The biggest company by market cap in the world is set to report its second quarter earnings for its fiscal year 2026 after the market closes on Aug. 27. Then CEO Jensen Huang and the rest of Nvidia's (NVDA 1.56%) management team will hold a conference call with investors to discuss the results, take questions from Wall Street analysts, and provide some commentary on the red-hot artificial intelligence sector.
It could prove to be a big moment for the stock.
Nvidia, the ultimate pick-and-shovels play for artificial intelligence, has now been the ultimate darling on Wall Street for the past several years. The business flourished, the margins are incredible, and Huang is arguably the most closely followed CEO on Wall Street. Here's why Aug. 27 could be a catalyst-driven day for the stock.
What Wall Street is expecting
Whenever investors go into an earnings call, the most basic -- and also one of the most important -- things they look at are the numbers. How much earnings per share and revenue did the company generate in the quarter and how does that stack up compared to consensus estimates? Consensus numbers compile an average of all the estimates from Wall Street analysts covering a stock.
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In the second quarter, Nvidia is expected to post $0.95 of diluted earnings per share (EPS) or adjusted EPS of $1.01, according to data from Visible Alpha, which compiled estimates from 24 analysts. Meanwhile, revenue is projected to come in at $46.38 billion. These estimates are calling for a significant increase in EPS and revenue from the same quarter a year ago, in which the company posted $0.67 diluted EPS on revenue of just over $30 billion.
However, gross margins will likely be lower than the 75.1% the company posted last year. On a full-year basis, Wall Street is expecting the company to post $4.17 diluted EPS, or $4.42 operating EPS, with total revenue of over $204 billion, up roughly 56% year over year. Most analysts are optimistic going into the call. Wedbush analysts Matt Bryson and Antoine Legault recently reiterated an outperform on the stock and hiked their price target from $175 to $210.
"We continue to believe growth in announced hyperscale spend is largely going to build out AI capabilities and in particular ends up flowing to NVDA which supplies a disproportionate amount of the AI server value," the two wrote in a research note. "As such, we view CQ2 CSP (cloud service providers) capex results as supportive of this thesis, with hyperscale spend up 67% Y/Y (+23% Q/Q), marking an acceleration from CQ1."
What's going on with China?
One of the big stories for Nvidia right now has to do with its business in China. Not only have tariffs made things more difficult, but President Donald Trump's administration temporarily restricted Nvidia from selling chips to China, a market that previously made up a significant amount of revenue for the company, requiring Nvidia to first obtain export licenses. As a result, Nvidia took a $5.5 billion charge earlier this year "associated with H20 products for inventory, purchase commitments and related reserves."
NASDAQ: NVDA
Key Data Points
Earlier this month, media outlets reported that Nvidia and other players in the microchip sector had come to an agreement with the Trump administration that would allow them to sell chips in China, but would also require them to give 15% of their Chinese chip sales to the U.S. government. Reuters also recently reported that Nvidia is working on a scaled-back Blackwell chip that Trump may allow the company to sell in China. This chip would be more powerful than the less-advanced H20 chips Nvidia has been selling to China under previous government restrictions. Interestingly, media outlets also recently reported that Nvidia has instructed some of its suppliers to stop production on its H20 chips as China raised questions about the chips' security. That only adds to the confusion, so some clarity on what's going on with its business in China could be helpful.
"If NVDA were to include China in its guidance, we believe it would contribute an incremental $2-3 billion in revenue," KeyBanc Capital Markets analyst John Vinh said in a recent research note.
Catalysts can be positive or negative, but focus on the long term
It's important for investors to understand that catalysts can go both ways. If Nvidia misses estimates or provides guidance that is lower than analysts were expecting, the stock could struggle. Additionally, if Nvidia's management team doesn't discuss China or mentions it very little, the stock could also struggle. That's why investors should focus on a longer-term horizon -- investing based on quarterly results is extremely difficult.
Trading at about 40 times forward earnings, Nvidia's stock isn't cheap. However, viewed as the ultimate play for AI, a technology expected to change everything, valuation may be less important to the market right now. Long-term believers in AI can certainly continue to hold the stock long term. However, understanding what could potentially move a stock will help investors make better, more rational decisions on their investing journey.
