NVIDIA Corporation (NASDAQ:NVDA) is poised for a potential positive surprise as it prepares to unveil its second-quarter fiscal 2024 financial results on August 23, following the close of the market.
For the fiscal second quarter, the company has projected revenues of approximately $11 billion, with a potential variance of up to 2% in either direction. The Zacks Consensus Estimate, however, stands slightly higher at $11.02 billion. This projection reflects an impressive 64.4% surge compared to the figures reported a year ago.
In terms of earnings, the Zacks Consensus Estimate for the quarter is set at $2.06 per share. This forecast indicates a remarkable year-over-year growth of 303.9% from the earnings of 51 cents per share reported in the same quarter of the previous year.
Notably, NVIDIA’s track record includes surpassing the Zacks Consensus Estimate in two of the last four quarters, although it fell short on two occasions as well. The overall average surprise over these instances was 0.3%.
A Pre-Earnings Insight: Key Considerations
Before the official announcement, let’s explore the factors that have shaped NVIDIA’s performance.
The second quarter of NVIDIA is anticipated to have reaped the benefits of a rebound in both its Gaming and Professional Visualization segments. Notably, the past two quarters witnessed a steady recovery in the Gaming end market, with inventory levels normalizing among channel partners. This resulted in robust demand for gaming products across various regions.
Sequentially, the revenues from the Gaming end market registered a significant 22% uptick in the previous quarter. The Professional Visualization segment also displayed signs of recovery, recording a sequential revenue increase of 31%. This positive trend is projected to have extended into the second quarter, with estimated revenues of approximately $2.26 billion and $298.6 million for the Gaming and Professional Visualization end markets, respectively.
Furthermore, the consistent strength of NVIDIA’s Datacenter business, driven by the rising adoption of cloud-based solutions amidst the hybrid work trend, is likely to contribute to the second-quarter revenue growth. Anticipated tailwinds for this quarter include the surge in Hyperscale demand and the growing adoption within the inference market.
The Datacenter end-market business is predicted to have received a boost from the escalating demand for generative AI and large language models that employ GPUs based on the NVIDIA Hopper and Ampere architectures. The strong demand for these chips from major cloud service and consumer internet companies is anticipated to fuel the segment’s revenue growth, with estimated second-quarter revenues of $8.02 billion.
Additionally, the Automotive segment, which demonstrated positive trends in six of the last eight quarters, is likely to continue this momentum in the fiscal second quarter. This growth can be attributed to higher investments in self-driving and AI cockpit solutions, with estimated revenues of around $308.2 million for the Automotive end market.
However, it’s important to acknowledge the potential impact of macroeconomic challenges, such as elevated inflation and interest rates, which might have affected the sales of NVIDIA’s desktop workstation GPUs in the second quarter.
Earnings Outlook
Our reliable model anticipates a positive earnings outcome for NVDA this earnings season. The combination of a favorable Earnings ESP (Earnings Expected Surprise Prediction) and a Zacks Rank of #1 (Strong Buy), #2 (Buy), or #3 (Hold) enhances the likelihood of an earnings beat, which is the case here.
Specifically, the Earnings ESP reflects a positive variance of 2.39%, calculated as the difference between the Most Accurate Estimate ($2.11 per share) and the Zacks Consensus Estimate ($2.06 per share).
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