Nvidia Earnings Preview: Analysts Believe Blackwell's Strong Revenue Potential Can Offset Production Delays

Insights - From mid-July to early August, Nvidia's stock price fell nearly 23%, closing at $98.91 on August 7. This sell-off was driven by concerns that Nvidia's major tech clients might cut their AI spending budgets, alongside rumors that the launch of the Blackwell GPU, originally planned for later this year, would be delayed. Notably, several prominent investment funds reduced their Nvidia holdings, and Wall Street's doomsday predictions for Nvidia's stock further exacerbated the decline. However, the stock rebounded strongly from these lows, closing at $126.46 on August 26.

Nvidia is set to announce fiscal Q2 2025 earnings report after the market close on August 28. Analysts expect revenue and profit to more than double compared to the same period last year. Investors are likely to focus on the continued growth of the data center segment and the latest updates regarding the delays affecting the new Blackwell AI chips.

According to estimates from Visible Alpha, analysts forecast revenue to grow to $28.84 billion, reflecting a year-over-year increase of 113%. Net income is projected to reach $14.95 billion, a 142% increase compared to last year. This would mark the company's fifth consecutive quarter of triple-digit growth. However, EPS are expected to decline significantly due to a recent 10-for-1 stock split.

Source: Visible Alpha; Analyst Earnings Estimates

Nvidia's Competitive Advantage in AI Chips

Nvidia continues to dominate the AI chip market, with an estimated market share between 70% and 95%. Aarin Chiekrie, an analyst at Hargreaves Lansdown, noted, “The likes of Meta, Amazon, and Microsoft are all customers, each with deep pockets and a desire to build out their AI offerings with the power of Nvidia’s market-leading chips.”

Nvidia's competitive edge lies in CUDA, which allows developers to harness the parallel processing capabilities of Nvidia GPUs to accelerate machine learning workloads. The company continuously evolves CUDA's functionalities to maintain its market leadership.

The upcoming Blackwell platform is projected to deliver 30 times the inference capabilities of the existing Hopper, while reducing costs and energy consumption by 25 times. Nvidia may provide more details on increased Blackwell production during the upcoming earnings conference call. Even with AMD launching competitive products comparable to Blackwell, Nvidia retains a significant competitive advantage and remains the undisputed leader in the GPU market.

Moreover, there are enticing revenue dynamics at play. According to reports citing Morgan Stanley analysis, Nvidia and its partners are expected to price AI server racks equipped with the upcoming Blackwell GPUs between $2 million and $3 million. Based on demand for tens of thousands of AI servers, this pricing could generate over $200 billion in annual revenue by 2025.

Business Focus: Will the Blackwell Delay Impact Revenue?

In early August, reports showed that this AI chip leader would delay the release of its next-generation AI chips by at least three months due to design flaws, leading to a sharp drop in the company's stock price. However, multiple analysts believe that the Blackwell delay will not significantly impact Nvidia's performance.

Here are insights from various analysts.