What To Watch In Nvidia Earnings Report

Nvidia (NVDA) is scheduled to report results of its first fiscal quarter after the market close on Wednesday, May 26, with a conference call scheduled for 5:00 pm ET. What to watch for:

1. OUTLOOK: Nvidia announced at its annual Investor Day that first-quarter revenue for fiscal 2022 is tracking above its previously provided outlook, with outperformance in each of its market platforms. "While our fiscal 2022 first quarter is not yet complete, Q1 total revenue is tracking above the $5.30 billion outlook provided during our fiscal year-end earnings call. We are experiencing broad-based strength, with all our market platforms driving upside to our initial outlook," said Colette Kress, executive vice president, and chief financial officer of Nvidia.

"Within Data Center we have good visibility, and we expect another strong year. Industries are increasingly using AI to improve their products and services. We expect this will lead to increased consumption of our platform through cloud service providers, resulting in more purchases as we go through the year. Our EGX platform has strong momentum, and we expect this will drive increased revenue from enterprise and edge computing deployments in the second half of the year. Overall demand remains very strong and continues to exceed supply while our channel inventories remain quite lean. We expect demand to continue to exceed supply for much of this year. We believe we will have sufficient supply to support sequential growth beyond Q1," she continued.

The company also raised its first-quarter revenue estimate for its new CMP product for industrial-scale cryptocurrency mining to $150M, up from $50M previously expected. During the company's last earnings call back in February, Nvidia had said it expected first-quarter revenue of $5.3B, plus or minus 2%, gross margin of 66%, plus or minus 50 basis points, operating expenses of $1.2B, and tax rate of 10%, plus or minus 1%.

2. STRONG QUARTER EXPECTED: In a pre-earnings research note to investors, Morgan Stanley analyst Joseph Moore said he sees a strong quarter for Nvidia especially in gaming, with data center strength being key. Revenue in gaming is completely supply-constrained, with channel inventory remaining very lean, the analyst contended. That should point to multiple quarters of strong shipments, as when supply does catch up to demand there will likely be substantial channel fill, he added. Further, Moore argued that while the strength in gaming is completely clear, the sustainability risk is somewhat elevated due to cryptocurrency impact. In that context, the strength of the data center business will be key. He would assume that there is upside in the data center business given Nvidia's strong growth drivers and the recovery in enterprise/cloud.

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