The One Number Nvidia Investors Must Ignore to Make Money

Nvidia (NVDA) prepares to report second-quarter earnings on Aug. 26 and the market is ready. The AI chip-maker has secured its status as the world's most valuable company through massive demand for its data-center GPUs. It serves as the economic bellwether for the AI boom. Traders will scrutinize the results for signs of trouble or evidence of a bubble. They will dissect the release for specific metrics like gross margin and the growth of the data center business following the release of the new Rubin platform.

Investors do not expect weakness when the company reports after hours on Wednesday. The analyst consensus calls for a historic surge in financials. Revenue is projected to jump 97.2% to $92.2 billion. Adjusted earnings per share are expected to double from $1.05 to $2.09. This growth represents the fastest pace in nearly two years. It buckles earlier forecasts that predicted a gradual deceleration after the initial surge in 2023. Investors will closely watch the results and guidance to gauge the company's trajectory.[1]

The key metric to watch for Nvidia is distinct from the immediate earnings reaction. Nvidia's reports have become relatively predictable as the stock has beaten EPS estimates by a few cents in each of its recent quarters. The market reaction has also been relatively muted. For long-term investors, there is a better number to watch than the top-and-bottom-line results or even guidance. The most important number to watch is the change in the consensus EPS forecast following the report. This metric typically takes a couple of days for Wall Street analysts to adjust their forecasts.