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Nvidia (NASDAQ: NVDA) has a strong history of beating analyst expectations for quarterly earnings and sales. The company has beaten estimates in 9 of the past 10 quarters. According to data compiled by Barchart, Nvidia stock has risen on a majority of those earnings beats, but still fell on several occasions. So while an earnings beat doesn't guarantee a positive price jump, the odds are certainly stacked in that direction.
With so much market and trade uncertainty, it's reasonable to expect a weak earnings announcement from the company next month. But there's reason to believe the opposite could happen. As we'll see, Nvidia stands a good chance of beating earnings estimates next month. That, coupled with the stock being down more than 30% so far this year, could potentially lead to a sharp bump in valuation.
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2 Reasons to believe Nvidia will crush earnings
Nvidia's revenue growth estimates have come down sharply in recent months. Geopolitical tensions have generated uncertainty around global supply chains, especially regarding potential impacts from tariffs. Nearly one-third of Nvidia's sales last year may ultimately be tied to China in some way, whether that's through direct sales to China, related sales to Taiwan, or exports to Singapore that are then reexported to China. Rising pressures between the U.S. and China could make these exports more complicated, expensive, or even impossible to execute.
More importantly, however, end market demand -- especially from data centers -- continues to impress. Nvidia's data center segment experienced 93% growth year over year last quarter. Nvidia's management team has long expected this growth tailwind to continue for years to come. Previous estimates called for data center capital expenditures to hit $1 trillion industrywide by 2032, though that forecast has now been pulled forward to 2030. In a nutshell, the biggest driver of Nvidia's growth in recent years remains intact, and may be even stronger near term than many predict.
But it's not just end market demand that could boost results above expectations. Share buybacks could also play a role. Last August, the company announced a $50 billion stock buyback program. As of last quarter, the company has repurchased around $33.7 billion in shares, leaving $16.3 billion remaining. The share buyback program has already helped fractionally boost earnings per share. And if management was feeling aggressive, it may have stepped up these repurchases given Nvidia's weak share price so far this year. If share buybacks accelerate more than expected, we could see that translate into better per-share results, given the total number of outstanding shares would be lower than most analysts are predicting.