Nvidia Q4 Earnings Preview: Strong AI Demand Faces New Challenges

Nvidia is set to report its fourth-quarter fiscal 2025 earnings on February 26, after the market close, with analysts watching closely for any signs of slowing AI demand. Wall Street expects the company to deliver earnings per share (EPS) of $0.85 on revenue of $38.08 billion, according to FactSet consensus estimates.

Despite Nvidia's dominant position in artificial intelligence computing, concerns have emerged over competition from DeepSeek and a potential slowdown in hyperscaler capital expenditures. The company's flagship Blackwell architecture is expected to become a larger percentage of revenue, but delays in adoption and questions around near-term guidance could impact investor sentiment. Meanwhile, the stock has experienced significant volatility, rallying back to $142 before pulling back ahead of the report and now sitting on its 200-day moving average at $126.

DeepSeek and Competitive Pressures

One of the major concerns heading into Nvidia’s earnings report is DeepSeek, a Chinese AI firm that has demonstrated the ability to train large language models at a fraction of the cost using lower-end GPUs rather than Nvidia’s high-performance chips. The fear is that if AI firms shift toward more efficient training models, demand for Nvidia’s H100 and upcoming Blackwell GPUs could slow.

Nvidia CEO Jensen Huang addressed these concerns in a recent interview, arguing that DeepSeek is actually beneficial for Nvidia, as its value lies in post-training inference rather than initial model training. Analysts at Evercore ISI echoed this sentiment, stating that while some investors fear DeepSeek could reduce demand, Nvidia’s long-term AI dominance remains intact.

However, hyperscaler CapEx digestion remains a real concern. While cloud giants like Amazon, Microsoft, Alphabet, and Meta have significantly increased AI spending, questions remain about whether Nvidia’s customers might scale back orders after an aggressive buying spree in 2024.

Demand Outlook and Blackwell Transition

Despite competitive concerns, demand for Nvidia’s AI accelerators remains extremely strong, particularly with hyperscalers doubling down on AI infrastructure investments. Analysts at Piper Sandler expect Nvidia to “nicely beat” quarterly estimates, with Blackwell set to drive stronger revenue growth in the second half of 2025.

Blackwell GPUs, the next-generation AI chips from Nvidia, are expected to command 40 percent higher average selling prices than the current H100 and H200 series. Analysts believe initial shipments of Blackwell have already started, with supply constraints likely limiting early volumes.

Nvidia is expected to highlight its strong AI backlog, continued expansion of Blackwell GPUs, and demand from hyperscalers on its earnings call. However, any signs of CapEx moderation or delays in Blackwell ramp-up could spook investors.

Could Nvidia Issue a Soft Guidance?

One of the key risks heading into the earnings report is Nvidia’s fiscal Q1 2026 guidance. Wall Street expects Q1 revenue to increase sequentially to around $42 billion, up from the expected $38 billion in Q4.

Some analysts fear supply constraints on Blackwell GPU shipments could limit near-term upside, while hyperscalers adjusting their AI spending could result in a more conservative outlook than past quarters.

However, analysts at Raymond James and KeyBanc believe any softness in guidance would be due to short-term supply constraints rather than demand weakness, and that Nvidia is effectively sold out for calendar year 2025.

Options Market Activity Signals High Volatility

The options market is pricing in a 9 to 10 percent post-earnings move for Nvidia, which is slightly lower than previous quarters but still significant. Historically, Nvidia’s pre-earnings straddle (the combined price of call and put options) has been overpriced in five of the last six quarters, meaning that the stock has typically moved less than the options market expected following earnings.

Options traders remain skewed toward calls, with a 61 percent to 39 percent call-to-put ratio, in line with historical trends. However, some traders have taken bearish positions ahead of earnings, with a preference for downside puts in the near term.

Valuation Concerns Remain

Nvidia continues to trade at a premium valuation, reflecting the market’s expectation for continued high growth. The stock currently trades at a 45x forward P/E on a non-GAAP basis, 87 percent above the sector median.

While Nvidia’s growth justifies a higher multiple than peers, investors will be looking for strong forward guidance to maintain these levels. Some concerns have emerged about slowing margin expansion, as EPS growth has lagged revenue growth in recent quarters.

Q3 Segment Performance as a Benchmark

For comparison, Nvidia’s Q3 fiscal 2025 revenue grew 93.6 percent year-over-year to $35.08 billion, driven by strong demand across all business segments:

- Data center revenue surged 112 percent year-over-year and grew 17 percent sequentially, highlighting strong demand for AI workloads.

- Gaming revenue increased 15 percent year-over-year, benefiting from strong sales of GeForce RTX 40 Series GPUs.

- Professional visualization revenue climbed 17 percent year-over-year, supported by continued adoption of RTX GPU workstations.

- Automotive revenue jumped 72 percent year-over-year, marking a record quarter due to increased adoption of self-driving platforms.

These Q3 figures set a high bar for Q4 growth comparisons. Investors will closely watch how data center revenue performs in Q4, as this segment now accounts for the majority of Nvidia’s business.

Technical Trends and Stock Performance

Nvidia stock has seen significant volatility leading into the Q4 earnings report.

- The stock rallied into its Q3 report, hitting an all-time high of $152 the following day.

- It later pulled back to $125, before rebounding again to $142 in February.

- Concerns around DeepSeek AI triggered another selloff, sending the stock to a 2025 low of $113 on February 2.

- The stock has since recovered, but profit-taking has led to a retest of its 200-day simple moving average at $126 ahead of the report.

This makes $126 a key technical level to watch, as investors will assess whether the earnings results justify another leg higher or if the stock could break down further.

Conclusion: High Expectations, but Some Risks Remain

Nvidia enters its Q4 earnings report with high investor expectations, strong AI demand, and a major product cycle transition with Blackwell. While competitive concerns from DeepSeek and hyperscaler CapEx adjustments could introduce near-term volatility, analysts largely remain bullish on Nvidia’s long-term AI leadership.

If Nvidia delivers a slight revenue beat with strong visibility into Blackwell growth, shares could rally post-earnings. However, any cautious guidance or signs of order slowdowns could send the stock lower, particularly given its premium valuation and recent market weakness in AI-related stocks.

Investors will be watching closely for commentary on Blackwell supply constraints, hyperscaler spending trends, and any new AI partnerships that could drive further upside.