Nvidia Stock Down Despite Higher Earnings and Revenue

Yesterday, the Nasdaq fell nearly 2% as traders unwound some of their long positions ahead of Nvidia’s highly anticipated earnings report. Other tech stocks also experienced declines, reflecting a broader market caution. This reaction underscored the substantial risks associated with earnings season, even for megacap stocks that have met or exceeded earnings expectations but still faced pullbacks. That’s exactly what has happened, as the Nvidia earnings beat expectations yesterday but it opened lower today and is lower than the major indexes.

With such elevated expectations, there was a significant risk of disappointment. If Nvidia’s earnings failed to meet the market’s lofty expectations, it could trigger a larger sell-off. This potential for a negative surprise is why US stock indices were retreating ahead of Nvidia’s results, as investors brace for the possibility of a letdown. But, the Q2 Nvidia earnings and revenue were quite upbeat, which is keeping the sentiment positive in stock markets in this regard, nut Nvidia shares themselves are down for the day as shown on the char below.

Nvidia Chart Daily – The 50 SMA Has Been Broken

Nvidia Earnings and Revenue Report for Q2

Earnings Per Share (EPS):

• Reported: $0.68
• Estimate: $0.64
• Last Year: $0.27

Revenue:

• Reported: $30.04 billion
• Estimate: $28.5 billion
• Last Year: $13.51 billion

Key Segment Performance:

• Data Center Revenue:
  • Reported: $26.3 billion
  • Estimate: $25.08 billion

Margins and Expenses:

• Adjusted Gross Margins: 75.7% (versus 75.5% expected)
• R&D Expenses: $3.09 billion (versus $3.08 billion expected)
• Adjusted Operating Expenses: $2.79 billion (versus $2.81 billion expected)
• Adjusted Operating Income: $19.94 billion (versus $18.85 billion expected)

Nvidia Q3 Forecast and Guidance

• EPS Estimate: Initially estimated at $0.71, but the actual is projected to be significantly higher, potentially around four times the initial estimate.
• Revenue Guidance:
  • Pre-release estimate: $31.7 billion (approx. 77% annual growth)
  • Actual forward guidance: $32.5 billion
• Gross Margins: Expected to be in the mid-70% range for the next quarter.
• Fiscal Year Operating Expenses: Projected to grow in the mid to upper 40% range.

Strategic Moves

• Share Repurchase: Nvidia announced a substantial $50 billion share buyback program, indicating strong confidence in its financial position and future growth prospects.

These impressive earnings and revenue results reflect Nvidia’s robust performance, particularly in its data center segment, which continues to be a significant growth driver. The company’s positive outlook and large share repurchase plan are likely to boost investor confidence and support stock price momentum, which should be positive news for other chipmaker stocks and the tech-related Nasdaq index. Nasdaq opened lower at start of the US session a while ago, but is making quite a climb, and is up in the green now, while Nvidia stock is still in the red.

Nvidia Live Chart

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