When Nvidia reports earnings this week, the numbers for the past quarter may matter less than what the company says about the months ahead. That's the view from Wedbush, which expects the chipmaker to beat its own guidance for the fiscal second quarter and lay out a more upbeat outlook for October.
In a note Monday, Wedbush said Nvidia guided to roughly $91 billion in revenue for the fiscal second quarter, with a gross margin around 75%. That guidance, the firm estimates, implies earnings per share of about $2.03. Wedbush's own model sits close to those figures—near $91 billion in revenue and $2.05 in EPS—so the firm isn't expecting a huge surprise on the quarter itself. The bigger question, it says, is whether management's October-quarter outlook will lift expectations enough to change how investors value the stock.
Why the forward view matters
Nvidia has been the poster child for the artificial intelligence boom, with its graphics processing units (GPUs) powering everything from large language models to data center expansions. But even as demand for AI chips has soared, Nvidia's stock has gone roughly sideways since October of last year. That flat performance suggests investors have already priced in a lot of good news, and they're looking for signs that growth can continue at the same breakneck pace.
For a company like Nvidia, the guidance it gives for the next quarter is often more important than the actual results. That's because the stock's valuation is based on future earnings, not past ones. If Nvidia's October outlook comes in above what Wall Street expects, it could reignite enthusiasm. If it merely meets expectations, the stock might stay stuck in its current range.
Wedbush's note highlights that the market's focus is shifting from "how much did Nvidia make last quarter" to "how much will it make next quarter and beyond." That's a common dynamic for high-growth tech stocks, where the forward-looking narrative drives the share price more than the historical numbers.
The broader AI backdrop
Nvidia's earnings come at a time when the AI trade is under scrutiny. Nvidia's results could sway markets given its outsized weight in major indexes and its role as a bellwether for AI spending. If the company disappoints, it could drag down not just its own stock but also other AI-related names.
There are also cost pressures building in the AI supply chain. Nvidia AI server prices are set to rise due to higher memory costs, which could squeeze margins even as demand stays strong. That's one reason why the gross margin guidance—around 75%—is being watched closely. A dip in margins could signal that Nvidia is absorbing higher input costs, or that it's cutting prices to stay competitive.
Beyond Nvidia itself, the broader market is also paying attention. European stocks edged lower this week as investors braced for Nvidia's report and geopolitical headlines. The company's earnings have become a macro event, capable of moving indices and setting the tone for tech stocks globally.
What it means for investors
For everyday investors, the key takeaway is that Nvidia's earnings are about more than just the numbers. The company's guidance is a signal about the health of the AI boom. If Nvidia says demand is still accelerating, that's bullish for the entire AI supply chain—from chipmakers to cloud providers to software companies. If it sounds cautious, it could be a warning sign for the sector.
Wedbush's optimism suggests the firm believes Nvidia has room to surprise on the upside. But it's worth remembering that the stock has already run up a lot in recent years, and expectations are high. Even a strong report might not be enough to push the stock higher if investors were hoping for something spectacular.
Investors should also keep an eye on the broader market context, including the Federal Reserve's next moves. Interest rates and economic data can influence how much investors are willing to pay for growth stocks like Nvidia. A higher-for-longer rate environment could weigh on valuations, even if the company's fundamentals are solid.
Ultimately, Nvidia's earnings are a test of whether the AI trade has more room to run. Wedbush thinks the company will pass that test, but the market will have the final say.
