Nvidia Earnings Preview: The AI General Faces Its Next Big Test

Nvidia (NVDA), the undisputed general of the artificial intelligence trade, will report fiscal second quarter (July-end) results Wednesday after the close, and the market is treating it like a macro event in itself. The company has been the single most important driver of the AI-led equity rally, with a record 7.6% weighting in the S&P 500—nearly three times the entire energy sector. Expectations heading into this print are sky-high: hyperscaler demand remains robust, sovereign AI projects are scaling up, and product transitions from Hopper to Blackwell (and soon Blackwell Ultra) appear smooth. At the same time, the risks are equally clear. China remains a thorny issue, with export controls disrupting H20 shipments and forcing Nvidia to improvise with compliant versions. Competition from AMD and custom silicon looms larger with each quarter. And valuation sits in the stratosphere, with shares still trading near 30× forward earnings despite a near-30% rally year-to-date.

Key Metrics to Watch

Street consensus is looking for revenue of roughly $46 billion, modestly ahead of Nvidia’s conservative $45 billion ±2% guidance. Non-GAAP EPS is pegged near $1.00, with a wide range of estimates depending on assumptions for China shipments. Analysts expect gross margins around 71.8–72%, with management reiterating its goal of reaching the mid-70% range later this year as Blackwell ramps. Data center revenue remains the core driver, with forecasts around $42–43 billion, up more than 70% year-over-year. Networking should contribute around $6 billion, while gaming revenue is expected to normalize after a strong Q1.

Guidance will be equally important. For Q3, consensus expects revenue of ~$53 billion and EPS near $1.18, with several analysts modeling closer to $55 billion if China shipments fully resume. Investors will also parse commentary around operating expenses and net margins, which some bulls think could climb toward 54–55% given Nvidia’s operating leverage.

Products and Roadmap

Product launches remain central to the Nvidia story. The Blackwell architecture, led by the GB200 GPU, is ramping at hyperscalers and sovereign AI customers. The upcoming GB300 (Ultra) refresh is expected to improve inference workloads with higher ASPs and stronger margins. Nvidia is also laying the groundwork for “Rubin,” its next-generation architecture slated for 2026, with CEO Jensen Huang confirming multiple tape-outs already in process at TSMC. These product transitions are being carefully watched by the Street for signs of execution risk, but so far Nvidia has shown an ability to manage generational leaps without disrupting customer demand.

China’s Dilemma

No single issue is more complex than China. In Q1, export restrictions forced Nvidia to write down $4.5 billion in H20 inventory and cost it an estimated $2.5 billion in revenue. For Q2, guidance already reflects roughly $8 billion in lost sales tied to the China ban. The U.S. government has since begun issuing licenses for shipments, and Nvidia is reportedly preparing compliant versions of Blackwell chips for the Chinese market. Analysts estimate China could represent $6–10 billion in incremental quarterly revenue if shipments fully resume, but management has cautioned that the total addressable market could reach $50 billion and that losing access would be a “material adverse impact.” Bulls argue that any resumed sales represent pure upside, since consensus largely excludes China for the near term.

Geographic Mix

China aside, Nvidia’s revenue base remains globally diversified. The U.S. continues to lead in hyperscaler CAPEX, with Amazon, Microsoft, and Google all expanding AI infrastructure. Europe is emerging as a sovereign AI market, with Deutsche Telekom among the customers announcing large GPU purchases. In Asia, Taiwan and Korea remain critical manufacturing partners, while Japan and India are beginning to scale AI adoption. Nvidia’s ability to tap these varied markets has helped cushion the China shock and keep growth rates extraordinary.

Q1 Recap

The first quarter set the stage for another blowout. Nvidia delivered $44.1 billion in revenue (+69% YoY) and $0.81 in adjusted EPS (+33% YoY), beating Street estimates despite the $4.5 billion China write-down. Data center revenue surged 73% YoY to $39 billion, driven by the ramp of Blackwell, which already comprised nearly 70% of compute revenue. Networking rose 64% sequentially to $5 billion, and gaming revenue hit $3.8 billion, up 48% sequentially. Gross margins would have been 71.3% excluding the China charge, underscoring Nvidia’s pricing power. Management returned $14.3 billion to shareholders via buybacks and dividends, highlighting confidence in cash generation.

Growth Metrics for Q2

For Q2, the Street expects revenue growth of roughly +53% YoY, with EPS up nearly +50%. Sequentially, consensus implies ~4% revenue growth from Q1, which looks conservative given hyperscaler commentary and supply chain checks suggesting 20–25% growth in compute shipments. If China shipments resume meaningfully, some analysts think revenue could top $48 billion, a ~$2 billion beat versus guidance. Gross margin expansion will be closely scrutinized, especially given the mix shift toward higher ASP Blackwell GPUs.

Valuation and Market Weighting

Nvidia’s stock is a paradox: both expensive and arguably cheap. On a trailing basis, the company trades near 30× forward earnings and almost 30× sales, dwarfing AMD’s multiples and even Broadcom’s. Yet bulls argue that growth justifies the premium. Full-year FY2025 revenue is projected at $130 billion, up more than +110% YoY, and analysts see a path to $200–300 billion in data center revenue by 2026. That implies EPS power of $8 in CY26, which at 30× earnings would support a share price north of $240.

The company’s sheer weight in the indices makes it systemically important. At 7.6% of the S&P 500, Nvidia alone has three times the influence of the entire energy sector. Any disappointment could ripple across the market, while a strong beat could re-ignite the AI rally. Options activity suggests traders are positioning for a large move, with heavy call buying into September and beyond.

Conclusion

Wednesday’s print is shaping up as one of the most consequential earnings events of the year. Nvidia enters with momentum: hyperscaler demand, sovereign AI build-outs, and a robust product pipeline are all tailwinds. The risks are real—China remains unsettled, AMD is hungry for share, and valuation leaves no room for error. But if Nvidia delivers another beat-and-raise, margins stay elevated, and management confirms resumed China shipments, the stock could once again reset the bar for the entire AI trade. With its market weight and leadership role in the AI ecosystem, Nvidia’s Q2 results won’t just decide the fate of one stock—they may dictate the tone for equities into year-end.