Nvidia Might Deliver Another ‘Beat and Raise’ Quarter, But Its Financing Deals Could Be the Bigger Driver of NVDA Stock
Nvidia Corporation (NVDA) will release its fiscal Q2 2027 earnings on Aug. 26 after the close of markets. The stock is heading into the confessional on a relatively calm note, down 3.33% over the last five days and trading 8.5% below the record highs it hit in May, days before its Q1 earnings report. Nvidia’s…
Nvidia Corporation (NVDA) will release its fiscal Q2 2027 earnings on Aug. 26 after the close of markets. The stock is heading into the confessional on a relatively calm note, down 3.33% over the last five days and trading 8.5% below the record highs it hit in May, days before its Q1 earnings report. Nvidia’s Q1 earnings were the “usual” stuff, with earnings blowing past estimates and the company’s own guidance. The Q2 forecast also came in ahead of Wall Street’s estimates, but NVDA stock closed in the red despite a strong performance.
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NVDA Q2 Earnings Estimates
Consensus estimates call for Nvidia’s Q2 revenues to nearly double year-over-year (YOY) to $92.01 billion. Nvidia has forecast Q2 revenues at $91 billion, plus or minus 2%, and the current estimates are toward the upper end of the company’s guidance. As for the bottom line, analysts expect Nvidia’s Q2 earnings per share (EPS) to more than double to $2.01. Nvidia does not provide EPS guidance but forecasted GAAP gross margins between 74.4% and 75.4%.
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NVDA Stock Forecast
Wall Street is bullish on NVDA stock heading into the Q2 earnings, and Stifel analyst Ruben Roy expects a “Beat and Raise,” which basically means that he expects Nvidia to beat Q2 earnings estimates and raise its annual guidance. TD Cowen’s Joshua Buchalter believes investors expect another “Beat and Raise” quarter but does not see big moves in NVDA stock following the report. UBS also expects a significant revenue beat from Nvidia and sees it exceeding its revenue guidance by up to $4 billion while forecasting that the October quarter guidance will land well above Street estimates.
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Bank of America’s Vivek Arya finds NVDA’s valuations “compelling” and is not too perturbed by the company’s off-balance sheet commitments. Notably, Nvidia has agreed to provide guarantees for up to $105 billion for OpenAI’s Ohio data center, which is a potential risk not captured in the balance sheet. To be sure, this is not the first instance of “circular financing” that we have seen in the AI ecosystem, and there have been multiple instances of companies investing in their customers in what is seen as instances of vendor financing, or put bluntly, buying revenues.
Meanwhile, in his note following the meeting with senior Nvidia executives after the OpenAI data center commitment, Arya wrote, “Today’s conditions make this worthwhile: solid GPU rental rates, compute scarcity, and NVDA’s industry-leading free cash flow generation.” He added. “It also diversifies NVDA beyond public hyperscalers now building competitive custom chips.”
Goldman Sachs analyst James Schneider also expects a strong quarter from Nvidia and listed four areas that markets would watch during the earnings call. These include the $500 billion AI financing plan that Nvidia has announced with its partners, the ramp-up of the Rubin platform, the sustainability of Nvidia’s fat gross margins amid rising competition in the AI chip market, and the demand for the company’s CPU business from agentic AI. The brokerage, however, sees the bar as high amid the up move in NVDA stock heading into the earnings.
Should You Buy NVDA Stock?
Given the kind of capex commentary we saw during the earnings calls of hyperscalers, where all players barring Microsoft Corporation (MSFT) raised their 2026 spending guidance, we can expect upbeat Q2 revenues and a topline guidance raise from Nvidia. The key would be to watch Nvidia’s ability to protect its gross margins as competition rises in the AI chip market, including from the likes of Amazon.com (AMZN) and Alphabet (GOOG) (GOOGL), which are selling their chips to third parties while remaining key buyers of Nvidia’s chips.
Moreover, investors should watch management’s commentary on the risks associated with the $500 billion financing that Nvidia plans to arrange in partnership with six leading asset managers. Even though CEO Jensen Huang has said that AI chips are “investible assets,” the views over their value and depreciation are mixed at best.
From a valuation perspective, Nvidia stock looks quite attractive as it trades at a forward price-to-earnings (P/E) multiple of 25.59 times while the P/E-to-growth (PEG) multiple is just 0.44 times. There are some genuine concerns over Nvidia’s financing deals, but Nvidia has scope to move higher from these levels, even though investors should temper their expectations and not expect the stock to double every year.
On the date of publication, Mohit Oberoi had a position in: AMZN, GOOG, NVDA, MSFT. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com
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