Nvidia’s Strong Performance Sets Stage for Upcoming Earnings Report

The S&P 500 is on track for a 25% increase this year, largely driven by powerful growth stocks. Yet, one company stands out: Nvidia (NASDAQ: NVDA). Dominating the artificial intelligence (AI) chip market with about 80% market share, Nvidia has seen a surge in demand from AI customers, leading to impressive earnings growth in the triple digits quarter after quarter.

As the company prepares to announce its fiscal 2025 third-quarter earnings on Nov. 20, investors are keenly focused on this event. Nvidia has consistently exceeded expectations and recently highlighted “insane” demand for its products. However, with shares already up nearly 200% this year, this quarter could mark a turning point as Nvidia readies itself for its new Blackwell architecture launch.

Understanding Nvidia’s GPU Leadership

Nvidia’s story begins with its renowned graphics processing units (GPUs). These are sought after by customers, who are willing to pay a premium or wait for the latest models. Additionally, Nvidia offers a wide array of products and services to meet all AI needs, positioning itself as a convenient one-stop-shop. This broad presence across all public clouds has further solidified its appeal to customers.

The company’s recent performance reflects this success, reporting record revenues driven by its data center segment. In the latest quarter, data center revenue made up 87% of Nvidia’s total, which reached $30 billion—surpassing its entire revenue from just two years ago. Nvidia boasts a substantial gross margin of over 70%, indicating strong profitability.

As the company gears up for the Blackwell production ramp in the upcoming quarter, it anticipates a double-digit increase in revenue year-over-year for Q3, a drop from the prior triple-digit growth rates. This change may generate mixed reactions among investors, some of whom might see it as disappointing given the high expectations set by previous quarters.

High Demand from Industry Leaders

Comments from Nvidia’s CEO Jensen Huang confirm the increasing demand for the Blackwell platform, with Huang describing it as “insane” in a recent CNBC interview. Notably, Oracle’s Larry Ellison and Tesla’s Elon Musk have expressed their urgency for more GPUs during discussions with Huang. Furthermore, Taiwan Semiconductor Manufacturing, Nvidia’s chip manufacturer, reported double-digit revenue growth attributed to heightened demand.

This positive momentum suggests that Nvidia may have encouraging news to share on Nov. 20. However, it’s vital to stay grounded, as stocks can sometimes fall despite good news; many investors may consider the stock to be valued highly already.

What does all this mean for Nvidia and potential investors? There are numerous reasons to feel optimistic about the upcoming report, potentially driving the stock higher after Nov. 20. Even if the stock does not rise immediately, Nvidia’s market leadership and financial strength position it well for long-term growth in the AI sector.

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Adria Cimino has positions in Oracle and Tesla. The Motley Fool has positions in and recommends Nvidia, Oracle, Taiwan Semiconductor Manufacturing, and Tesla. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.