Could Nvidia's financial results have a big impact on stock prices? Here are the points to focus on from a short-term perspective!

NVIDIA is one of the companies that has shown the best performance in the US stock market in the past two years. The company's stock price has nearly doubled since the beginning of 2024. In the earnings report in May, a stock split was announced, and many investors are also paying attention to this earnings report. The financial results for the first quarter of fiscal year 2025 Q1 are scheduled to be announced after the close of trading on the US stock market on August 28.

How should we view NVIDIA's earnings? Let's examine it from four focal points.

1. Comparison of actual results and guidance (company forecasts) with analyst estimates

The semiconductor industry has emerged from a downturn cycle over the past two years due to the demand for computing power chips driven by the AI boom. NVIDIA, a leading company in GPUs and power semiconductors, has the strongest growth and resilience in recent quarters.

Forecasts made by Wall Street analysts may significantly deviate from NVIDIA's actual performance. You can see the content of the preliminary forecast for NVIDIA's performance by analysts in our app. Generally, if the actual performance significantly exceeds the preliminary forecast, it will provide significant tailwind to the short-term stock price. Conversely, if the actual performance falls short of expectations, it may create downward pressure on the stock price in the short term.

What if NVIDIA's performance does not exceed expectations? Since the market already has high expectations for NVIDIA, it is natural to assume that some degree of expectation is already factored into the stock price. To further boost the stock price, it may be necessary to have material that exceeds expectations, rather than simply meeting expectations.

Let's take a brief look back at past earnings. In the earnings for fiscal year 2024 Q3, sales reached $18.120 million, surpassing the market's forecast of $16.110 million. Earnings per share also exceeded expectations at $3.710. The company set the sales forecast for Q4 at about $20 billion. However, the stock price was weak on the day after this earnings report.

In fiscal year 2024 Q4, NVIDIA's sales were $22.1 billion, significantly exceeding previous guidance and market expectations, and the sales forecast for fiscal year 2025 Q1 was $24 billion. After this earnings announcement, NVIDIA's stock price has risen significantly.

The actual sales for Q1 of the 2025 fiscal year were $26 billion, which significantly exceeded guidance and market expectations. The sales forecast for Q2 is also $28 billion, which is much higher than expected. In addition, a stock split was announced, and the stock price has surged in the short term since the last earnings announcement.

For this earnings announcement, the focus will first be on comparing the actual performance of NVIDIA with the forecasts of Wall Street analysts.

2. Revenue from Datacenter

Datacenter business is a key growth engine for NVIDIA. However, in Q1 of the 2021 fiscal year, its revenue accounted for only 37% of the total. But in just 3 years, by Q2 of the 2024 fiscal year, its revenue reached around 80.1%. NVIDIA, which was an important supplier of computing chips such as GPUs for the increasing demand for AI, has high expectations for further growth in the datacenter business.

After a period of slowdown since Q4 of the 2023 fiscal year, revenue from datacenter has begun to recover and has shown an increasing trend compared to the same period last year and the previous month. Furthermore, supported by the demand for large language models, application training, and other AI-related needs, the datacenter revenue has been accelerating quarter by quarter.

According to the Q1 financial results of the 2025 fiscal year, datacenter revenue reached approximately $22.56 billion, an increase of 427.2% compared to the previous year, and a 22.6% increase compared to the previous month. Datacenter revenue accounted for the highest-ever 86.6% of the total revenue. The growth of the datacenter division will continue to be a focus in the next earnings announcement.

Although the company's datacenter revenue has experienced tremendous growth over the past few quarters, it may be difficult to expect the same level of growth acceleration in future earnings announcements. As the revenue has already reached a high level, it is expected that the growth rate will gradually slow down over the next few quarters.

In fact, the quarter-over-quarter growth rate of datacenter revenue has been slowing down for the past two quarters, and a significant slowdown is expected compared to the same period of the previous year in the next quarter. In future earnings announcements, it is important to pay attention to whether the revenue growth rate of the datacenter division will stabilize at a relatively high level while gradually slowing down.

3. Inventory situation

"Inventory situation" is a very important indicator for measuring cyclical changes and growth expectations in industries with cyclical supply and demand fluctuations such as the semiconductor industry. When demand declines and supply becomes excessive, the company's inventory level rises, leading to increased sales pressure to sell inventory, which becomes a drag on stock prices. Conversely, when there is an upturn in cyclical demand, the company's inventory level decreases rapidly, and sales prospects improve. This is a positive factor for stock prices.

The appropriate measure to gauge changes in inventory levels is the inventory-to-revenue ratio, and the higher this ratio, the higher the inventory level and the greater the sales pressure. For example, from Q4 of the 2022 fiscal year, the inventory-to-revenue ratio began to increase continuously, and it is evident that the stock price also began to decline significantly from that point.

There has been significant progress in the inventory-to-revenue ratio from the 2024 fiscal year to the 2025 fiscal year. The ratio decreased from 85.3% at the end of the 2023 fiscal year to 22.5% in Q1 of 2025, reaching historically low levels. Let's continue to monitor whether the inventory-to-revenue ratio can be maintained at low levels in the future. If a significant reversal is observed, we may need to be cautious.

4. Profitability

The growth of NVIDIA's profitability in the process of continued upward movement in the supply and demand cycle is also one of the important points that the market is paying attention to.

From the perspective of gross profit margin, the level of gross profit margin has been rising gradually over the past few quarters as the economy gradually emerges from cyclical lows, reaching 76% in Q4 of the 2024 fiscal year. In Q1 of the 2025 fiscal year, the gross profit margin further increased to 78.4% during the same period, driven by strong demand for computing power chips such as GPUs and NVIDIA's strong negotiating power.

Looking at the net margin, there has been a rapid upward trend over the past few quarters, reaching 55.6% in Q4 of the 2024 fiscal year. In Q1 of the 25 fiscal year, the net margin further increased to a record high of 57.1%. Let's continue to pay attention to whether the net margin can be maintained at a high level in the upcoming earnings reports.

Earnings reports can greatly affect stock prices before and after their release, whether positively or negatively. This is especially true for star companies in the USA. The fluctuation of stock prices can bring various trading opportunities to investors.

Let's not miss the impact that NVIDIA's earnings report will have on the stock market this time.

Conclusion.

NVIDIA's ability to adapt to and handle market fluctuations in the continuing growth phase of the industry is extremely high.

Earnings reports have a significant impact on short-term stock prices. We need to pay attention to four important points.

• Comparison between actual performance, financial estimates, and company guidance.

The gap between actual performance and financial estimates has a significant impact on short-term stock prices.

• Revenue situation of the datacenter division.

This business is nvidia's core and should be monitored for its growth.

• Inventory levels

Let's pay attention to whether we can maintain a low level of the revenue-to-inventory ratio.

• Profitability can be analyzed from gross profit margin, net profit margin, and ROE (return on equity).

Let's pay attention to whether we can maintain a high level of gross profit margin and net profit margin.

With each earnings report, there is a possibility of trading opportunities arising from large fluctuations in stock prices. Let's make appropriate investment decisions based on risk tolerance.