Nvidia Pre-earnings Analysis
Earnings season is about to come to an end and markets have saved the best for last. Nvidia will release Q1 2025 results on Wednesday aftermarket close, which may act as a catalyst to where the stock goes for the coming months. Here’s what to watch for on the re[prt:
• Updates on AI demand and spending by hyperscalers
• Progress and outlook for China sales amid export restrictions
• Gross margin trends and commentary on cost structure
• Management’s guidance for the next quarter and fiscal year
Hyperscalers like Meta, Amazon, and Microsoft have dedicated billions to building AI data centers using Nvidia’s chips. Markets want to hear about this from Nvidia point of view and how orders are actually looking. This will play directly into the company’s revenue growth, which is expected to grow 66% from the same quarter last year; while this may be impressive, it does mark a significant deceleration of revenue compared to Q1 2024 growth of 262%. Nvidia’s revenue once grew at triple digit percentage points, but has slowed over the past four quarters, perhaps signaling that the “bulk” of GPU orders has passed.
Nvidia can reverse deceleration if they report strong growth in China. The company’s market share of China fell from 20% to 13% in recent years due to higher restrictions, but Trump’s recent actions to rescind some export curbs on AI chips may help. This will especially play a part in the company’s guidance, which is probably the most important part of this entire report. Markets don’t really care about what already happened, they want to see if revenue is going to continue to grow. Profit margins will also be in question, especially with tariffs taking a toll from sales. Nvidia’s profit margins have been substantial, with net profit margin at 56%, but investors fear that higher tariffs will eat into the company’s ability to maintain this.
Last but not least, Trump’s recent dealings with Saudi Arabia, Qatar, and Abu Dhabi are expected to benefit Nvidia and may make up for any lost revenue in China. Nvidia will deploy 18,000 Blackwell chips to Saudi Arabia alone, and other Arab countries are also buying in billions.
The chances of Nvidia beating expectations are very high, and it’s unlikely that investors will want to see shares here. If the stock does dip after earnings, it’s an opportunity to buy into the world’s second largest company (by market cap). Nvidia seems to be staged for a move back towards all time highs, perhaps earnings will give it the fuel it needs.
Option chain analysis:
Nvidia’s option chain expiring on May 30th projects a (+/-) $10 move from the underlying stock. Going out further in expiration, the June 27th option chain is projecting a (+/-) $17 move.