Nvidia Earnings Review: CEO Hinted Guide's Too Conservative

NVIDIA earnings report last night beat the Street by $.40 and guided higher than the Street in both revenues and earnings. So why's the stock down? We'll review that and how the CEO hinted that their guidance is way too conservative.

NVIDIA Guide

NVIDIA guided revenues to $3.1B for the July quarter which was higher than the Street consensus. The implied EPS guide calls for $.17-.37 upside versus the Street for the July quarter depending on which consensus estimate you use.

If NVIDIA Was So Good, Why Was The Stock Down In The Aftermarket?

Good question.

Let's see what NVIDIA did ahead of the earnings.

Off its very recent low April 25th, a mere 12 trading days ago, the stock made a 24% move. Not bad for twelve days of trading, right. Please don't annualize that, yet.

We told you April 13th and April 19th we thought NVIDIA would be good despite the crypto-bear stories.

Let's look at the chart.

The two left arrows are our reports that we loved NVIDIA.

The right arrow shows you that NVIDIA's stock was hitting all-time highs into the quarter.

So you were paid somewhat before the quarter was even reported.

Not bad.

But The CEO Gave You Even More

NVIDIA officially guided to $3.1B. But the CEO, Jensen Huang gave you a hint that their internal numbers are much much (much) higher than the guide they gave.

Let's listen to what he said,

"We're expecting Q2 to be better than seasonality... And we're expecting Q2 to be better than seasonality."

He said it twice in one breath.

Nobody heard that?

Let's show you the math what that means.
 

Normal seasonality means how much are revenues up in the July quarter versus the April quarter. It ranges between being up 12-15% over the last three years. Dr. Huang though said the July quarter will be higher than normal seasonality. He said it twice, right? What's higher? Well a little higher would be 16-18%. "Higher," I think means 20%.

You see that Gaming is more than 50% of your revenues so that's the biggie. If that's going to be up faster than normal seasonality the entire business is going to be on fire.

For Datacenter we assume about the same roughly 14% sequential growth (growth from last quarter).

For OEM, which includes crypto-specific revenues which they said would be 1/3 of what it was in the April quarter which is why we show 387 going to 128. That is also too conservative because crypto is on fire.

Let's add it up.

Doing simple math based on what the company's CEO said himself (twice) we get much much higher than their $3.1B guide.

You see the bold number above? $3415 means $3.4B which is higher than $3.1B.

Analysts don't do the math. You'd think analysts being analysts and all, they'd do the math, right?

There was one perturbed analysts on the call that got it and called the CEO out on it but the CFO took over and didn't let Dr. Huang give away any more of the goods. The CFO talked the numbers back to the guide as she kicked Dr. Huang under the table to be quiet.  

If you listen to the replay carefully you can hear a "KLOP."  

That was the kick under the table.

But really, even if it's normal seasonality of 15% for gaming, we'd still get $3.3B, not $3.1.

But NVIDIA Beats

Ever notice NVIDIA pretty much beats every quarter. They leave themselves nice room and their business is on fire.  So even if the stock is down today, you have more conviction that there is more upside in the future.  You have the same type of upside that's launch the stock to all-time highs continuously.

Conclusion

NVIDIA didn't show all its cards in their official guide. The CEO gave a big tell though and the CFO kicked him under the table not to give up all the upside three months before you report next.