Nvidia is set to report its fiscal second-quarter earnings, which are widely seen as a crucial barometer for the broader AI market. Wall Street analysts expect Nvidia's revenue to almost double year-over-year to $92.2 billion, with the data center division accounting for $86.3 billion, or 94% of total sales. Earnings per share are anticipated to be around $2.09. JPMorgan analysts project even higher revenue, between $94 billion and $95 billion, representing a 15% sequential increase.
Investors are particularly concerned about Nvidia's customer concentration, as a significant portion of its revenue comes from hyperscalers like Amazon, Google, and Microsoft. In Q1, hyperscaler sales were $37.9 billion, nearly matching the $37.5 billion from the ACIE (Automotive, Communications, Industrial, and Enterprise) segment. While hyperscaler revenue grew 115% year-over-year in the last quarter, compared to 74% for ACIE, analysts expect this trend to flip. For Q2, ACIE revenue is projected to grow 149% to $43 billion, surpassing the estimated 83% growth to $43.6 billion for hyperscalers. This shift is crucial for mitigating investor concerns about the sustainability of hyperscaler spending, especially given that some, like Amazon and Alphabet, turned cash flow negative in Q2, and Meta's cash generation significantly dwindled.
To address customer concentration and facilitate broader adoption of its GPU technology, Nvidia has launched a program with six financial firms. This initiative aims to provide up to $500 billion in financing, allowing more companies to borrow money at lower rates for GPU purchases by treating chips as an investable asset. Analysts like Gene Munster of Deepwater Asset Management emphasize the need for the ACIE segment to grow to lessen reliance on hyperscalers. Investors will also be scrutinizing sales of the new Vera Rubin systems, with CEO Jensen Huang previously forecasting $1 trillion in sales through 2027 from Blackwell and Vera Rubin platforms. Options traders are pricing in a 5.4% move in Nvidia's stock post-earnings, which translates to a $280 billion swing in market capitalization, although this is lower than its historical average volatility.
For the full year, analysts predict 83% revenue growth to $396 billion, slowing to 44% in the following year. Beyond the headline numbers, investors will be closely watching Nvidia's revenue guidance, chip demand, profit margins, and updates on AI-related capital spending from major cloud providers. The company's earnings report is expected to provide key insights into the capital expenditure trajectories of hyperscalers and the overall return on investment for AI infrastructure, which will influence the broader tech ecosystem.
