Nvidia's Q2 Results Exceed Expectations, But Future Guidance is Uncertain

Nvidia's Market Performance

Nvidia has once again been recognized as the world's most significant company for the second consecutive year. The company's market cap has soared more than 150% YTD to an impressive $3.1 trillion, significantly outpacing the Nasdaq. This growth puts Nvidia in close competition with Apple for the title of the world's largest company.

While the company's stock price gains have been largely attributed to consistent increases in forward earnings expectations, questions are arising about the potential for further earnings growth. With whisper numbers at extremely high levels compared to already optimistic guidance and estimates, it's no surprise that the options market is anticipating a 10% swing after hours.

Concerns About Nvidia's Product Lineup

Nvidia's second quarter was not without its issues. The company did not entirely dismiss reports of potential problems with its forthcoming Blackwell product lineup. However, analyst reports have downplayed these issues as insignificant given the high demand for existing products, specifically the Hopper chip line. Despite this, management is expected to address these concerns.

Earlier this month, Nvidia stated, “As we’ve stated before, Hopper demand is very strong, broad Blackwell sampling has started, and production is on track to ramp in the second half. Beyond that, we don’t comment on rumors.”

Q2 Results and Future Guidance

Despite high expectations for the current quarter and even higher expectations for the company's guidance, Nvidia reported impressive Q2 results. The company's Q2 revenue was $30.0B, exceeding estimates of $28.86B and even surpassing the JPM whisper number of $29.85BN. Other highlights include Q2 Data Center Revenue of $26.3B, beating expectations of $25.08B, and a Q2 EPS of $0.68, surpassing the expected $0.64.

However, the company's guidance showed a slight weakness. Nvidia projected Q3 revenue to be $32.5 million, +/- 2%. While this was above the average estimate of $31.9 billion, it fell short of JPM's whisper of $32.95BN and was significantly below the most optimistic sellside prediction of $37.9 billion.

To appease investors, Nvidia announced a massive new $50 billion buyback and tried to preempt questions about its reportedly troubled Blackwell chips, stating that “samples are shipping to our partners and customers” and that it expects to ship several billion dollars of Blackwell revenue in Q4.

Market Reaction

Initially, NVDA shares bounced on the big beat, but they dipped on the disappointing guidance, sliding as much as 6% after hours. The stock is still determining its direction, swinging between gains and losses as traders digest the earnings. The options markets had priced in a swing of 10% after hours, so the current reaction is relatively tame compared to expectations.

Bottom Line

Nvidia's Q2 results have exceeded expectations, but the company's future guidance has raised some concerns. How do you interpret these results? Do you think Nvidia can maintain its impressive growth in the future? Share your thoughts and discuss this article with your friends. Don't forget to sign up for the Daily Briefing, which is delivered every day at 6pm.