Nvidia will report its first quarter earnings for fiscal year 2025 on May 22, which will either support or challenge its enormous $2.2 trillion valuation and the market’s focus on AI stocks. The company has been a leader in AI solutions since 2012 when it launched an application called AlexNet that accelerated machine learning using GPUs. Nvidia’s growth in the AI sector has been significant, with its Data Center division growing revenue by 217% in fiscal year 2024, contributing to a tripling of its stock price. However, there are concerns about overvaluation and the company’s ability to sustain its growth.
Key metrics to watch in Nvidia’s upcoming earnings report include revenue growth, specifically in the Data Center and Gaming divisions, gross margin, operating expenses, and adjusted diluted EPS. The company is expected to report revenue of $24 billion, with a significant increase compared to the prior year. Analysts predict adjusted diluted EPS of $5.57, representing notable growth quarter-over-quarter and sequentially. Nvidia has a history of positive revenue and earnings surprises, which may support another strong earnings report.
Challenges for Nvidia moving forward include increased competition from other chip makers, high investor expectations for AI stocks, supply chain issues, and restrictions on AI chip sales to China imposed by the US government. Despite these challenges, Nvidia’s biggest opportunity lies in product development, where it can continue to leverage its dominant position by introducing faster and more powerful solutions. The company recently announced Blackwell GPUs, which are expected to be twice as powerful as its prior-generation chips for training AI models.
Analysts are optimistic about Nvidia’s long-term outlook, with a consensus price target of $999 representing a 12.5% upside and expectations for strong EPS growth in fiscal years 2025 and 2026. The company’s continuous innovation in the AI space and its strong track record of delivering positive results are driving confidence in its future performance. Investors are eagerly awaiting Nvidia’s first quarter results to determine its valuation and growth potential in the AI sector, with expectations for another positive earnings surprise that could fuel further stock appreciation.
