Earnings season has a coda. More than 95% of S&P 500 companies have had their solo spotlights this quarter, but the reporting symphony won't truly hit a crescendo until Wednesday afternoon when AI giant Nvidia (NVDA) delivers results.
"In my view, the keys for Nvidia remain the overall pulse on AI-chip demand and whether any competitive threats from custom chips are taking market share," said Nathan Peterson, director of derivatives analysis at the Schwab Center for Financial Research. "Investors have come to expect a beat-and-raise quarter from Nvidia, while maintaining low-to-mid 70% gross margins, so forward revenue and gross margin guidance will be important metrics to gauge both demand and pricing."
Nvidia's shares fell after its previous earnings report when the company's fiscal fourth-quarter gross margin dropped to 73% from 76% a year earlier. Expenses associated with the launch of the more powerful Blackwell AI chip raised costs.
At the time, Nvidia forecast gross margins of 70.6% in the fiscal first quarter, based on generally accepted accounting principles. Any disappointment on gross margin results and gross margin guidance might affect shares Wednesday, with the options market pricing in an approximately 7% move following the earnings report.
Nvidia's earnings come after neck-snapping moves that even long-term investors in this volatile stock haven't seen before. Shares fell below $90 in early April to nearly one-year lows in a sell-off driven by tariff news and restrictions on chip exports to China that cost Nvidia $5.5 billion.
Almost from the day Nvidia announced these charges—related to U.S. licensing requirements on the company's H20 AI chips—shares began roaring back. By mid-May, they topped $130 again for the first time since early this year. Nvidia's chart over the last month resembles the heartbeat of a patient shocked back to life.
How much extra life remains in the near term depends on many things investors hope to learn tomorrow, including how deep a wound the $5.5 billion charge will carve and whether it hurts guidance. CEO Jensen Huang said last week that the effective ban on H20 chips to China is "deeply painful" and could ultimately cost Nvidia $15 billion.
China setback caused financial hit
Nvidia designed the H20 chip, in part, to be a less-advanced product for the Chinese market because U.S. security restrictions prohibit more complex chip exports. While exports of H20 aren't banned, Nvidia appeared to have decided that getting the license wasn't worth the time, cost, and effort, considering Chinese competitors are likely at work developing better chips of their own.
"Anybody who thought that one chess move to somehow ban China from H20s would somehow cut off their ability to do AI is deeply uninformed," Barron's quoted Huang saying last Monday. "If we don't compete in China, and we allow the Chinese ecosystem to build a rich ecosystem because we're not there to compete for it, and new platforms are developed and they're not American at a time when the world is diffusing AI technology, their leadership and their technology will diffuse all around the world."
Even with that hit to financials, Nvidia is expected to deliver another quarter of significant earnings and revenue growth, according to analysts. The latest round of earnings from so-called "hyperscalers" like Microsoft (MSFT) and Amazon (AMZN) showed no lack of appetite for spending on chips from Nvidia and its competitors. And they mostly reported strong gains in their data center businesses supported by that chip spending. All that was music to Nvidia investors' ears and likely played into the recent stock rally.
The average Wall Street earnings per share estimate is $0.88, up 45% from a year ago, according to data collected by Schwab, and revenue is seen up 65.2% to $43.25 billion, according to Yahoo Finance.
Those numbers, impressive though they sound, might not impress investors after revenue in the prior quarter rose 78% annually. Nvidia guided for around $43 billion in revenue this time out, so landing there also might not satisfy those who are used to Nvidia handily beating analysts' estimates. When the company last reported in late February, revenue of $39.3 billion outpaced the average analyst estimate of $38.1 billion, and guidance of $43 billion surpassed the average analyst estimate of $41.8 billion.
The level of Nvidia's beat on quarterly revenue and quarterly revenue guidance also could help determine where the stock goes Wednesday. Both were about $1.2 billion above expectations last time out, so that could represent a floor for investors' hopes this time around.
"You want to track to see how the company is performing compared to estimates," Schwab's Peterson said. "Those are the guideposts to get a sense of demand, where competition is coming in, and whether hyperscalers need as much. Nvidia's price-to-earnings ratio has been coming down, which means the market is saying the company's growth and beat rates aren't sustainable. There's skepticism that the demand Huang is conveying is going to have to taper at some point, and investors don't want to be holding the stock in the quarter when Nvidia comes out with in-line guidance."
At the risk of getting bogged down, the expected 65% year-over-year revenue growth would be down significantly from 262% in the same quarter a year earlier. Nvidia, like other members of the "Magnificent Seven," is running into the law of large numbers that eventually makes the triple-digit growth seen from 2022 to 2024 unachievable over the long term, barring massive new demand from somewhere or a huge product improvement.
"Sovereign" market demand could blunt hiccups from hyperscalers
Nvidia is working to both cultivate demand and launch new initiatives, having recently announced a strategic partnership with HUMAIN—the new full AI value chain subsidiary of Saudi Arabia's Public Investment Fund—to build AI infrastructure in the Gulf country. Factories in Saudi Arabia with a projected capacity of up to 500 megawatts will be powered by several hundred thousand of Nvidia's most advanced graphics processing units (GPUs) over the next five years, Nvidia said in a May 13 press release.
Nvidia emphasized how deals like these reduce its dependence on hyperscalers. Many analysts following the industry say the heavy spending can't continue forever, and AI firms like Nvidia will eventually feel the impact of lower demand. It's unclear when that will happen, but sovereign AI arguably provides another revenue stream.
Nvidia also appeared to get a break in May when the Trump administration rescinded a last-minute Biden administration rule that would have limited the number of advanced chips companies could export to certain international markets without government approval, The Associated Press reported. This was a separate issue from the H20 licensing requirement that led to the $5.5 billion charge and could signal a looser regulatory environment. "These new requirements would have stifled American innovation and saddled companies with burdensome new regulatory requirements," the Commerce Department said.
In addition, Nvidia recently announced that it's opening its AI server platform to rival chip makers, including Qualcomm (QCOM). This would allow companies to launch custom central processing units (CPUs) that can link Nvidia's chips to power data centers.
How will CEO Huang describe demand?
Huang is running out of adjectives to paint a picture of AI-chip demand. Last October, he called demand for Blackwell "insane," and in February 2025, he said Blackwell demand was "amazing" and "moving at light speed." The question is what he'll say this time.
Blackwell is a chip expressly designed for AI use, which is one reason for big growth expectations. The other reason is planned spending from hyperscalers. The combination sounds potentially positive, but Nvidia's fiscal Q1 Blackwell revenue and guidance will get a close look. Blackwell revenue reached full-scale production earlier this year, and revenue from the chip hit $11 billion in the company's fiscal fourth quarter.
Investors may also get an update on the company's Rubin chip, slated for a late-2026 launch.
One possible hurdle is chip production. Earlier this year, an earthquake in Taiwan slowed production for Taiwan Semiconductor Manufacturing (TSM), the world's largest chip foundry. Nvidia also had hiccups of its own as it put Blackwell chips into production. Investors likely want to hear that Blackwell output is now running smoothly.
While investors likely can't expect an encore of the triple-digit earnings and revenue growth conducted by CEO Huang and company over the last few years, they're hoping Nvidia can close out earnings season on a sweet note.
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