Nvidia Earnings Preview: What Might Be Expected for Q2?

GPU-maker Nvidia reports earnings after market close on Thursday, August 16. Here’s a look at what might be expected from the semiconductor stock’s Q2 results.

Print
https://tickertapecdn.tdameritrade.com/assets/images/pages/md/Closeup of GPUs and server chips
3 min read

Even though the semiconductor industry has been on a tear these past few years, some analysts and investors are starting to question whether or not high growth rates can be maintained going forward. Investors will get an idea of how business has been at Nvidia (NVDA) when the company reports second-quarter fiscal 2019 earnings after market close on Thursday, August 16. 

For Q2, NVDA is expected to report adjusted EPS of $1.83 on revenue of $3.1 billion, according to third-party consensus analyst estimates. In the same quarter last year, the company reported adjusted EPS of $1.01 on revenue of $2.23 billion. NVDA has beat estimates in each of the past eight quarters. 

Gaming and Datacenter 

Both gaming and datacenter have been NVDA’s largest and fastest-growing market platforms. In the first quarter, gaming revenue increased 68% year over year to $1.72 billion, while datacenter revenue jumped 71% to $701 million. Analysts are expecting gaming revenue growth to slow and datacenter growth rates to be similar to last quarter. 

On Monday, CEO Jensen Huang unveiled new graphics processing units (GPUs) based on the company’s new Turing architecture. Those products are high-priced and geared towards professional use. Since the company hinted that it would have “spectacular surprises” at its GeForce event on August 20 at gaming expo Gamescom, many analysts and investors are expecting that’s when NVDA will unveil new consumer-focused GPUs. 

Automotive 

Automotive has been a small segment from a revenue perspective, although the company considers it an important part of its growth strategy in the future. In the first quarter, automotive revenue increased 4% year over year to $145 million. 

Tesla (TSLA) recently stated that it was working on manufacturing its own chips and plans to eventually use those over NVDA’s to power its self-driving and autopilot functions its vehicles. Investors didn’t appear to put too much stock in the news as NVDA hardly budged. 

Self-driving cars are widely seen as a major potential market for high-end chips that essentially act as the vehicle’s brain. Currently though, the market is limited since they aren’t legal in many places. 

Cryptocurrency Sales

Analysts are expecting the company’s cryptocurrency-related sales to have declined during the second quarter. The reason being that the price of a vast majority of cryptocurrencies declined between the start of April and the end of June. As prices drop, it becomes less economical for miners to operate mining rigs since the value of their potential earnings decreases. 

NVDA recently started breaking out some of these specific results and said that $289 million of the revenue in its OEM and IP division was related to GPUs for cryptocurrency mining—that doesn’t include any off-the-shelf GPUs that NVDA sells to consumers building their own mining rigs. In Q1, the company generated $387 million total in OEM and IP revenue. 

Dividend and Buybacks

For all of fiscal 2019, NVDA said it plans to return a total of $1.25 billion to shareholders through dividends and buybacks. A majority of that has already been returned as the company reported that it had repurchased $655 million in shares and distributed $91 million in dividends in the first quarter. 

At this time, NVDA pays a quarterly dividend of $0.15, putting its current yield at 0.23%. 

Climbing Higher. So far this year, NVDA has continued to build on its 2017 performance and is up just over 31% year to date as of this morning, compared to a 5.16% increase in the PHLX Semiconductor Index (SOX, purple line) and a 14.37% increase in the Nasdaq 100 (NDX, teal line). The stock has been climbing closer to its all-time high of $269.20, but still remains a little ways away.  Chart source: thinkorswim® by TD Ameritrade. Not a recommendation. For illustrative purposes only. Past performance does not guarantee future results.

Nvidia Options Trading Activity

Around the upcoming earnings release, options traders have priced in a 5.5% stock move in either direction, according to the Market Maker Move indicator on the thinkorswim® platform. Implied volatility was at the 51st percentile as of this morning. 

At the August 17 monthly expiration, recent trading on the call side has been concentrated at the 260 and 270 strike prices, although there’s been a decent amount of volume at many strikes ranging from the 250 strike up to the 280 strike. Volume has been lighter on the put side and concentrated at the 250 and 260 strikes. 

Further out at the September 21 monthly expiration, call trading has been heavier at the 250 and 255 strikes. For puts, the 250 strike has had higher volume with 1,751 contracts trading during yesterday’s session. 

Note: Call options represent the right, but not the obligation, to buy the underlying security at a predetermined price over a set period of time. Put options represent the right, but not the obligation to sell the underlying security at a predetermined price over a set period of time.

Good Trading,
JJ

Visit the TD Ameritrade Markets Overview page for timely market information, articles, snapshots, earnings releases, and more.

Looking to stay on top of the markets on a daily basis? Check out my Daily Market Update on the Ticker Tape.  Or tune into the TD Ameritrade Network, which is live programming that brings you market news and helps you hone your trading knowledge.

The TD Ameritrade Network is brought to you by TD Ameritrade Media Productions Company. TD Ameritrade Media Productions Company and TD Ameritrade, Inc. are separate but affiliated subsidiaries of TD Ameritrade Holding Corporation.

Call Us
800-454-9272

Probability analysis results from the Market Maker Move indicator are theoretical in nature, not guaranteed, and do not reflect any degree of certainty of an event occurring.

TD Ameritrade and all third parties mentioned are separate and unaffiliated companies, and are not responsible for each other’s policies or services.

Inclusion of specific security names in this commentary does not constitute a recommendation from TD Ameritrade to buy, sell, or hold.


adChoicesAdChoices

Market volatility, volume, and system availability may delay account access and trade executions.

Past performance of a security or strategy does not guarantee future results or success.

Options are not suitable for all investors as the special risks inherent to options trading may expose investors to potentially rapid and substantial losses. Options trading subject to TD Ameritrade review and approval. Please read Characteristics and Risks of Standardized Options before investing in options.

Supporting documentation for any claims, comparisons, statistics, or other technical data will be supplied upon request.

The information is not intended to be investment advice or construed as a recommendation or endorsement of any particular investment or investment strategy, and is for illustrative purposes only. Be sure to understand all risks involved with each strategy, including commission costs, before attempting to place any trade. Clients must consider all relevant risk factors, including their own personal financial situations, before trading.

This is not an offer or solicitation in any jurisdiction where we are not authorized to do business or where such offer or solicitation would be contrary to the local laws and regulations of that jurisdiction, including, but not limited to persons residing in Australia, Canada, Hong Kong, Japan, Saudi Arabia, Singapore, UK, and the countries of the European Union.

TD Ameritrade, Inc., member FINRA/SIPC. TD Ameritrade is a trademark jointly owned by TD Ameritrade IP Company, Inc. and The Toronto-Dominion Bank. © 2018 TD Ameritrade.

Scroll to Top