After the US stock market closes on Wednesday (19 November), Nvidia‘s (NASDAQ:NVDA) set to release its quarterly earnings. Given that it’s the largest company on the planet by market-cap, and based on historical earnings releases, I expect the share price to be volatile both in pre-market trading and through to the end of the week. Here’s what I’m watching for.
Financial metrics
One factor that dictates the immediate movement will be how revenue and earnings compare to what analysts are expecting. For example, revenue consensus is $54.6bn for the quarter. So a miss or beat of this number offers a transparent initial view on whether Nvidia did well or not relative to what the market expected.
This is key because the bar’s set high. If the business achieves that revenue target, it would represent a 55% growth rate compared to the same period last year. For a company as large as Nvidia, that’s exceptional. Yet it also poses a risk that the business may miss this mark, even though it might still perform well. If it delivers a 40% revenue increase, the share price could tumble, simply because investors were looking for more.
The gross margin and operating margin percentages will be scrutinised. Both provide a good indication of whether cost pressures or weaker pricing power are eating into revenue.
Non-financial indicators
One of the largest drivers for the US stock should come from guidance from management. In recent months, there have been many large deals struck between tech companies that are pushing ahead with AI infrastructure spending. In theory, these deals should include Nvidia chips. So the business outlook will be key to determining how much increased revenue they expect from these deals in the coming year.
If it can show demand isn’t slowing (or even accelerating), that supports the long-term growth story. In turn, after the initial volatile move, this factor should help to support the stock in the coming months.
Investors will also be watching for an update on the impact of regulatory and trade issues between the US and China. Things have indeed gone a little quiet on this front in recent weeks. But a headache can quickly start with just one social media post from President Trump!
Getting prepared
I don’t currently own Nvidia stock. I never like to buy or sell a stock so close to the earnings date, as it’s like flying blind. Therefore, I’ll wait to see what happens and will have a much clearer picture by Wednesday evening.
For those who are shareholders, again, I don’t see any reason to consider selling so close to the report. The point worth flagging is always to remember to have a long-term investing time horizon, not getting spooked by any short-term erractic stock movements.
