NVIDIA Earnings: Can The AI Powerhouse Beat Expectations?

19-11-24

This Wednesday, November 20th, NVIDIA will release its Q3 Fiscal 2025 earnings after market close providing the market with a closer look at its recent financial performance and renewed forward guidance. The global leader in semiconductor technology and artificial intelligence has continued to dominate headlines as the backbone of the AI revolution. Its essential role as a full stack computing platform in schemes such as the Global AI Infrastructure Investment Partnership (GAIIP) is earmarked to lead the next ‘industrial revolution’. NVIDIA’s GPUs are central to the operations of cloud providers, tech giants, and AI developers, making it indispensable in the global AI ecosystem.

Analysts are forecasting Q3 Fiscal 2025 earnings per share (EPS) of $0.74 and revenue of $32.86B.

NVIDIA’s previous Q2 Fiscal 2025 results, reported on August 28, 2024, set a high bar for performance. The company reported an EPS of $0.68, exceeding the expected $0.64 by 6.25%, and generated $30.04B in revenue, beating estimates by 4.67%. These results reinforced NVIDIA’s position as a cornerstone of the AI and semiconductor sectors.

Heading into earnings everyone is keen to see if NVIDIA can sustain its momentum. The forecasted revenue of $32.86B would mark another significant milestone.

Recent stock performance has mirrored its earnings success. Since its last earnings announcement on 28^th August the stock has posted a net 24% gain despite enduring a 12.5% one week drop as the market sold-off following the Bank of Japan’s surprise 15 basis point interest rate hike spooking US equity markets. Investors have remained confident in the company’s ability to deliver long-term growth and its stock price reflects optimism in the broader AI and semiconductor markets, in which NVIDIA is often seen as the bellwether for AI-related investments.

However, investor enthusiasm also brings high expectations. Any misstep in Q3 Fiscal 2025 earnings or guidance could trigger a sell-off, not just in NVIDIA but across the AI sector, as lofty market valuations leave little room for error.

Investors and analysts alike will scrutinise NVIDIA’s forward guidance closely, seeking indications of sustained growth in a competitive and evolving market landscape. With expectations riding high, NVIDIA’s ability to beat forecasts once again could solidify its position as the undisputed leader in AI and semiconductors. If you believe that NVIDIA will continue to outperform market expectations, you may consider purchasing a long-dated call option in order to gain leveraged upside exposure with a defined risk profile.

Call Option

buy +1 NVDA 17-JAN-2025 140 CALL @ 13.70

Trade Idea

Call Option

NVIDIA Cash Price = $138.77 (as of 18/11/2024 @ time of writing)

Total consideration: $1370 excl. fees + commissions

Maximum loss: $1370 plus fees + commissions

1 (contract) x 13.70 (contract price) x 100 shares (contract size) = $1370 debit

A 30% increase on the current share price to $180.40 by 17-JAN-2025 expiry would value the call option @ $180.40 (share price) – $140 (strike price) = $40.40 for a total of $4040 (please note contract size of 100 shares)

The $140 call option would break even if the NVIDIA share price increased to $153.70 at expiry on 17-JAN-2025

Defined risk profile, maximum loss of a long option position is equal to the premium paid.

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