-year increase. The Data Center segment is expected to reach record revenue of $29.53 billion, up from $26.3 billion in the previous quarter. Earnings per share (EPS) are anticipated to rise 88% year-over-year to $0.75, reflecting NVIDIA's operational efficiency amid strong market demand. Looking ahead, analysts forecast Q4 revenue of $36.94 billion, representing a 67% annual increase, alongside EPS of $0.82, up 58% from the prior year. Investors will closely watch NVIDIA’s Q3 guidance and commentary on its new Blackwell AI chip, which could significantly influence future growth. These estimates underscore NVIDIA’s leadership in generative AI and accelerated computing, positioning it for sustained growth in a competitive landscape.
(Source: Macro Trends)
Nvidia shares remain richly valued but in a solid uptrend
The market will be mostly looking for guidance about chip-demand and whether Nvidia can deliver another upgrade to its outlook. This includes continued strong demand for the company’s legacy Hooper product, especially from AI “hyperscalers”, and the roll-out of its successor processor, Blackwell, which will cater to the same customers.
A risk for Nvidia is potential overinvestment by its major tech customers, especially its so-called “Magnificent Seven” counterparts, that crimps future demand for chips. Nvidia’s share price is trading at a multiple which reflects rosy expectations of robust sales growth going forward, with the bar once again set high for the company going into this set of results.
In saying this, Nvidia’s price-to-sales ratio is trading below levels typically associated with a top in the market. Historically, investors have trimmed exposure to Nvidia when its P/S ratio exceeds 40x. Currently, it’s roughly 10% below that mark at roughly 36x.
(Source: Y Charts)
A reflation of that multiple would imply a share price roughly around the $US150 level which marks technical resistance and all-time highs. A lift of guidance from Nvidia could drive its share price towards that level, with a break being a bullish signal. However, there are signs of slowing momentum in the short-term for the stock, with its upward trend channel breaking down. Nvidia’s shares are oscillating around $US140 heading into the earnings release, with $US130 a possible level of technical support.
(Source: Capital.com)
(Past performance is not a reliable indicator of future results)