The AI juggernaut reports Q4 earnings on Wednesday.
The markets have been sluggish this week as investors hope for a jolt later in the week when AI juggernaut NVIDIA (NASDAQ:NVDA) reports fourth quarter and year-end earnings.
Wall Street analysts, as they typically do, have high expectations for NVIDIA when it posts earnings on Wednesday after the market closes.
The consensus among analysts calls for another record quarter for revenue, as they target $38.1 billion in revenue, which would be about a 72% year-over-year increase.
Earnings are anticipated to rise some 62% year-over-year to 85 cents per share.
The Wall Street consensus is a bit more optimistic than NVIDIA’s own guidance, which called for revenue of $37.5 billion, plus or minus 2%, in Q4. Investors will be watching data center revenue, which was up a huge 112% year over year and 17% sequentially in the last quarter to $30.8 billion. That accounted for 88% of total revenue.
NVIDIA did not provide earnings guidance for Q4, but it did offer an outlook for the gross margin to be 73%, and 73.5% on an adjusted basis. That would be lower than the 74.6% gross margin, and 75% on an adjusted basis, in Q3.
DeepSeek and Blackwell chips
There are a couple of major potential catalysts that investors will be watching when NVIDIA drops earnings on Wednesday. One would be any impact from the Chinese start up DeepSeek, which introduced a new open-source AI model in January. The model was hailed as a disruptor because it is cheaper to develop, uses less energy and resources, and is open-source, or free.
The DeepSeek impact may already be baked in, however, as NVIDIA stock has stagnated since the January announcement. In fact, it is down 9% in the last month, 3% year-to-date, and flat over the past six months.
INVIDIA investors are looking for a jolt and it may come from the new Blackwell chips that NVIDIA rolled out last quarter and is continuing to ramp up this quarter, and throughout 2025. The new Blackwell chips are hailed by NVIDIA as AI superchips that are faster and more secure than previous models.
AI spending ramps up
Another tailwind for NVIDIA could be the jump in AI spending. The big four tech companies, Meta, Microsoft, Amazon, and Alphabet are expected to spend $325 billion on AI this year, according to FactSet. That’s $100 billion more than the same quarter a year ago. And Apple just announced a plan to spend $500 billion over the next four years on AI data centers.
The bulk of NVIDIA’s revenue comes from data centers, to which NVIDIA supplies the chips that make them run.
The recent malaise for NVIDIA may not be a bad thing as it brought down the valuation significantly. The P/E ratio is now about 51, which is still high, but lower than the 81 a year ago. And the forward P/E is just 30. Further, the P/E-to-growth ratio is below 1 at 0.93, which suggests a reasonable price in relation to its five-year earnings projections.
Investors are hoping for a long-awaited surge Thursday in NVIDIA stock after a few sluggish months.
Analysts are certainly expecting a boost, as the median 12-month price target is $175 per share, which would be a 38% jump from the current price.
