Nvidia's Q1 Earnings: Record Results Driven by AI Chip Dominance?

Article written by Hebe Chen, IG Market Analyst

Nvidia's financial results: a preview

NVIDIA is set to release its Q1 FY25 financial results on May 22, 2024, with expectations of delivering another record revenue and margin. In the previous earnings season, Nvidia stocks surged by nearly 10% on the earnings date. Will the forthcoming report help NVIDIA’s stock price mark another all-time high or even reach a four-digit price tag for the first time?

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Nvidia earnings date

NVIDIA is set to release its 1st Quarter FY25 financial results on May 22, 2024, after the US market closes.

Nvidia earnings – what to expect:

Nvidia, a dominant market leader in AI chips and software, has reaped significant rewards from the new era of technological revolution. The company's fiscal year 2024 earnings report highlights a substantial surge in demand for its AI offerings. The Data Center segment, specializing in AI, experienced a remarkable 409% year-over-year revenue increase in the previous quarter and significantly contributed to the company's full-year revenue, which surged by 126% year-over-year.

Looking ahead to the upcoming quarterly report, Nvidia is expected to report approximately $24 billion in total company revenue, reflecting a 9% increase from the previous quarter and a 234% increase year-over-year.

In terms of earnings per share (EPS), Nvidia is forecasted to deliver $5.52 per share in its upcoming report, compared to $4.55 per share in the previous quarter, representing a year-over-year change of +406.4%.

Nvidia earnings key watch:

• Data Center

Driven by a surge in demand for data processing, training, and inference from major cloud service providers and GPU-specialized applications across various industries, Nvidia’s Data Center is currently riding a wave of explosive growth. In the fourth quarter, revenue skyrocketed to a record $18.4 billion, marking a stunning 409% increase from a year ago. With anticipation high, the upcoming quarter is expected to deliver yet another record-breaking performance.

• Margin

According to guidance from the previous quarter, Nvidia anticipates further improving its enviable margins from 72% in FY24 to 76%-77% in the first quarter of the new fiscal year.

• Opportunities and Challenges

Jensen Huang isn’t satisfied with Nvidia being just a hardware provider. The business model he envisions involves offering the best AI chips, packaged with top-tier networking kits and software. This approach allows Nvidia to leverage its dominant position in chip offerings while maintaining clients over extended product cycles.

However, Nvidia's path is not without obstacles. Established chipmakers like AMD and Intel pose a significant threat, while major cloud providers like Amazon and Alphabet are developing in-house AI chips, potentially disrupting Nvidia's dominance within their ecosystems. Additionally, recent U.S. restrictions on AI chip exports to China, a key market representing nearly a quarter of Nvidia's revenue, could reshape the landscape.

Further complicating matters are potential supply chain disruptions. Nvidia's primary chip manufacturer, Taiwan Semiconductor Manufacturing Company (TSMC), recently announced production capacity limitations that could constrain Nvidia's ability to meet market demand in the near future.

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Nvidia share price

Nvidia's stock price has surged over 95% year-to-date and investor sentiment remains positive.According to IG data, 40 out of 42 analysts surveyed in the past three months rated Nvidia as a "strong buy," with the remaining two recommending a "hold" position.TipRanks reinforces this sentiment with an "Outperform" score for the stock.

Analyst Consensus

Source: IG

From a technical standpoint, a rebound of over 20% from the April 19th bottom ($760) has brought its price just inches away from its record high, with some profit-taking holding the price around the $930 level. Breaking through the ceiling at $958 will effectively open the door for the price to revisit its all-time high above $970, or even reach $1000 on a psychological level.

On the other hand, if the price pulls back further, the 5-day SMA will provide imminent support at around the $920 price level. Below that, the major test of the uptrend momentum will focus on the ascending trend line established by all lows since mid-April.

Nvidia Daily Chart

Source: TradingView, prepared by Hebe Chen, IG Australia