NVIDIA Earnings Preview: Can the AI Giant Continue Its Stellar Run?

 

NVIDIA ($NVDA) is set to release its Q4 FY2025 earnings report after the market closes on February 26th, and there's a lot to unpack. The stock has had quite a rollercoaster ride recently, especially after the DeepSeek breakthrough triggered a sharp 16.97% drop in late January. But since then, NVIDIA has shown impressive resilience, bouncing back by over 20% in just a few weeks. Still, with AI and data center demand continuing to grow, can NVIDIA keep riding this wave?

 

 

Analysts are projecting a strong quarter, with revenue expected to hit $38.13 billion, a solid 72.5% YoY increase. EPS is also looking strong, with an anticipated rise of 61.8% YoY, coming in at $0.80.

 

 

The real key to NVIDIA's performance continues to be its data center business. Bloomberg anticipates data center revenue will hit $33.99 billion, an 84.68% YoY surge. Since early 2023, this segment has eclipsed NVIDIA's traditional gaming business, now accounting for over 85% of total revenue.

 

 

The demand for AI infrastructure, fueled by hyperscalers like Microsoft, Amazon, Google, and Meta, shows no signs of slowing down. These tech giants are collectively planning to pour $320 billion into AI and data center investments in 2025—an enormous tailwind that should continue to benefit NVIDIA.

 

 

However, the recent DeepSeek-induced market turbulence raised questions about the sustainability of such massive capital expenditures. Yet, Wedbush analysts suggest that demand for NVIDIA's Blackwell GPUs remains robust, far outstripping supply. This indicates that despite short-term market jitters, the long-term growth story for NVIDIA's data center business remains intact.

 

 

Blackwell is a big deal for NVIDIA. The next-generation AI chip is seeing strong demand, with some estimates putting its Q4 2024 revenue at $9 billion, far outpacing initial projections. This new GPU is set to power large-scale AI models and could continue fueling NVIDIA's data center revenue growth through 2026.

 

 

However, NVIDIA is facing supply chain constraints, which has raised some concerns. But reports show that Blackwell production is ramping up, with systems from partners like Supermicro ready to ship. Once production is in full swing, Blackwell should be a significant contributor to NVIDIA's top line. The real question, though, will be whether the production timeline aligns with market demand.

 

 

While NVIDIA's growth story is compelling, there are some near-term challenges. The higher costs and lower yields associated with Blackwell production are expected to weigh on margins. Bloomberg forecasts Q4 gross margins at 73.46%, down slightly from 74.6% in Q3 but still within the company's guidance range of 73%-73.5%.

 

Derren Nathan of Hargreaves Lansdown notes that while margin compression is worth monitoring, NVIDIA's margins remain enviably high. “Many companies would kill for a 70%+ gross margin,” he says. For now, NVIDIA's pricing power and market dominance seem to insulate it from significant margin erosion.

 

 

Wall Street remains largely bullish on NVIDIA, with an average price target of $180.42, implying nearly 30% upside from current levels. UBS forecasts FY2025 revenue of $234 billion and EPS of $5.33, with FY2026 EPS expected to exceed $6.25. The firm also predicts Q1 FY2026 revenue guidance will surpass consensus estimates of $425-$430 billion, driven by strong data center growth.

 

However, not all analysts are without concerns. Mizuho's Vijay Rakesh has tempered expectations for Q4 data center revenue due to potential Blackwell production delays. Yet, he remains optimistic about Blackwell's growth acceleration in the latter half of 2025, particularly with the launch of the GB300 GPU.

 

 

NVIDIA's earnings report is likely to be a mixed bag of stellar growth and near-term challenges. The data center segment and Blackwell demand are undeniable bright spots, but margin pressures and supply chain risks warrant caution.

 

From an investment perspective, I believe NVIDIA remains a strong buy for long-term investors. The company's leadership in AI and data center markets, coupled with its innovative product pipeline, positions it well for sustained growth.

 

As always, keep an eye on management's commentary during the earnings call. Any updates on Blackwell production, data center demand, and margin outlook will be critical in shaping NVIDIA's narrative for the rest of 2025.

 

What's your take on NVIDIA's upcoming earnings?