VIDEO: How to Prepare for Nvidia Earnings

With the move winding down, Chris Versace discusses what the market expects from Nvidia’s (NVDA) earnings this week, explaining why we’re focusing on its guidance for the current July quarter.

As part of that, Chris also shares other items, including Blackwell’s ramp and margin guidance, that will be focal points for investors. And as quarterly reporting shifts more toward retailers, Chris explains the three items the Portfolio will be putting under the microscope when the likes of Home Depot (HD), Target (TGT) and Walmart (WMT) deliver their quarterly results and guidance.

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At the time of publication, TheStreet Pro Portfolio was long NVDA shares.

Transcript

CHRIS VERSACE: Hey, folks, Chris Versace here. And it is May 18, better known as the first day of trading for the second half of the current quarter. And the first half, extremely strong for the market, but also very, very good for the pro portfolio. But as we shift gears into the second half of the quarter, there is a big week ahead of us. So let’s break it down.

By and large, what do we have Well, another big week of earnings, not necessarily the greatest number of earnings. But what we get from NVIDIA to the retail swath that’s coming, it’s going to be very insightful and important for the market for a couple of different reasons. So let’s take a look.

And we’ll start with NVIDIA. It’s the largest holding in the S&P 500, the NASDAQ 100, which means, by definition, how it is perceived, how those results are perceived by the market are going to be very, very important. What do we know? Well, over the last several weeks, we’ve seen a lot of confirmation about the strength in demand for AI and data center components, as well as other aspects to it that have been beneficial for other non-chip holdings that we have in the portfolio.

Now, all of that tells us that demand, well, it should be very robust for NVIDIA, making it a very powerful tailwind for NVIDIA’s April quarter results. But as we have seen in the past, it’s not just the quarter that’s being reported. It’s also the guidance. And this is true for a couple of reasons. One, NVIDIA, very strong run, as I just mentioned, the market being strong over the first half of the current quarter, NVIDIA shares, as strong, if not stronger. And that, of course, raises the stakes, the expectations for what they’re going to have to deliver.

But also, too, as we’ve seen in the past with NVIDIA, we can see a strong run-up and then some disappointment because of potential whisper numbers that the market may have been expecting. There is the consensus numbers that are out there, and I’ll talk about them in a second. But it’s the numbers that are higher than those, the whisper, call it or irrational or overly exuberant expectations that might be out there in the marketplace.

And there have been times in the past when NVIDIA has delivered on those numbers, surpassing them even. And there have been other times where they come up a little short. So in my opinion, following the strong run on NVIDIA shares, the company is really going to have to deliver not just a nice, easy beat against the consensus numbers, but they’re going to have to really deliver another leg up.

So let’s talk about these things. So for NVIDIA’s July quarter, Wall Street sees the company delivering EPS of $1.96 on revenue of $87 billion. Remember, this is the July quarter, the current quarter. So that is what the market expects them to guide around for the July quarter. Now, some context for that $87 billion– up 86% year over year, clearly, clearly benefiting the robust demand for AI and data center. But it’s also up from the $79 billion that NVIDIA is expected to report for its April quarter.

Now, that’s the consensus. The high end of expected July quarter revenue is around $96 or $97 billion, which means that, for NVIDIA to really deliver a beat-and-raise quarter, it’s going to have to go beyond that $87 billion that the market expects, probably deliver something with a 9 in front of it. So call it at least $90 billion. Now, what will that show? Well, think about it. Really, over the last several weeks, we’ve heard a lot of other companies out there talking about program wins.

We’ve seen the hyperscalers partner up with the likes of Marvell, Broadcom, companies that we have in the portfolio. We’ve also seen strong demand for chips out of AMD, even Qualcomm making a lot of noise, which I explained to you is just– it’s interesting conversation for Qualcomm, but it’s not really the tailwind that some folks have made it out to be. And lo and behold, since we removed Qualcomm from the bullpen, it’s actually started to come back down to Earth. I wouldn’t be surprised if we get more of that for the reasons that I discussed in the Alert in which we removed Qualcomm from the bullpen.

But getting back to NVIDIA, it’s going to have to show that it can continue to hold its own, really reconfirming its industry position as the company that is dominating when it comes to AI and data center demand. So that guidance will be key. But we’re also going to want to pay attention to a few other things when it comes to NVIDIA– comments on margins in the second half of the year, particularly as Blackwell continues to ramp.

Where are we in terms of the successor to Blackwell, better known as Rubin? And we’ll also, of course, be interested in what CEO Jensen Huang has to say about AI adoption and usage. You know that we continue to track that, but we also want to understand his latest comments on the shift that’s starting to happen from AI models and training to inference and, more importantly, inference at scale. We’re going to get all of that Wednesday after– excuse me, after Wednesday’s market close, when NVIDIA reports.

But in and around that report, we are going to get a gaggle of retailers. And when we think about weightings in the S&P 500, just like I mentioned for NVIDIA, the companies that we really want to pay even closer attention to– Walmart, Home Depot, and Target. And here’s the thing. With those results for those 3 companies, but others in the retail space, the consumer spending data has been fairly upbeat. So it’s not like we’re worried about the April quarter.

Really, what we want to focus in on– and this gets back to some of our favorite words, so “inflation,” “duration,” and “follow-through.” So when we think about that, it’s going to be the guidance that these companies deliver for their July quarter– again, the current quarter– and how that stacks up, yes, against market expectations. But we’re going to want to go 1 level deeper.

There are really 3 things that we’re going to want to focus in on. The first one is going to be the comp sales forecast. Is it slowing compared to the April quarter? What does that tell us? What do we see in the second one, which is margins? Are they starting to come under pressure? What’s the guidance compared to the prior quarter compared to the year-over-year quarter? What’s the outlook for the back half of the year?

We already know that certain suppliers are already raising their prices in advance of the 2026 holiday shopping season. So we’re going to want to pay attention to that in particular. And kind of an offshoot of margins, what are they saying about pricing? Are they taking pricing action? Are there plans for pricing action, and what that might mean on the margin front?

And just to tie those 2, margins and pricing, together, are we looking to see something that is disciplined for the long term, or are we seeing companies say we’re going to look to pick up market share? Now, typically when we’ve seen that in the years that we’ve been doing this, when a company starts to focus in on market share, not being disciplined with its business, that tends to throw a flag on the play, so to speak. So we’ll be listening to see if any companies are going to be doing that.

And again, kind of triangulating on those 3 things will really help us read between the lines, get a better sense of what these companies expect for the back half of the year, what they expect for the consumer, as well. So we’ll be getting all of that this week, plus fresh set of Fed meeting minutes on Wednesday, which means, my friends, it’s going to be a busy week.

But don’t worry because we will be here to break it all down, which means please be sure to check your emails, your alerts. We want to make sure you’re getting our latest thoughts. And if we make any moves with the Portfolio, like we did earlier today with the shares of TJX, we want to make sure that you are right there with us. Thanks for watching.