Prediction: Nvidia will beat Wall Street’s earnings estimate by 10% or more on Wednesday

The artificial intelligence (AI) giant. Nvidia (NVDA 1.46%) is scheduled to report results for the second quarter of fiscal 2025 (ended July 28, 2024) on Wednesday, August 28, after the market closes.

Nvidia’s upcoming earnings release is widely considered the most anticipated of this quarterly earnings season. This is because the company is viewed as a benchmark, or indicator, for the AI ​​space and the market as a whole.

Nvidia dominates the fast-growing AI chip market. If it delivers stronger-than-expected results — particularly in its AI-powered data center business — that suggests the broader AI market is likely more robust than previously thought.

Nvidia’s stock performance has also become an indicator of the likely strength of the overall market. Nvidia is the second largest stock on the S&P 500 index (behind Apple) and has skyrocketed since the start of 2023, so it has been an important driver of the index’s overall performance.

My two-part prediction is that (1) Nvidia will beat Wall Street’s earnings estimate and (2) it will do so by at least 10%. We’ll get to where the 10% came from.

Nvidia’s Q2 guidance and Wall Street estimates

Data sources: Nvidia and Yahoo! Finance. Fiscal Q2 2025 ended July 28, 2024. *Reflects 10-for-1 stock split in June 2024. **Reflects 10-for-1 stock split; author’s calculation based on metrics for which management provided guidance.

Nvidia has a fantastic track record of beating Wall Street’s earnings estimates, so the likelihood of it doing so on Wednesday seems high.

How strong is that track record?

Nvidia earnings beat/wanted record

We analyzed Nvidia’s quarterly results for the last four years, so 16 quarters. This data is from the second quarter of fiscal year 2021, which ended at the end of July 2020. Below is the summary.

Data source: Nvidia. Calculations by author. *Earnings as adjusted earnings per share (EPS). AI = artificial intelligence.

Consider the five-quarter period in which generative AI (the technology behind Open AI’s ChatGPT and other chatbots) became a major growth driver. Stock price movements are also included.

Data sources: Nvidia earnings reports, Yahoo! Finance and YCharts.

Key recommendations:

• Nvidia has beaten Wall Street’s revenue estimate every quarter since generative AI became a major growth driver.
• Nvidia’s earnings, on average, got higher in, let’s call it, the era of generative AI.

Prediction: Nvidia to beat Wall Street’s earnings estimate by at least 10%

Last quarter, Nvidia beat the Street’s earnings estimate by 10%. Over the past five quarters — the generative AI era — the company’s earnings pace has generally declined in size: 10% (most recently), 12%, 19%, 32% and 18%. So I use the lowest win rate as my prediction. I use the smallest and not, say, the mean because of the trend in the data.

The Big Picture: Nvidia stock probably isn’t as expensive as it seems

Since generative AI entered the scene, Nvidia’s earnings beats have become considerably higher (18% on average). I think this trend will continue.

The data in this article weakens the argument that says something like, “Nvidia stock is overvalued because its forward price-to-earnings (P/E) ratio is X.” (The forward P/E is 46.2 as of August 26.) A forward P/E uses an estimate of earnings, generally Wall Street’s. And these estimates are likely too low, inflating the forward P/E.