Investors in NVIDIA (NASDAQ:NVDA) have had a lot to celebrate. The company's graphics processing unit (GPU) remains the gold standard among hardcore and casual gamers alike, and the advent of cloud computing and artificial intelligence (AI) have created vast new markets for NVIDIA's products.

These developments have led to massive growth, with revenue from the last fiscal year nearly doubling compared to just two years ago. The stock price has followed the financial results, up more than 81% -- four times the return of the S&P 500. The company will need to produce blockbuster earnings to keep that trend going.

NVIDIA is scheduled to reports its financial results for its first quarter on Thursday, May 10, after the market closes. Here are some of the things investors should look for.


What will the quarter hold for NVIDIA investors? Image source: NVIDIA.

More phenomenal growth?

To review last quarter's remarkable performance, NVIDIA reported record sales of $2.91 billion, up 34% compared to the prior-year quarter and well above the $2.65 billion the company forecast. As has been the case over the past seven successive quarters, revenue from its data center segment stole the show, producing triple-digit year-over-year growth to $600 million, and accounting for nearly 21% of the company's total sales last quarter. While data center growth gets the headlines, revenue from gaming still pays the bills, up 29% to $1.7 billion. Investors will likely be looking for more stellar growth from both segments.

For the first quarter, NVIDIA said it expects revenue of $2.9 billion (plus or minus 2%), which would represent year-over-year growth of 49.7% at the midpoint of guidance. The company is also forecasting gross margins of 62.7% (plus or minus 50 basis points), and operating expenses of approximately $770 million -- all on a GAAP basis.

Analysts are also forecasting significant growth. Consensus estimates are calling for revenue of $2.89 billion, and earnings per share of $1.45.

Other areas of interest

In addition to the company's overall growth, investors will want to pay particular attention to the data center segment. The rapid growth of revenue from the increasing adoption of cloud computing and AI over the last several years has propelled NVIDIA's stock to new heights. Any significant weakness or deceleration of this growth will likely hit the stock price.

Another area to watch will be the auto segment, which includes revenue from infotainment systems and self-driving car systems. On the last conference call, NVIDIA CEO Jen-Hsun Huang said that the company expected to see increased adoption of autonomous driving systems beginning in late 2019, and that "almost every" car created by 2022 will have some form of self-driving capability. Investors will be looking for any update on when revenue from the segment will begin to meaningfully impact the company's results.

Potentially big swings

It's important to remember that there are high expectations baked into NVIDIA's stock. From a price-to-earnings perspective, it trades at 47 times trailing earnings -- significantly higher than the 24 times of the S&P 500. With a sky-high valuation like that, any real or perceived weakness or failure on NVIDIA's part, and the stock could plummet from its frothy heights.

NVIDIA will need to continue its recent pattern of monstrous growth in order to satisfy investors that its rich valuation is deserved.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.