Nvidia’s Q2 Earnings: What to Expect

Nvidia Corporation (NVDA) is set to release its fiscal Q2 2027 earnings on August 26 after the close of markets. The company’s stock has been relatively calm in the lead-up to the report, with a 3.33% decline over the last five days and a trading price 8.5% below the record highs achieved in May, just before its Q1 earnings report. Nvidia’s Q1 earnings exceeded expectations, with earnings and revenue both blowing past estimates and the company’s own guidance. Similarly, the Q2 forecast also came in ahead of Wall Street’s estimates, but the stock closed in the red despite a strong performance.

NVDA Q2 Earnings Estimates

The consensus estimates call for Nvidia’s Q2 revenues to nearly double year-over-year (YOY) to $92.01 billion. Nvidia has forecast Q2 revenues at $91 billion, plus or minus 2%, and the current estimates are toward the upper end of the company’s guidance. As for the bottom line, analysts expect Nvidia’s Q2 earnings per share (EPS) to more than double to $2.01. Nvidia does not provide EPS guidance but forecasted GAAP gross margins between 74.4% and 75.4%.

Wall Street’s Expectations

Wall Street is bullish on NVDA stock heading into the Q2 earnings, with analysts predicting a ‘Beat and Raise’ quarter. Stifel analyst Ruben Roy expects Nvidia to beat Q2 earnings estimates and raise its annual guidance. TD Cowen’s Joshua Buchalter also believes investors expect another ‘Beat and Raise’ quarter but does not see big moves in NVDA stock following the report. UBS expects a significant revenue beat from Nvidia and sees it exceeding its revenue guidance by up to $4 billion while forecasting that the October quarter guidance will land well above Street estimates.

NVDA’s Financing Deals: A Cause for Concern

While Nvidia’s Q2 earnings are expected to be strong, the company’s financing deals are a potential concern for investors. NVDA has agreed to provide guarantees for up to $105 billion for OpenAI’s Ohio data center, which is a significant risk not captured in the balance sheet. Bank of America’s Vivek Arya finds NVDA’s valuations ‘compelling’ and is not too perturbed by the company’s off-balance sheet commitments. However, he notes that this is not the first instance of ‘circular financing’ in the AI ecosystem, with multiple companies investing in their customers through vendor financing.

A Potential Upside Driver

Nvidia’s $500 billion AI financing plan with its partners is another area that markets will watch during the earnings call. Goldman Sachs analyst James Schneider expects a strong quarter from Nvidia and has identified four areas that markets would watch, including the ramp-up of the Rubin platform, the sustainability of Nvidia’s fat gross margins amid rising competition in the AI chip market, and the demand for the company’s CPU business from agentic AI.

In conclusion, while Nvidia’s Q2 earnings are expected to be strong, the company’s financing deals are a potential concern for investors. The key will be to watch Nvidia’s ability to protect its gross margins as competition rises in the AI chip market. Additionally, investors should watch management’s commentary on the risks associated with the $500 billion financing that Nvidia plans to arrange in partnership with six leading asset managers.

From a valuation perspective, Nvidia stock looks quite attractive, with a forward price-to-earnings (P/E) multiple of 25.59 times and a P/E-to-growth (PEG) multiple of just 0.44 times. There are some genuine concerns over Nvidia’s financing deals, but the company has scope to move higher from these levels, even though investors should temper their expectations and not expect the stock to double every year.

Overall, Nvidia’s Q2 earnings are expected to be strong, but the company’s financing deals are a potential concern for investors. The key will be to watch Nvidia’s ability to protect its gross margins and manage the risks associated with the $500 billion financing plan.

Key Takeaways

• Nvidia’s Q2 earnings are expected to be strong, with revenues nearly doubling year-over-year to $92.01 billion.
• Analysts expect Nvidia to beat Q2 earnings estimates and raise its annual guidance.
• NVDA’s financing deals are a potential concern for investors, with the company providing guarantees for up to $105 billion for OpenAI’s Ohio data center.
• The key will be to watch Nvidia’s ability to protect its gross margins and manage the risks associated with the $500 billion financing plan.