Here's Our Game Plan for Nvidia's All-Important Earnings

After today's market close, Nvidia NVDA will report its January-quarter results, and it has the potential to move markets. We say this because Nvidia is the second largest component of the S&P 500 and the Nasdaq Composite, which means significant investor dollars will be following the action.

The company is expected to report EPS of $0.85 on revenue of $38.15 billion, up 63% and 72.6%, year over year, but we would argue Nvidia’s forward guidance is far more important for the shares and the market. We say this because Nvidia’s guidance has the potential to quell the noise that has been circulating in and around the data center and AI space these last few weeks.

That noise, which began with DeepSeek and extending to a recent report from TD Cowen raising questions over Microsoft’s MSFT capital spending, has weighed on the shares of companies that stand to benefit from the data center build-out. Obviously that includes Nvidia, but also fellow TheStreet Pro Portfolio holdings Marvell Technology MRVL, Eaton ETN, and others. Even though Microsoft has since come out and reaffirmed its capital spending plans, uncertainty stemming from developments over the last few weeks remains.

For the April quarter, the consensus forecast is for Nvidia to deliver EPS of $0.91 on revenue of $42 billion, up quarter over quarter, but a far more dramatic increase compared to the April 2023 quarter’s EPS of $0.61 and $26 billion in revenue. Rising capex figures and the company’s ramping Blackwell chip are behind those figures, but once again expectations are running high, something we can surmise by the rebound in the shares from their recent low near $115 at the start of February.

Because Nvidia has established a track record of beating Wall Street consensus forecasts, an in-line January quarter or current-quarter guidance that matches market expectations is likely to see NVDA shares trade off in response. We’ll want to know the details backing the quarterly results and guidance, but we recognize that quarter-to-quarter performance can be volatile, especially when ramping new products at a time when customers are capacity constrained. That was the message from Meta META, Amazon AMZN, Alphabet GOOGL, and Microsoft a few weeks back. As their capital spending dollars are put to work, the ensuing capacity ramp should translate into stronger shipments from Nvidia, Marvell, and others. That’s why we’ll be more interested in any annual guidance offered by Nvidia.

Stepping back, we continue to see signs of more companies adopting AI. The latest came from Workday’s WDAY earnings call last night, which reaffirmed our decision to pick up more shares of ServiceNow NOW earlier today. On that call, Workday CEO Carl Eschenbach said “… AI is front and center in every conversation I have with customers, prospects, and partners. They want to move beyond incremental productivity gains… Similar to Q3, we once again saw 30% of our customer expansions involve one or more AI SKUs.”

To us, this reaffirms prior data points about shifting IT budgets toward AI, something that should drive data center capacity utilizations higher even as additional capacity is added this year. As we move forward from the very early innings of AI adoption, that rising adoption suggests Big Tech will need to add further to its AI and data center capacity. And that keeps us bullish on NVDA and MRVL shares over the long term.

With that in mind, if Nvidia’s quarterly results or guidance leave the market underwhelmed, and we see the stock fall meaningfully in response, it may allow us to pick up more shares. However, because we are disciplined investors, should things go better than expected tonight and NVDA shoots higher in response to what the company delivers, past a certain point prudence would suggest locking in a slice of those big gains. NVDA shares ballooning to a 4.5% or larger position size would be a catalyst for such a move.

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At the time of publication, TheStreet Pro Portfolio was long NVDA, MRVL, ETN, NOW, GOOGL and MSFT.