Can Nvidia meet sky-high AI hopes? Its Q4 earnings should provide clues
Published: 11:27 26 Feb 2025 EST
Nvidia Corp (NASDAQ:NVDA, ETR:NVD) is set to report fourth-quarter earnings this afternoon, with analysts weighing potential outcomes ahead of the company's highly anticipated GPU Technology Conference (GTC) in March.
Bank of America analysts see Nvidia benefiting from strong AI hardware demand.
In a note Wednesday, analysts outlined three scenarios: a baseline case where Nvidia beats expectations but issues cautious guidance due to Blackwell chip delays and China restrictions; a bullish case with revenue exceeding estimates by $1 billion to $2 billion per quarter and gross margins above 71% to 72%; and a bearish case where results align with expectations but first-quarter guidance disappoints, putting the stock at a lower valuation.
For 2025, analysts anticipate strong AI-related sales, fueled by increased supply from Taiwan Semiconductor Manufacturing Co. (TSMC) and memory providers like SK Hynix and Micron. Cloud spending is rising sharply, with tech giants boosting capex by over 30% to more than $360 billion. European governments are also ramping up AI investments, potentially offsetting China-related revenue risks.
Key investor focus areas include Nvidia’s data center growth, margin trends, and guidance. Data center sales are expected to grow by at least $4 billion per quarter, with gross margins rebounding to 73% to 75% in the second half of 2025.
The GTC conference, beginning March 17, could reinforce Nvidia’s AI leadership.
"In most scenarios, we expect the lead-up to GTC conference – aka AI 'Woodstock' – as a more durable recovery catalyst in re-energizing confidence around NVDA's AI leadership," they wrote.
Bank of America expects announcements on the GB300 chip, featuring improved memory and software optimizations.
Swissquote analyst Ipek Ozkardeskaya cautioned that while fourth-quarter revenue is projected at $38 billion, risks remain. "Big Tech companies that include names like Meta, Microsoft, Apple, Amazon, are nothing to be minimized as they made up to 50% of Nvidia’s revenue in Q3," Ozkardeskaya said.
However, Ozkardeskaya noted that investors will also monitor supply chain constraints, margin pressures, and rising competition. "The risk of high concentration should be addressed in the medium to long-run given that these companies are working to launch their own chips.”
With Nvidia widely expected to post another quarter of robust earnings, Ozkardeskaya warned that market conditions remain uncertain.
"Investors are very much used to seeing impressive results, therefore the risk factors could reverse optimism from strong results," Ozkardeskaya wrote, adding that if Nvidia fails to lift investor sentiment, a broader market selloff could accelerate despite falling bond yields.
Shares of Nvidia rose 4.4% on Wednesday morning ahead of its earnings report.
