The dawn of artificial intelligence (AI) in late 2022 has had a profound impact on the technology landscape. The initial fervor has since died down, and investors are looking for compelling evidence that the adoption of AI has room to run. Nvidia (NVDA 1.65%) graphics processing units (GPUs) were widely adopted and have become the gold standard for generative AI.
The company is scheduled to release the results of its fiscal 2026 second quarter after the market closes on Wednesday, Aug. 27, and Wall Street and shareholders alike will be sitting on the edge of their seats looking for clues that strong demand for AI chips continues.
Let's look at the company's most recent results, what current events suggest about the future, and determine if Nvidia stock still represents a compelling opportunity heading into the company's highly anticipated financial report.
Image source: Getty Images.
Remarkable results
After generating triple-digit revenue and profit growth for two consecutive fiscal years, growth inevitably slowed, and investors got the jitters. Despite tough year-over-year comps, Nvidia's results were still enviable.
For its fiscal 2026 first quarter (ended April 27), Nvidia reported record revenue of $44.1 billion, which soared 69% year over year and 12% sequentially. This resulted in adjusted earnings per share (EPS) of $0.81, up 33%, but there's an asterisk on those numbers. Nvidia took a $4.5 billion writedown on H20 chips destined for China, because of the Trump administration's moratorium on AI chip sales in that country (which has since been lifted). Without that charge, EPS would have been $0.96, a 57% increase.
Make no mistake: It was the continuing adoption of AI that drove the robust results, as revenue from Nvidia's data center segment climbed 73% to $39 billion, representing 89% of its total revenue.
Management expects Nvidia's growth spurt to continue, albeit at a more moderate pace. For its fiscal 2026 second quarter (ended July 27), management is guiding for revenue of $45 billion, which would represent year-over-year growth of 50%. Wall Street is equally bullish, with analysts' consensus estimates calling for revenue of $45.68 billion and adjusted EPS of $1.00. While this would represent a minor slowing compared with last quarter's robust growth, it would still be remarkable nonetheless.
Same customers, expanding opportunity
The biggest concern among Nvidia investors is that the adoption of AI will hit a wall, but there's simply no evidence to back that assertion. In fact, all the available evidence suggests the proliferation of AI continues.
Amazon Web Services, Microsoft Azure, and Alphabet's Google Cloud, are collectively known as the "Big Three" in cloud computing, and each has recently revealed plans to increase infrastructure spending this year, beyond the already robust spending that was previously announced. Furthermore, most of that spending will be allocated to additional data centers to support the growing demand for AI -- most of which will run on Nvidia GPUs. In addition, Meta Platforms also announced that it was increasing its capital expenditure spending plans for the year. The totals are enlightening:
- Amazon: $118 billion, up from $100 billion.
- Microsoft: $100 billion, up from $80 billion.
- Alphabet: $85 billion, up from $75 billion.
- Meta: $69 billion, up from $62.5 billion.
It's no coincidence that these four companies are also Nvidia's biggest customers. Add to that the resumption of H20 chip sales and China, and it appears clear that Nvidia's AI opportunity continues to expand.
Should you buy the stock before Aug. 27?
To be clear, I expect Nvidia stock to remain volatile, driven by the inevitable ebbs and flows of AI spending. That said, its success thus far has been undeniable. Over the past three years, the stock has gained 882% (as of this writing) but has also fallen as much as 37% -- so it isn't for the faint of heart. This helps illustrate one of the hallmarks of investing success: Treat buying stocks as partial ownership in a business, own stocks in the best companies out there, and commit to holding for at least three to five years.
That takes us back to the main question: Should you buy Nvidia stock before Aug. 27? The unspoken question here is whether Nvidia stock will be up or down following the release of its highly anticipated quarterly report. Truth be told, I have no idea, nor does anyone else for that matter.
My crystal ball has been on the blink for some time, but if I were in the mood to prognosticate, I would feel comfortable making several very vague predictions:
- Nvidia will announce yet another in a long and growing series of quarterly revenue records.
- Given the company's track record of exceeding expectations, I suspect it will beat analysts' consensus estimates, which are calling for sales of $45.68 billion -- which is slightly ahead of management's guidance of $45 billion -- and adjusted EPS of $1.00.
Beyond that, it's anyone's guess, and my predictions could be way off base.
That said, I'm still extremely confident that my investing thesis for Nvidia remains intact. The company's cutting-edge GPUs are still the gold standard, driving the AI revolution, and rivals have yet to challenge its position as the undisputed market leader or come up with a superior product. The specter of competition remains, as there's always the possibility that a technological innovation could steal Nvidia's thunder.
Most experts agree that it's still early innings for AI, but there's no consensus about the size of the market. Even the most conservative estimates start at $1 trillion. Big Four accounting firm PwC estimates the total economic impact at $15.7 trillion between now and 2030. The truth is nobody knows for sure.
Nvidia stock is currently selling for roughly 30 times next year's earnings. However, that premium is backed by the company's track record of innovation, industry-leading position, and history of growth. This underpins my confidence that the runway ahead is long.
For those who believe that the AI revolution will play out over the next decade and Nvidia will maintain its position as the leading provider of AI chips, the answer is clear. We don't know what the stock will do between now and Aug. 27 and for long-term investors, that doesn't matter. We'll simply buckle up for the bumpy (and profitable) ride ahead.
