NVIDIA (Nasdaq: NVDA) just delivered its latest earnings report, and it’s packed with information that traders need to digest quickly. With shares down 8% in after-hours trading, there are several critical factors driving this move, from revenue expectations and guidance shortfalls to delays in next-gen technology. Here’s a breakdown of what traders should watch closely.
Revenue Beats, But Concerns Linger
NVIDIA reported revenues of $30.04 billion, surpassing Wall Street’s estimate of $28.73 billion. Earnings per share (EPS) came in at $0.68, slightly above the expected $0.64. While these headline numbers seem solid, the market’s initial reaction suggests that there are deeper concerns.
For the next quarter, NVIDIA projects revenue of $32.5 billion and adjusted gross margins of 75%. While this guidance exceeds the consensus estimate of $31.7 billion, it still falls short of the “whisper numbers” from buy-side analysts, who were hoping for $33 to $35 billion. This shortfall is critical for traders, as it signals that institutional expectations were set much higher, dampening enthusiasm despite the top-line beat.
Share Repurchase Plan and Cash Flow Miss
NVIDIA’s board approved a new $50 billion share repurchase plan, a bullish signal that the company believes its shares are undervalued at current levels. However, even with this positive news, NVIDIA’s free cash flow of $13.48 billion came in below the expected $13.57 billion. While this miss is relatively small, it could be seen as another sign that the company’s financial performance is facing pressure points, which could impact sentiment in the near term.
Market Reaction: Down 8% and Counting
As of 6:00 p.m. ET, NVIDIA shares were down about 8%, with two main factors driving this move. First, guidance for next quarter, while above Wall Street estimates, was not high enough to meet the lofty expectations set by the buy-side. Second, the delayed rollout of NVIDIA’s next-generation Blackwell chip is creating uncertainty around revenue growth.
It’s also essential to consider that NVIDIA’s stock had surged 27% over the past three weeks, leading into the earnings report. This recent run-up may have set an unrealistic bar for the earnings announcement, contributing to the pullback.
Blackwell Chip Delays: A Critical Focus
One of the primary concerns weighing on NVIDIA’s stock is the delay in its next-generation Blackwell chip. The company revealed that while customer samples were shipped in Q2, production has been pushed to start in Q4 and continue into fiscal 2026. NVIDIA expects only “several billion dollars” in Blackwell revenue by the end of this fiscal year, which ends in January. This delay has raised doubts about NVIDIA’s ability to hit higher-end revenue projections for 2025.
For traders, this news highlights the importance of timing in technology rollouts. A delayed launch could mean missing out on market opportunities or losing ground to competitors. Moreover, Blackwell’s limited initial contribution to revenues suggests that NVIDIA might not fully capitalize on its new product cycle until later in 2025 or beyond.
Margins Under Pressure: A Key Risk
NVIDIA’s gross margins dropped from 78.9% last quarter to 75.7%, a decline that reflects some of the pressures the company is facing. Margin compression is a significant risk factor, particularly as suppliers like Taiwan Semiconductor (NYSE: TSM) consider price increases. As NVIDIA ramps up Blackwell production, traders should watch for further margin declines that could weigh on profitability.
Strategic Moves and Competitive Moat
During the earnings call, NVIDIA emphasized the broad range of technologies involved in the Blackwell platform, including its Grace CPU, BlueField DPU, and various network interface and switch products. This strategy aims to showcase NVIDIA’s comprehensive ecosystem, potentially creating a moat around its core GPU business. For traders, this aggressive positioning is a sign that NVIDIA is attempting to fend off competition by emphasizing the depth and integration of its product offerings.
Key Takeaways for Traders
- Short-Term Volatility Likely: Given the mixed results and the 8% after-hours drop, expect short-term volatility in NVIDIA shares. The market’s reaction to the guidance and Blackwell delays suggests a cautious stance in the near term.
- Monitor Margin Trends: Keep a close eye on NVIDIA’s gross margins. Further compression could indicate increasing cost pressures or difficulties in maintaining pricing power, which may impact earnings.
- Watch for Execution on Blackwell Rollout: The delayed production ramp of the Blackwell chip is a pivotal factor. Traders should monitor any updates on the timeline and volume of shipments, as this will heavily influence revenue growth projections for 2025.
- Consider Share Buybacks: The $50 billion share repurchase plan could provide downside support for the stock. If the company starts buying back shares aggressively, this could mitigate some of the negative sentiment.
Conclusion
NVIDIA’s latest earnings report offers plenty of food for thought for traders. While the company has delivered strong sales growth, delays in its next-generation chip and margin pressures are key risks to watch. The market’s reaction underscores the high expectations surrounding NVIDIA, and traders should stay vigilant for any signs of execution challenges or further guidance adjustments. With volatility on the horizon, those trading NVIDIA will need to balance the near-term uncertainties against the longer-term growth story.