AI giant Nvidia (NVDA) will report its second-quarter earnings after the close of trading on Wednesday. Nvidia's announcement, the most anticipated of the quarter, will have ripple effects across the tech industry as investors look for signs that AI deals will continue to dominate market conversations in the second half of the year.
Nvidia shares are up about 160% year to date and more than 60% in the past six months. Shares of rival AMD (AMD) are up 2% year to date but are down about 14% in the past six months.
Intel (INTC) shares have fallen 60% since the beginning of the year and 53% in the past six months as the company continues to struggle amid a massive restructuring effort.
For the current quarter, Nvidia is expected to report adjusted earnings per share (EPS) of $0.65 on revenue of $28.7 billion. This would represent a 139% increase in EPS and 113% increase in revenue compared to the year-ago quarter, when EPS was $0.27 and revenue was $13.5 billion.
Nvidia is the global leader in AI chip design and software, controlling 80% to 95% of the market, and is expected to maintain its lead as it begins rolling out the next generation of its Blackwell chip line, according to Reuters.
Nvidia CEO Jensen Huang speaks as a keynote speaker at SIGGRAPH 2024 in Denver, July 29, 2024. (AP Photo/David Zalubowski) (The Associated Press)
The Information also reported on possible delays to Blackwell's shipments, but analysts at Goldman Sachs, KeyBanc and Loop Capital don't see this as a major concern for Nvidia in the near future.
“Our research suggests that Blackwell is indeed delayed as we first wrote (on Aug. 8), but that it could be as much as 120 days rather than 90 days. However, this may not be much of a concern as (1) TSMC's hopper yields continue to improve and (2) hopper production ramp-up through the fall may outweigh the volume lost due to the Blackwell delay,” Ananda Baruah, managing director at Loop Capital, said in a note to investors.
This quarter, NVIDIA's crucial data center business is expected to bring in $24 billion in revenue, up 142% from $10.3 billion in the same period last year. Wall Street expects NVIDIA to not only beat second-quarter expectations but also raise its third-quarter guidance, which could be bolstered by recent earnings beats from TSMC (TSM). TSMC makes chips for NVIDIA.
However, data center's growth surge is lower than last quarter's 426% revenue growth and last year's fourth quarter's 408% revenue growth.
That growth is expected to slow further in the third quarter, when the company's data center revenue is expected to increase 91% year over year to $27.7 billion.
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“NVIDIA expects data center revenue to hit nearly $30 billion in October, so the law of large numbers is at play here,” Stifel Managing Director Reuben Roy told Yahoo Finance on Monday, “but again, we think the company's profitability will continue to grow.”
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Nvidia's rivals aren't resting on the laurels either. In early August, AMD announced it was acquiring ZT Systems for $4.9 billion, a move that gives AMD more leverage in building AI system servers, a big driver of Nvidia's own sales.
And while this could boost AMD's sales, it doesn't mean Nvidia will face any major threat to its status as AI king anytime soon.
“Newer competitors like AMD are starting to gain market share,” Roy said, “but when you look at the overall infrastructure spending cycle, which is expected to continue to increase, it seems like NVIDIA is best positioned to benefit.”
Besides AI revenue, NVIDIA is expected to report gaming revenue of $2.7 billion. Once NVIDIA's main source of revenue, gaming now represents a much smaller portion of the company's business. Still, the segment is much larger than NVIDIA's other businesses, such as professional visualization and automotive.
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