What to Expect From Nvidia's Q3 2023 Earnings Report
On November 21st, 2023, after the market closes, $NVIDIA(NVDA.US$ is scheduled to release its Q3 FY24 results. The company's share price has enjoyed a 21% increase in November and a 238% increase year-to-date. As the earnings date approaches, what can we anticipate from Nvidia's upcoming financial report?
Here are key expectations to watch:
Key Things to Watch - Data Center
Nvidia earlier said heavy demand from cloud computing services and other customers for chips to power AI systems caused revenue for its second quarter, which jumped 101 percent from a year earlier, to $13.5 billion, while profit surged more than ninefold to nearly $6.2 billion. Nvidia projected third-quarter sales of $16 billion, nearly triple the level a year ago. Jensen Huang, Nvidia's chief executive, said major cloud services and other companies were investing to bring Nvidia's AI technology to every industry.
Nvidia as a market leader in the AI chip industry, has been able to leverage its position to enjoy significant pricing power. The company has also benefited from explosive demand this year, with major US tech giants and Chinese companies like $Tencent(TCEHY.US$ purchasing Nvidia's chips. Despite elevated chip export restrictions imposed by the Biden administration, Chinese tech companies have continued to stock up on Nvidia's made-for-China chips.
Undoubtedly, the US government's chip restrictions have had a significant impact on Nvidia's Chinese market, which accounts for nearly one-quarter of the chip market's total revenue. While Nvidia has attempted to release three new chips specifically for China in response to the bans, Chinese companies are increasingly losing confidence and turning to non-US suppliers. For example, $Baidu(BIDU.US$ recently announced a deal to source chips from Huawei. As a result, Nvidia's performance in the upcoming quarter and year ahead will be closely monitored in light of this new reality and its Q3 earnings report.
Key Things to Watch - Gaming
The "Gaming" and "Professional Visualization" sectors of Nvidia are anticipated to continue their recovery in the third quarter. In the previous quarter, the Gaming sector saw a 22% increase in revenue year-over-year, while the Professional Visualization sector experienced a 24% increase. The strong demand for gaming products across most regions is expected to result in a revenue increase of 76.5% for the Gaming sector in the third quarter, bringing it to $2.78 billion compared to the same quarter in 2022.
What Analysts Say
Based on ratings from 38 Wall Street analysts, 37 suggested the stock as a buy, while one rated it as a hold. For the next 12 months' price target, the average price range for Nvidia is around $645, representing a 30% premium from current stock price.
$UBS Group(UBS.US$ said it's standing by its buy rating heading into earnings next week.
We are unlikely to get much new to sway this debate as Nvidia likely maintain a similar tone to last quarter by simply reiterating that visibility extends several quarters. Given these fears, we expect the PE multiple to remain low, in a 20-25x range, similar to prior cycles as the market determines the direction of FY25.”
It's also worth pointing out that Nvidia had surprised many with its previous results, announcing EPS more than 30% above consensus, and sales that exceeded expectations by 21.8%. Exceeding analysts' forecasts has become a habit for the company in recent years, as it has exceeded revenue expectations for the last 8 consecutive quarters, and for 6 of the last 8 quarters as far as earnings are concerned.
Source: CNBC, Investing.com, IG Bank, Seeking Alpha, The New York Times
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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