NVIDIA (NVDA) to Report Q2 Earnings: What's in the Cards?

NVIDIA Corporation NVDA is scheduled to release second-quarter fiscal 2023 results on Aug 24.

The graphic chip maker slashed its revenue guidance last week to $6.70 billion for the fiscal second quarter from the previous forecast of $8.10 billion (+/- 2%). The Zacks Consensus Estimate for the same is pegged at $7.12 billion, indicating a 9.5% increase from the year-ago reported figure.

The Zacks Consensus Estimate for quarterly earnings is pegged at 59 cents per share, suggesting a significant year-over-year decline of 43.3%.

The company’s earnings beat the consensus estimate in all the preceding four quarters, the average surprise being 5.3%.

Let’s see how things have shaped up before the announcement.

NVIDIA Corporation Price and EPS Surprise

NVIDIA Corporation price-eps-surprise | NVIDIA Corporation Quote

Factors to Consider

NVIDIA’s second-quarter performance is likely to have been negatively impacted by weakening demand for its chips used in the gaming end market.

In its fiscal second-quarter preliminary results reported on Aug 8, the company stated that weak top-line performance expectation is primarily attributable to lower sell-in of gaming products, reflecting a reduction in channel partner sales due to macroeconomic headwinds. The company anticipates reporting Gaming segment revenues of $2.04 billion, down 33% year over year and 44% sequentially.

Nonetheless, the continued strength in its data-center business on the growing adoption of cloud-based solutions amid the pandemic-induced work-from-home wave is expected to have boosted NVDA’s second-quarter revenues. An increase in the Hyperscale demand and the growing adoption in the inference market are likely to have been tailwinds during the to-be-reported quarter.

However, the company stated that data-center revenues might fall short of management’s expectations due to the ongoing supply-chain disruptions. NVIDIA projects to report revenues of $3.81 billion from the segment, reflecting an increase of 61% on a year-over-year basis and 1% sequentially.

The company’s Automotive and Professional Visualization divisions have shown an improvement in trends in three of the last four quarters. The positive trend is likely to have continued in the fiscal second quarter as NVIDIA expects the Automotive segment’s revenues to increase 45% year over year and 59% sequentially to $220 million.

However, disruptions in retail channel sales due to travel restrictions and social-distancing measures implemented across several parts of China, along with ongoing supply-chain constraints and the Russia-Ukraine war, might have weighed on overall financial performance in the fiscal second quarter.

What Our Model Says

Our proven model does not conclusively predict an earnings beat for NVDA this season. The combination of a positive Earnings ESP and Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. However, that is not the case here.

NVIDIA currently carries a Zacks Rank of #5 (Strong Sell) and has an Earnings ESP of -13.18%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks With the Favorable Combination

Per our model, Campbell Soup CPB, Oracle ORCL and Science Applications International SAIC have the right combination of elements to post an earnings beat in their upcoming releases.

Campbell Soup carries a Zacks Rank #2 and has an Earnings ESP of +0.22%. The company is expected to report fourth-quarter fiscal 2022 results on Sep 7. Campbell Soup’s earnings surpassed the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 10.8%. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for CPB’s fiscal fourth-quarter earnings is pegged at 56 cents per share, indicating a year-over-year increase of 1.8%. The consensus mark for revenues stands at $1.97 billion, suggesting a year-over-year increase of 5.2%.

Oracle is expected to report first-quarter fiscal 2023 results on Sep 12. The company carries a Zacks Rank #2 and has an Earnings ESP of +1.41% at present. Oracle’s earnings beat the Zacks Consensus Estimate thrice in the trailing four quarters while missing the same on one occasion, the average surprise being 5.8%.

The Zacks Consensus Estimate for quarterly earnings is pegged at $1.07 per share, suggesting a year-over-year improvement of 3.9%. ORCL’s quarterly revenues are estimated to increase 17.9% year over year to $11.47 billion.

Science Applications currently carries a Zacks Rank #3 and has an Earnings ESP of +1.19%. The company is slated to report its second-quarter fiscal 2023 results on Sep 1. Science Applications’ earnings beat the Zacks Consensus Estimate in the preceding four quarters, the average surprise being 23.6%.

The Zacks Consensus Estimate for Science Applications’ second-quarter earnings stands at $1.68 per share, implying a year-over-year decline of 14.7%. SAIC is estimated to report revenues of $1.82 billion, which suggests a decrease of 0.8% from the year-ago quarter.

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