Nvidia Earnings Preview: Can Another Blowout Justify Record Valuation?

Nvidia is set to report its fiscal second-quarter earnings on August 26th. Analysts expect revenue of approximately $92 billion, nearly double the $46.7 billion generated a year earlier. This growth is expected to continue, with adjusted earnings also anticipated to roughly double.

However, options markets are pricing a relatively restrained 5.4% move after the report, or about $280 billion in market value, below the roughly 7.4% average move following Nvidia's past 12 earnings releases. This suggests that investors don't doubt Nvidia will beat estimates but are questioning whether it will post a blowout.

The company has repeatedly exceeded Wall Street forecasts, yet its shares have fallen following each of its past four earnings releases despite beating revenue and earnings estimates. The key number will likely be third-quarter guidance, where analysts currently expect revenue of roughly $104 billion, up more than 80% from a year earlier.

A forecast comfortably above $105 billion could reinforce expectations that Nvidia's growth remains ahead of even aggressive forecasts. Guidance closer to $103 billion, while still representing exceptional growth, risks being viewed as merely adequate. At Nvidia's scale, maintaining growth rates requires tens of billions of dollars in incremental quarterly demand.