Nvidia reports Tuesday: first results under Kress, and the outlook matters more than the quarter
Nvidia reports fiscal Q3 results on Tuesday, November 17, at about 1:20 p.m. PT — the first under interim CEO Colette Kress. Analysts expect about $109.2 billion of revenue, up about 91% from a year earlier, but the quarter ended October 25, before the scandal broke, so the Q4 outlook and Kress's tone are the real test.
The News
Nvidia reports fiscal third-quarter results on Tuesday, November 17, at about 1:20 p.m. PT, with a call at 2 p.m. PT — the first results under interim chief executive Colette Kress. The quarter ended October 25, before the scandal broke, so the numbers will describe the old business: a company still run by Jensen Huang, selling chips into a market that had not yet heard the news.
Analysts polled by LSEG expect revenue of about $109.2 billion, up about 91% from a year earlier, and adjusted earnings of about $2.48 a share. The company's own August guidance was $108 billion, plus or minus 2%, with a gross margin of 74%, plus or minus half a point — a margin is the share of each sales dollar left after the cost of making the product — and the guidance assumes zero revenue from data-centre computing in China.
A consensus estimate is simply the average of what professional analysts expect — in this case, the analysts polled by LSEG. When the actual numbers come in above the consensus, the company is said to have beaten expectations; below it, it missed. The consensus matters because the stock often moves on the gap between the forecast and the result, not on the result alone.
The real test is not the quarter but the outlook. Kress has been on calls to reassure customers and suppliers, Reuters reported in its November 12 profile of the interim chief executive, and her tone on the call — and the guidance for the current quarter — will be read as the first statement of how the new leadership sees the business. Nvidia's market value has fallen from about $5.8 trillion in early October to roughly $4 trillion, and the stock closed Friday at $162.85, down 2.01%. TSMC, which manufactures Nvidia's chips, closed at $398.73, down 1.67%.
Tuesday's numbers describe the old Nvidia — the outlook will describe the new one.
Why It Matters
Earnings previews usually focus on whether a company beats the numbers. This one is different: the numbers are almost beside the point. The quarter being reported ended before the resignation, the scandal and the export-control headlines, so a beat or a miss would tell investors about a business that no longer exists in the same form. What matters is what Kress says about the next quarter.
The guidance will be read for three things. First, whether demand for Nvidia's chips is holding up despite the leadership crisis and the new export rules The Information reported on November 12 that the Commerce Department is preparing for Southeast Asia and six other countries. Second, whether the company can still give a confident outlook while its chief executive search is at square one. Third, whether Kress, who was chief financial officer, can speak for the company the way Huang did — as its public face, not just its numbers person.
The consensus is high for a reason: $109.2 billion of revenue would be nearly double last year's quarter, and the market is pricing in a company that is still growing fast. But the bar is also high in a different sense. A cautious outlook from a new interim chief executive, on a call where every word will be parsed for doubt, could move the stock more than the reported numbers.
Analyst's Take
Our call is Mixed. The quarter itself should be strong — the consensus expects revenue up about 91% — but the print describes a business that predates the crisis, and the outlook is genuinely uncertain. Kress has to reassure customers, suppliers and investors in her first outing as chief executive, with the search for her permanent replacement barely started. Strong numbers with a shaky guide would be a wash; a confident guide would be the real beat.
The comparison to last quarter's guidance matters too: in August the company guided to $108 billion, plus or minus 2%, for the quarter now being reported. Tuesday's fourth-quarter guidance should be judged against what analysts expect for the fourth quarter, not against last quarter's $108 billion — a guide flat against that figure would be soft, not a hold.
What to watch on Tuesday: the revenue and earnings prints against the $109.2 billion and $2.48 consensus, the fourth-quarter guidance against the $108 billion the company guided last quarter, and Kress's language on demand, on China and on the succession. The call starts at 2 p.m. PT.
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By The Numbers
FAQ
When does Nvidia report?
Tuesday, November 17, at about 1:20 p.m. PT, with an earnings call at 2 p.m. PT. It is the first results announcement under interim chief executive Colette Kress, who was previously chief financial officer.
Why does the outlook matter more than the quarter?
The quarter ended October 25, before Jensen Huang's resignation and before the latest export-control headlines, so the reported numbers describe the old business. The outlook for the current quarter and Kress's comments on the call will be the first read on how the new leadership sees demand.
What is a gross margin?
Gross margin is the share of each dollar of sales left after the cost of making the product. Nvidia guided to 74%, plus or minus half a point, meaning it expects to keep about 74 cents of every sales dollar before other costs like research and marketing.
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Source: Invezz