Nvidia Earnings: What to Look For


Key Takeaways

  • Analysts estimate adjusted EPS of $1.69 for Q1 2021 vs. $0.88 in Q1 2020.
  • Gross margins are predicted to grow YOY.
  • Company expected to continue its successful rollout of new GPU and software products.

What to Look for

Chipmaker Nvidia Corporation (NVDA) has long been a well-known brand in the market for graphics processing units (GPUs). Historically, GPUs have largely been used by customers wishing to run graphically-intensive video games. In recent years, however, the market for GPUs has expanded to include a wide range of other applications, including cryptocurrency mining, professional design, and artificial intelligence (AI). Over the past 12 months, the company has significantly outperformed the S&P 500, rising by over 130%.

Source: TradingView.

Nvidia’s revenues have likewise grown significantly, as it has developed new products to serve these markets. In addition to its gamer-oriented GeForce GPUs, Nvidia’s Quadro GPUs are focused on professional designers, while its Tesla GPUs—no relation to the automaker—are geared toward the needs of advanced AI researchers. Between January 31st, 2017 and January 31st, 2020–Nvidia’s fiscal year ends in January– Nvidia’s reported revenues grew from $6,910,000 to $10,918,000, an increase of almost 60%. Its market capitalization has likewise grown significantly over this timeframe, rising from an average of roughly $90 billion in 2017 to just over $215 billion as of May 18th, 2020.

Nvidia reported its Q4 FY2020 results on February 13th, 2020. In that report, Nvidia posted adjusted earnings per share (EPS) of $1.89, surpassing its Q4 FY2019 adjusted EPS of $0.80. Nvidia’s share price rose by roughly 20% between February 13th, 2020 and May 18th, 2020.

On May 21st, 2020, NVIDIA will be reporting its first-quarter results for its 2021 fiscal year. Going into the earnings report, analysts have a consensus adjusted EPS of $1.69 per share, representing a YOY increase of over 90%. Of particular importance to many investors are the company’s gross margins, which were 59.01% in Q1 FY2020. Looking forward to next week’s earnings report, analysts are expecting to see substantial YOY margin improvements, with a consensus estimate of 65.36%.

Nvidia Key Metrics
  Estimate for Fiscal Q1 2021 Fiscal Q1 2020 Fiscal Q1 2019
Adjusted Earnings Per Share $1.69 $0.88 $2.05
Revenue (in billions) $3.0 $2.2 $3.2
Gross Margin 65.4% 59.0% 64.7%

Gross margins are especially important to NVIDIA because of the highly competitive and cyclical nature of its industry. In order to maintain stable profitability, NVIDIA must retain as much money as possible from each dollar of revenues it achieves. At the same time, Nvidia and other chipmakers must continuously maintain and improve their operational efficiency in order to remain competitive with their peers.

Given that gross margin is commonly used as an indicator for the overall efficiency of a firm, investors should a close eye on this critical figure.

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