Nvidia (NVDA 1.45%) is the backbone of the AI economy. The company's earnings don't just affect its own investors; they ripple throughout the industry both in the U.S. and worldwide. Nvidia is set to release its fourth-quarter 2026 earnings on Feb. 25. So, should you buy the stock now or wait and see what happens? Let's have a look.
NASDAQ: NVDA
Key Data Points
Nvidia's core businesses have driven explosive growth, expanding margins, and an absolutely dominant market share. Nvidia provides customers with critical AI infrastructure, and demand for its GPUs and other core products isn't likely to slow anytime soon.
Buying Nvidia before earnings isn't so much about expecting a price pop if the company once again exceeds expectations. Instead, investors should care about the longer-term prospects and underlying fundamentals. For example, last quarter, even though Nvidia beat Wall Street's revenue expectations, the stock still slid about 3% almost immediately following. Yet, when we look at a longer time frame, we see Nvidia's stock is up over 40% in the past 12 months, and in the past five years, the stock has risen a whopping 1,230% as of Feb. 6.
Nvidia's moat is wide
Nvidia's financials remain quite strong. As of last quarter, the AI company reported record revenue of $57 billion. That's a 62% increase from the previous year. Nvidia's GAAP-adjusted gross margins were also an impressive 73%. Looking ahead to this quarter's forecast, Nvidia anticipates revenue jumping to $65 billion and margins increasing to 74%.
As far as the company's balance sheet, Nvidia is sitting on about $61 billion in cash and marketable securities. The AI leader only has $42 billion in total liabilities. Nvidia's economic moat is powerful. So even if an industry pullback occurs, Nvidia has positioned itself to withstand in the long term.
Image source: Getty Images
A lot is riding on data center infrastructure
The biggest threat to Nvidia right now is if its customers slow their AI spending. A reduction in capex investments would spell trouble for the GPU giant. This concern is particularly significant regarding data centers, where nearly 90% of Nvidia's current revenue comes from.
However, history and Nvidia's fundamentals suggest the company rewards long-term investors who bought before earnings and stayed invested. The combination of solid company financials and heavy intermediate to long-term demand for its products means Nvidia's global dominance isn't going anywhere for at least the next few years.
Buy the dip?
Savvy investors might see the recent sell-off among tech stocks as a welcome pre-earnings opportunity. Nvidia stock is slightly down year-to-date. Nvidia's market cap remains above $4 trillion, but its forward P/E ratio has fallen to a very reasonable level, currently around 22 as of Feb. 6. Nvidia remains an excellent investment for buy-and-hold investors.
Don't let short-term earnings dictate when you purchase this stock. Instead, focus on the company's prospects over the next several years, which seem quite bullish. If Nvidia fits within your risk profile, then there's no time like the present.
