If you think Nvidia (NVDA -0.98%) has been a volatile stock in recent weeks, you might want to buckle your seat belts. The artificial intelligence (AI) bellwether will report its fiscal second-quarter results after the market close on Wednesday afternoon.
Nvidia shares will be on the move. It's not as simple as the shares moving higher if it's a good report or lower if it's not. Like many market relationships with battleground stocks, it's complicated. Let's go over the three things that Nvidia needs to get right this week.
Image source: Getty Images.
1. Accelerating revenue growth is just the first step
Expectations are high for Nvidia stock heading into this week's big financial reveal. Analysts see revenue soaring 97% to $92.1 billion for its second quarter of what is now fiscal 2027, its biggest jump in two years. Momentum has been kind on the top line. This would be Nvidia's fourth consecutive quarter of accelerating year-over-year revenue growth.
- Q2 FY 2026: 56%
- Q3 FY 2026: 63%
- Q4 FY 2026: 73%
- Q1 FY 2027: 85%
- Q2 FY 2027: 97% (est.)
You would think that Wall Street pros are targeting triple-digit revenue gains for the current quarter, but that's not the case. Analysts see top-line growth decelerating to 82% for the current quarter (and 44% for all of fiscal 2028). Most companies would love to be growing at that clip, but after a year of stepping on the gas, the market's bracing for a slowdown. This is the first opportunity for Nvidia to deliver a positive surprise, coming through with a rosier outlook for its near-term performance.
NASDAQ: NVDA
Key Data Points
2. Snapping the earnings season curse
Let's turn to the bottom line. Nvidia has been good at managing the market's earnings expectations. It's four for four in beating Wall Street's profit targets over the past year. The beats haven't been much, clocking in between 3% and 6% in the last four quarters. The victories may be small, but keep in mind that analysts have perpetually raised their income projections for Nvidia. In just the past month, five of them have raised their expectations for the quarter that will be announced this week.
I guess you're ready for the head-scratching chart I was waiting to spring on you. Here is Nvidia's stock performance over the past year. I've also added the dates when each of the four previous earnings reports came out. There are two unusual things I want to highlight for you.
The most jarring revelation is that the Nvidia shares have fallen in the days following each of its last four earnings reports. The downticks have continued for about a week or longer. The market has reacted this way despite the bottom-line beats, accelerating top-line growth, and increased guidance. This should give my fellow Nvidia investors pause heading into Wednesday afternoon's report, but I'm not worried.
The second revelation is that the stock has clawed its way back every time, trading higher by its next quarterly update. Unfortunately, that won't be the case this time around. Barring a rally through the first three trading days of this week, Nvidia will be lower this time than it was for its previous financial update. This might not be a bad thing. It could be the tempering of expectations that finally leads Nvidia to move initially higher on earnings news for the first time in more than a year.
3. Looking beyond financial results
Nvidia investors have been treated to a 23% gain over the past year, barely ahead of the market. Smaller Nvidia competitors, memory plays, and other AI-related businesses have largely fared better. There is no denying that demand is booming, and that Nvidia is the leader. There are just supply chain constraints and other risks to the business that are outside of Nvidia's control.
Will the shortage of storage manufacturing or the growing resentment of data center build-outs slow Nvidia's ability to meet the spike in demand? Will investors turn on the surging capital expenditures that companies are budgeting for AI? Are circular financing deals to bankroll the growth a house of cards? The headwinds are there for the bearish picking, and every word that Nvidia CEO Jensen Huang doles out on Wednesday will be weighed.
I take comfort in knowing that Nvidia enters this week trading at a reasonable 24 times this fiscal year's earnings and 16 times next year's target. It's a good price for a great company that is growing substantially faster. The risks of the business slowing and margins contracting are real, but so is a future where Nvidia continues to climb the wall of worry to deliver a well-received financial performance for a change.
