Nvidia earnings preview: Another record quarter expected

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Nvidia is set to announce its fiscal Q3 earnings for 2025 after US markets close on Wednesday. In the wake of a recent tech sector retreat, Nvidia’s results will play a crucial role in shaping market sentiment for the remainder of the year. As the primary beneficiary of the artificial intelligence (AI) boom, Nvidia’s performance is also critical to gauging the broader trajectory of the industry.

Nvidia has repeatedly surpassed Apple as the world’s most valuable company by market capitalisation since June. As of Monday’s close, Nvidia’s market capitalisation stood at $3.43tn (€3.24tn), slightly trailing Apple’s $3.45tn.

Despite a 184% year-to-date surge in its share price, Nvidia experienced a selloff last week amid the unwinding of the “Trump Trade”. Further pressure arose from reports by The Information highlighting overheating issues with Nvidia’s Blackwell processors when installed in high-capacity server racks. These concerns contributed to a further decline in Nvidia’s share price on Monday.

Nevertheless, Nvidia’s Data Centre segment, which dominates the global AI chip supply, remains the focal point of its earnings report. Investors will pay close attention to the shipment of Blackwell chips and the company’s guidance for the current quarter and the full fiscal year.

Record Data Centre Growth Anticipated

Nvidia achieved record Data Centre revenue in Q2, and analysts expect this segment to reach another milestone in Q3, with sales projected to hit $29.53bn (€27.87bn). This would represent a 200% increase compared with the same period last year.

Overall revenue is forecast at $33.28bn (€31.41 billion), marking an 84% year-on-year rise. These expectations align closely with Nvidia’s guidance of $32.5 billion (€29.2 billion), plus or minus 2%. Meanwhile, earnings per share are expected to reach $0.74 (€0.70), an 89% increase compared to the year-ago quarter.

The company continues to supply advanced AI chips to major tech firms, including Amazon, Microsoft, Alphabet, and Meta Platforms. These technology giants have been investing heavily in their AI infrastructure.

“Nvidia’s data centre revenue is seeing huge growth on the back of the AI spending frenzy from big tech,” eToro market analyst Josh Gilbert commented in a note to clients. He added that sales will remain robust as these companies race to monetise their AI investments.

However, Nvidia’s gross margin slipped to 75.1% in the second quarter, down from 78.4% in the first quarter, due to rising operating expenses. Analysts expect this trend to continue, with margins likely narrowing to around 74.4% as the company anticipates a further increase in operating expenses, exceeding $3bn (€2.8bn) for the third quarter.

Blackwell Shipments at the Forefront

Nvidia’s Blackwell AI chips, regarded as a significant growth driver for its data centre sales, have become a central focus. These chips are expected to reduce the operating costs and energy consumption of large language model (LLM) inference by up to 25 times compared to previous offerings.

Nvidia CEO Jensen Huang has highlighted the intense demand for Blackwell chips, describing it as “insane”. He expects these chips to generate billions in sales during the December quarter, with orders already booked for the next 12 months. Despite the enthusiasm, concerns over overheating issues related to Blackwell processors have raised questions. The company is likely to address these concerns in its earnings report.

Production of Blackwell chips, initially planned for the September quarter, was delayed to the December quarter due to unspecified design flaws. While Nvidia has not clarified the nature of these issues, the delay has sparked speculation about the potential impact on its data centre revenue and its ability to sustain growth momentum.