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As Nvidia (NVDA) gears up to release its Q2 2025 earnings after the market closes this Wednesday, Aug. 28, investors are eager to see if the AI chip leader can keep its edge. The global artificial intelligence (AI) market is expected to hit $1.8 trillion by 2030, and Nvidia's performance is viewed as a key bellwether for the sector, thanks to its dominant presence in AI infrastructure - including hyperscale data centers.
That's why reports of production issues with the company's Blackwell AI chips have sparked concerns ahead of earnings. While CEO Jensen Huang had previously projected “a lot of Blackwell revenue” this year, reports now indicate that Foxconn won't ramp production until the first quarter of calendar year 2025, and investors will certainly be awaiting more specifics on the earnings call.
However, brokerage firm Barclays said in a recent note that the delay hasn't really affected Nvidia's supply chain, with analyst Tom O'Malley adding that the Blackwell setback "seems like the normal cadence of a qualification cycle, not a material design flaw."
As the Q2 earnings report approaches, the big question is: Can Nvidia continue its streak of earnings dominance amid production hiccups and rising competition in the AI chip space? Let's dive into what to expect from the company's earnings and its strategic role in the fast-changing AI world.
Can NVDA Hit New Highs After Earnings?
Nvidia (NVDA), which is known for its groundbreaking work in GPUs, has grown into a full-fledged computing powerhouse. The company makes most of its money through its computing and networking segment, which covers AI and data center solutions, as well as its graphics segment.
As Nvidia heads into its upcoming earnings report, its financial health is rock-solid, thanks to its strong market position and asset-light business model. In the past year, its stock has skyrocketed by a whopping 173.2%, reflecting just how well it's performing in the AI and graphics processing markets.
NVDA set an all-time high of $140.76 in June, and the shares are down about 12% from that high. Analysts at Citi are among the bulls forecasting fresh highs for Nvidia stock after earnings.
In its Q1 earnings report, Nvidia reported record revenue of $26.04 billion for Q1 2025, up 18% from the previous quarter and a massive 262% from the year before. The data center segment alone brought in $22.6 billion, a jaw-dropping 472% increase from the previous year. This huge growth is mainly because Nvidia is crushing it in the AI world, where hyper-scalers like Microsoft (MSFT) and Meta Platforms (META) are snapping up its GPUs for data centers.
Since Nvidia is a designer and not a manufacturer of chips, its profits are looking great, too. Its gross margin went up to 78.4% in Q1 from 64.6% a year ago, showing that it's running more efficiently and has pricing power. The net income for the same period was $14.9 billion, a mind-blowing 628% increase from the previous year, proving that Nvidia can turn its revenue growth into serious profits.
These results are reflected in its valuations. Nvidia's forward P/E ratio is 46.55, way higher than the tech sector average of 23.23. But given Nvidia's explosive growth and ability to reflect its dominant AI market position directly in its bottom-line results, this premium valuation seems fair.
Income investors should note that NVDA plays it safe when it comes to dividends. The company recently bumped up its quarterly dividend by 150% to $0.10 per share, which now translates to $0.01 on a post-split basis. The modest dividend yield of 0.03% is fairly typical for tech giants, which often prefer to reinvest and buy back shares rather than pay out dividends. As Nvidia keeps innovating and executing its growth strategies, it's in a great position to maintain its market dominance and drive long-term value for investors.
Nvidia's Growth Engines
Nvidia's early bets on AI and its knack for constantly innovating have helped it stay ahead of the pack and cash in on the AI market's explosive growth. Notably, Nvidia views robotics as the next wave in AI, and they've been proactive in attempting to extend their dominance into this niche - which could end up being the secret sauce behind its next phase of growth.
Recently, Nvidia rolled out some major upgrades to the Universal Scene Description (OpenUSD) framework, making it easier for industries like robotics and engineering to adopt it. While creative industries have dominated generative AI so far, the company believes this platform can help usher in the “generative AI boom for heavy industries.”
On top of that, they launched the AI Foundry service, which puts Nvidia at the forefront of generative AI. This lets companies create “custom AI supermodels,” leveraging the latest open LLMs from Meta, that fit their specific needs like a glove.
This continued drive for innovation should help Nvidia fend off challenges from rivals like Advanced Micro Devices (AMD), which have so far attempted to compete with the AI chip market leader primarily on price.
What's the Analyst Forecast for NVDA?
Nvidia's own Q2 outlook is bullish, projecting revenue of $28.0 billion at the midpoint - up more than 100% year over year. If they hit this target, it would be another quarter of amazing growth. Nvidia also expects to keep its impressive profit margins, with GAAP and non-GAAP gross margins expected to be 74.8% and 75.5%, respectively, plus or minus 50 basis points.
Overall, analysts are overwhelmingly positive about Nvidia's prospects. Out of 39 analysts, the consensus is a resounding "strong buy." Breaking it down, 34 analysts say "strong buy," 2 suggest a "moderate buy," and only three recommend a “hold.”
Analysts have set an average price target of $141.65 for Nvidia's stock - about 9.6% higher than Friday's close, and slightly above that June high.
While analysts at KeyBanc and Raymond James have echoed the upbeat tone from Barclays around Blackwell delays, Dan Ives from Wedbush Securities thinks Nvidia's upcoming earnings report on Aug. 28 will be a pivotal moment for the tech industry.
He stresses that investors worldwide will be closely watching CEO Jensen Huang's insights on the huge demand for AI chips through 2025. Ives believes this will be another "drop the mic moment" for tech, highlighting Nvidia's central role in shaping the AI landscape.
However, amid these glowing reviews, it's worth pointing out that there are some potential challenges that could impact Nvidia's short-term performance. A sluggish PC market, economic uncertainty, trade tensions with China and geopolitical saber-rattling around Taiwan, and increasing competition from rivals like AMD - and even Intel (INTC) - are all factors to watch. Despite these risks, Wall Street remains optimistic about Nvidia's prospects, focusing on its long-term potential in AI, high-performance computing, autonomous vehicles, and the metaverse.
Should You Be Worried About Nvidia's Supply Chain Ahead of Earnings?
All of that said, Nvidia investors shouldn't lose sleep over supply chain concerns ahead of earnings. Despite the Blackwell delays, channel checks from multiple analysts seem to confirm there's no critical impact to the upcoming results. Coupled with Nvidia's stellar financial performance, dominant market position in AI, and rock-solid balance sheet, the company seems well-positioned to weather any potential storms. While the stock's valuation might raise a few eyebrows, Nvidia's consistent ability to innovate and capitalize on the AI boom suggests it's still got plenty of gas in the tank for the long haul.
On the date of publication, Ebube Jones did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
