Reporting After the Bell Today, Is Nvidia Stock a Buy?

Investors are bracing for another closely watched earnings update from Nvidia (NASDAQ: NVDA) this afternoon, when the AI (artificial intelligence) chip designer will report results for the third quarter of its fiscal 2026. The company now supplies many of the graphics processors that power large language models and other intensive AI workloads, so its results influence sentiment across the broader market.

The stock has moved sharply around recent earnings announcements in both directions, and another dramatic move would not be surprising after this release. No one can predict ahead of time whether the market will cheer or punish the next set of numbers, so investors buying now should be prepared for volatility either way and focus on making any investment decision based on their expectations for the shares over the long term rather than the short term.

Viewed through that lens, Nvidia looks compelling. But there are real risks.

Image source: Nvidia.

Recent performance and outlook

In the second quarter of fiscal 2026, Nvidia's revenue grew 56% year-over-year to $46.7 billion as demand for its data center chips remained intense. Data center sales, which now drive most of the business, also rose 56% year-over-year to $41.1 billion, powered by customers adopting the new Blackwell platform. Non-GAAP earnings per share climbed 54% year-over-year to $1.05, reflecting strong volumes and high gross margins.

"The AI race is on, and Blackwell is the platform at its center," Jensen Huang, founder and CEO, said in the second quarter earnings release.

But the direction of change now matters more than the absolute size of those numbers. Management expects third-quarter fiscal 2026 revenue of about $54 billion at the midpoint of guidance, which would represent about 54% year-over-year growth compared with the $35.1 billion reported in the same period last year. That outlook still points to extraordinary expansion, yet it comes after year-over-year growth of 94% in last year's third quarter and 78% in the most recent fourth quarter, so the pace is moderating.

Valuation and cycle risk

Behind its impressive growth rates sits a capital spending boom as cloud computing providers rush to build AI infrastructure. But spending cycles tied to new computing platforms eventually slows as customers achieve sufficient computing capacity or bump up against budget constraints.

If that happens with AI accelerators, Nvidia's revenue growth could downshift quickly, especially because a relatively small group of hyperscale customers drives a large portion of its sales. On top of that, cloud giants are designing their own AI chips, and rivals such as Advanced Micro Devices are working hard to offer competitive alternatives.

Geopolitical and regulatory risk also remain significant, since restrictions on chip exports to China and potential antitrust scrutiny could disrupt demand or limit where Nvidia can sell its most advanced products.

As of this writing, the stock trades around $186 per share and gives Nvidia a market value near $4.6 trillion. That price implies a price-to-earnings ratio of 53, which already assumes that very strong growth continues well beyond the next quarter or two. Even with strong free cash flow and with $24.3 billion returned to shareholders through repurchases and dividends in the first half of fiscal 2026, the valuation is pricey. There's ultimately a risk of a sharp valuation reset if growth slows faster than investors expect.

All in all, Nvidia looks both appealing and dangerous ahead of this week's report. The underlying business remains exceptional, with demand for AI computing still ramping. But the stock already reflects enormous confidence that customers will keep spending at a rapid pace for many years.

For patient investors who don't mind sharp price swings and the risk of a boom-and-bust style cycle in AI infrastructure, a small Nvidia position bought before earnings can still make sense as part of a broader portfolio -- but only with a long-term mindset because there's no telling what happens when Nvidia reports earnings. More cautious investors, on the other hand, might prefer to wait for a better entry point (if it ever comes).

Daniel Sparks and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices and Nvidia. The Motley Fool has a disclosure policy.