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Nvidia (NVDA) earnings report Q2 2024

Nvidia CEO Jensen Huang,speaks at the Supermicro keynote presentation during the Computex conference in Taipei on June 1, 2023.

Walid Berrazeg | Sopa Images | Lightrocket | Getty Images

Nvidia is set to report fiscal second-quarter earnings on after market close Wednesday. The chipmaker’s stock price has more than tripled this year, sparked by a boom in artificial intelligence applications.

Here’s what analysts are expecting:

  • Earnings: $2.09 per share, according to Refinitiv.
  • Revenue: $11.22 billion, according to Refinitiv.

Here’s what Wall Street is expecting from Nvidia’s top business units:

  • Gaming: $2.38 billion in revenue, according to StreetAccount
  • Datacenter: $8.03 billion in revenue, according to StreetAccount

Driven by insatiable demand for graphics processing units (GPUs), which are at the heart of most generative AI services, Nvidia’s revenue likely increased 67% in the quarter ended July 31, from $6.7 billion a year earlier.

Investors will be particularly focused on Nvidia’s outlook to see if the momentum is poised to continue. Analysts expect third-quarter revenue of $12.61 billion, according to Refinitiv, which would be an increase of over 110% from the prior year.

Nvidia CEO Jensen Huang has positioned his company at the center of the AI wave, and said recently it was seeing “surging demand.” He compared last year’s release of OpenAI’s ChatGPT chatbot to the introduction of the iPhone in 2007. Nvidia is the primary vendor of GPUs needed to train and run AI models like ChatGPT.

The stock has been by far the best performer this year in the S&P 500, which is up about 16% in 2023. Facebook parent Meta is next in line, up 146%.

But Nvidia’s soaring stock price suggests that the company is walking a tightrope. It needs to show incredible growth in both revenue and earnings to justify its $1 trillion-plus valuation and a profit multiple that dwarfs richly valued companies like Tesla and Amazon.

A closer look at estimates shows just how reliant Nvidia has become on AI chips. Gaming, the company’s historically core business, isn’t thriving in nearly the same way.

Nvidia is expected to post $2.38 billion in gaming revenue during the quarter, which would be a 16% increase from a year earlier. But that’s an easy comparison to 2022 numbers, which reflected a deep slump in graphics cards because so many people refreshed their gaming technology during the pandemic. It also includes sales from the chip at the heart of Nintendo’s Switch.

By contrast, Nvidia’s Datacenter group, which houses AI chips, is looking at a 111% increase in revenue to $8.03 billion, according to estimates. Nvidia’s AI chips, including the A100 and H100, have been difficult to purchase in recent months as startups, big companies, governments and cloud providers all place their orders at the same time.

Nvidia faces some challenges that management might address on the call. Supply is an issue, given that Taiwan Semiconductor Manufacturing Company (TSMC) manufactures the chips Nvidia designs. Huang had dinner with TSMC chairman Morris Chang during the quarter.

China is another big topic. Last year, the U.S. placed export restrictions on Nvidia, which forced the company to make specialized, slower versions of its AI chips for the Chinese market. Additional export restrictions currently being considered by the Biden administration could further limit the products Nvidia sells to Chinese companies.

WATCH: Nvidia earnings could move index away from seasonally weak period

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