NVIDIA's Q2 2025 Earnings Preview: Expectations and Key Drivers

As NVIDIA prepares to announce its fiscal Q2 2025 earnings on August 28th, analysts are expecting robust results with revenue projected at $28.84 billion and EPS anticipated at $0.64. These figures indicate significant year-over-year growth, with revenue expected to more than double, reflecting a 137.84% increase. Given NVIDIA’s pivotal role in the AI industry, this earnings report is highly anticipated and could influence market sentiment broadly.

One of the critical focus areas for investors will be NVIDIA's data center revenue, which has been a major growth driver for the company. Analysts expect data center revenue to hit $25.19 billion in Q2, representing more than 85% of the company's total revenue and a substantial increase from last year. The continued demand for AI infrastructure, particularly for NVIDIA's Hopper GPUs, is expected to bolster these figures. However, potential delays in the launch of the new Blackwell AI chip could temper future expectations, making updates on this front crucial.

Despite the strong anticipated results, NVIDIA’s ability to sustain its impressive gross margins will be closely monitored. Analysts project a gross margin of around 75.5% for Q2, slightly declining to 75% in Q3. This is reflective of ongoing supply chain challenges and competition, particularly from AMD. NVIDIA has consistently beaten revenue expectations in recent quarters, but the extent of these beats has narrowed, indicating that analysts have adjusted their models to better reflect the company's performance.

Another point of interest is NVIDIA’s guidance for the upcoming quarters. For Q3, analysts expect revenue growth of 75.4% to $31.8 billion and EPS growth of 77% to $0.71. However, the market will be keen on any updates regarding Blackwell chip production delays, which could impact these projections. Despite potential challenges, analysts remain bullish, with some raising their FY25 EPS estimates due to the anticipated success of NVIDIA's H200 and H20 SKUs.

Investors will also be looking for details on how NVIDIA plans to utilize its substantial free cash flow, projected to exceed $270 billion over the next three years. The possibility of significant share buybacks could support EPS growth and bolster the stock price. However, with the company trading at a high forward P/E ratio of 33x, some analysts caution that the stock may be nearing peak bullishness, especially if growth expectations become harder to meet.

The market is also concerned about potential delays with the Blackwell chip, which have sparked unease among investors. These delays, primarily due to challenges with advanced packaging technology, could push back the deployment of Blackwell chips into key customers' data centers, potentially affecting AI infrastructure projects. Although some analysts argue that the impact may be modest, any prolonged delays could allow competitors like AMD to gain ground, increasing the stakes for NVIDIA.

Finally, NVIDIA's valuation remains a key topic of discussion. With a robust EV/FCF and a capex-light business model, the company is well-positioned relative to its peers. However, the high expectations placed on NVIDIA mean that any missteps in execution could lead to significant downside risks. The upcoming earnings report will be a critical test of whether NVIDIA can continue to meet the market's lofty expectations and maintain its dominant position in the AI hardware space.

In summary, while NVIDIA is expected to deliver strong Q2 results, the real focus will be on its guidance, the impact of potential Blackwell delays, and how the company plans to leverage its financial strength. Given the high valuation and market positioning, investors may need to weigh the risks of a "sell the news" reaction against the long-term growth prospects of this AI powerhouse.