Nvidia will release its Q4 FY2025 results on 26th February after market close. Analysts expect Q4 revenue to grow 72.3% YoY to $38.1 billion and adjusted EPS to grow 63.8% YoY to $0.84. The company has a history of beating consensus estimates, at a minimum of $1 billion for six quarters.
Questions persist as from the supplier stocks listed below, Super Micro lowered guidancefrom a range of $26 billion to $30 billion, down to $23.5 billion to $25 billion on February 13th. Semtech pulled its $50 million floor guidance for AI revenue. AOSL’s Q1 missed. Regarding Astera’s raise for Q1, they called out custom silicon as driving Q1 revenue rather than merchant GPUs. Vertiv gave mixed results that were a hair lower than previous full year organic sales growth (at 16% instead of 17%). TSMC lowered guidance due to an earthquake.
With that said, analysts expect Super Micro revenue to grow 27% sequentially in Q2, which suggests more meaningful Blackwell revenue could begin to ramp in the June quarter. We will look for more information from Nvidia on Wed evening.
Revenue
Management guided Q4 revenue of $37.5 billion, representing YoY growth of 69.7% and 6.9% QoQ at midpoint. The Q4 growth is expected to be driven by continued demand for Hopper architecture and the initial ramp of Blackwell products. Management provided guidance during Q2 results to “ship several billions in Blackwell revenue” and provided an update during Q3 earnings call that “we are on track to exceed our previous Blackwell revenue estimate of several billion dollars as our visibility into supply continues to increase.”
UBS analyst Timothy Arcuri expects Blackwell’s revenue of $9 billion in Q4. He said, "We now see Blackwell revenue at ~$9B in Jan Q (vs. ~$5B previously and supply chain capacity able to support as much as $14B) but we believe Hopper is down in Jan," Arcuri added. "Net, we remain at ~$42B for FQ4 (Jan) (Data Center ~$38B) with FQ1 (April) still ~$47B."
- Q3 revenue grew by 93.6% YoY to $35.08 billion, driven by strong Hopper revenue.
- Analysts expect Q4 revenue to be $38.1 billion, representing YoY growth of 72.3% and QoQ growth of 8.6%
- Q1 revenue consensus is $41.98 billion, for YoY growth of 61.2% and QoQ growth of 10.2%.
Looking at sequential growth, Q4 would represent the slowest QoQ growth for two consecutive quarters since Hopper’s ramp, which is to be expected given the new generation of GPUs are scheduled to ramp in H1 2025. We expressed concerns about the timing of Blackwell ramping, primarily based on what suppliers were saying in their most recent earnings reports.
- Looking further out, analysts expect revenue to grow 51.7% YoY to $195.9 billion in FY2026 ending January 2026 and 21.4% YoY to $237.8 billion in FY2027.
Margins
Margins are also expected to be a focus during the upcoming earnings, as the Hopper ramp helped the company to improve its bottom line. However, the gross margins will drop for a couple of quarters during the initial ramp of Blackwell to the low-70s and increase to the mid-70s when Blackwell is fully ramped in the second half of the calendar year 2025. This was further clarified in the Q3 earnings call Q&A.
Q: Timothy Arcuri (Analyst)
“[…] And then Colette, you kind of talked about Blackwell bringing down gross margin to the low-70s as it ramps. So I guess if April is the crossover, is that the worst of the pressure on gross margin? So you're going to be kind of in the low-70s as soon as April. I'm just wondering if you can sort of shape that for us. Thanks.”
A: Colette Kress (CFO)
Sure. Let me first start with your question, Tim. Thank you regarding our gross margins, and we discussed our gross margins as we are ramping Blackwell in the very beginning and the many different configurations, the many different chips that we are bringing to market, we are going to focus on making sure we have the best experience for our customers as they stand that up. We will start growing into our gross margins, but we do believe those will be in the low 70s in that first part of the ramp. So you're correct, as you look at the quarters following after that, we will start increasing our gross margins and we hope to get to the mid-70s quite quickly as part of that ramp.”
Q: Vivek Arya (Analyst)
“Thanks for taking my question. Colette, just to clarify, do you think it's a fair assumption to think NVIDIA could recover to kind of mid-70s gross margin in the back half of calendar 2025? Just wanted to clarify that.”
A: Colette Kress (CFO)
“Okay. Vivek, thank you for the question. Let me clarify your question regarding gross margins. Could we reach the mid-70s in the second half of next year? And yes, I think it is reasonable assumption or a goal for us to do, but we'll just have to see how that mix of ramp goes. But yes, it is definitely possible.”
Q: Stacy Rasgon (Analyst)
Hi, guys. Thanks for taking my questions. Colette, I had a clarification and a question for you. The clarification, just when you say low-70s gross margins, is 73.5 count as low-70s, or do you have something else in mind?
Colette Kress (CFO)
“So first starting on your first question there, Stacy, regarding our gross margin and defined low. Low, of course, is below the mid, and let's say we might be at 71%, maybe about 72%, 72.5%, we're going to be in that range. We could be higher than that as well. We're just going to have to see how it comes through. We do want to make sure that we are ramping and continuing that improvement, the improvement in terms of our yields, the improvement in terms of the product as we go through the rest of the year. So we'll get up to the mid-70s by that point.”
–End Quote
- Q3 gross margin was 74.6% compared to 74% in the same period last year. Management’s guide for Q4 is 73%. The adjusted gross margin was 75% in Q3 for both periods and the management guide for the next quarter is 73.5%.
- Q3’s operating margin was 62.3% compared to 57.5% in the same period last year with a guide of 60.2% for Q4. Adjusted gross margin was 66.3% compared to 63.8% in the same period last year and guide of 64.4% for Q4.
- Q3's net margin was 55% compared to 51% in the same period last year and the guide for Q4 is 51.2%. Adjusted net margin was 57% in Q3 compared to 55.3% in the same period last year.
EPS
Q3 GAAP EPS grew by 110% YoY to $0.78, and adjusted EPS grew by 101.5% YoY to $0.81, driven by strong operating leverage. Analysts expect strong growth in the coming quarters. However, growth is expected to moderate in line with the revenue growth.
- Analysts expect Q4 adjusted EPS to grow 63.8% YoY to $0.84 and 49% YoY to $0.91 in Q1.
- Looking further out, analysts expect adjusted EPS to grow 50.3% YoY to $4.44 in FY2026 and 26.1% YoY to $5.60 in FY2027.
Cash Flows and Balance Sheet
Q3 cash flow remained strong, with operating and free cash flow margins both expanding sequentially and YoY.
- Q3's operating cash flow margin was 50.3% compared to 40.5% in the same period last year.
- Q3’s free cash flow margin was 47.9% compared to 38.9% in the same period last year.
- Cash and marketable securities were $38.49 billion and debt of $8.46 billion compared to $34.8 billion and $8.46 billion at the end of Q2.
- The company repurchased shares worth $11.0 billion and paid $245 million in dividends in Q3.
Key Metrics
Q3 data center revenue grew by 112% YoY and 17% QoQ to $30.77 billion, driven by strong Hopper revenue.
According to estimates from FactSet, the data center is expected to increase $2.6 billion sequentially to $33.37 billion compared to the $4.5 billion increase in Q3, which would mark the lowest sequential increase since the AI boom at the beginning of 2023. UBS analyst Timothy Arcuri is more bullish and expects Data Center revenue to be $38 billion with Blackwell’s revenue of $9 billion in Q4.
However, analysts are mixed with Mizuho’s Vijay Rakesh stating he is expecting a “more flattish” Q1 with data center revenue of $36.7 billion versus $37.4 billion consensus.
On the other hand, KeyBanc analyst believes that despite the supply chain constraints for GB200 servers it will be backfilled with HGX-based B200 servers with x86 head nodes. The same note points toward H2 being more likely GB200s: “Baird believes previously discussed delays for GB200 have not been related to demand but to data enter availability while architecture novelties have taken time to implement and optimize. Investors should not assume that these initial delays will lead customers to skip to the next-generation products, the firm contends. It expects GB200 to represent the majority of Nvidia's GB mix in the second half of 2025 and into 2026.” The analyst believes GB200s will be offset by B200 servers including the HGX-based servers and H20 GPUs from China.
- Q3 gaming revenue increased 15% YoY and 14% QoQ to $3.28 billion, driven by GeForce RTX 40 Series and game console SoCs. Management expects gaming revenue to decline sequentially due to supply chain constraints.
- Pro Viz revenue increased 17% YoY and 7% QoQ to $486 million, driven by the ramp up of RTX GPU workstations.
- Automotive revenue increased 72% YoY and 30% QoQ to $449 million, driven by the ramp of Nvidia’s self-driving platform revenue.
- OEM and other revenue increased 33% YoY and 10% QoQ to $97 million.
Valuation
The company is trading at a P/E ratio of 54.5 and a forward P/E ratio of 31.2.
The P/S ratio is 30.4 compared to the average P/S ratio of 25, the forward P/S ratio is 17.3. These valuations are very reasonable and typically present a buying opportunity as the company has been rapidly growing its top and bottom line.
Technical Analysis
By Knox Ridley
Since Nvidia bottomed on October 13th 2022, we have seen three distinct uptrends emerge. We are in the 3rd of these uptrends, and it is markedly different than the prior two. For one, unlike the first two, the uptrend that started in August of 2024 is relatively weak with a messy and overlapping structure. The prior two were nearly vertical. The second notable difference is that volume is weakening the higher price goes into the current uptrend. This is not like the prior two uptrends that saw volume expand with price. This signals that there is less excitement about the current move higher, as less buyers are supporting it.
If we examine the potential pattern the current uptrend is taking, there are only two that make sense, given the price action. Within the larger context of the uptrend, we are either setting up for the final 5th wave or a drop to complete the larger 4th wave.
If we zoom in, we can get a better idea of the levels to monitor that will signal what is likely playing out.
The Green Count – If this is a continuation of the larger uptrend, it is taking the form of an ending diagonal pattern. These patterns are the final swings in a larger 5 wave uptrend. They also tend to follow a powerful 3rd waves, which is what we saw with NVDA in 2024.
Ending diagonals are also a 5 wave patterns that have significant overlaps and are relatively weak. If this is the pattern in play, we will need to hold over the $119 – $123 support zone and then break above the $144 – $149 resistance zone. If this does happen, we will be in the 5th wave of this ending diagonal, which will target between $165 – $211. This will end the 5th wave and should lead to a notable retrace.
The Blue Count – Considering the messy and overlapping nature of this uptrend, there is a chance that this was a corrective bounce in an on-going correction that started in June of 2024. This would suggest that the B wave of this downtrend ended on January 7th with a double top. The final C wave drop should break below $123 – $119, and find support between $102 – $83.
Considering that Nvidia has been the market leader since 2023, and the most important name in the AI infrastructure cycle, how this stocks breaks will be very important to the bull market.
Conclusion:
Nvidia has an attractive valuation and is one of the few tech stocks in the market that does. Typically, we would buy here. However, the I/O Fund prefers to wait to see how the supplier commentary around Blackwell resolves before deciding next steps since we are particularly exposed to AI semis.
Our team has no doubt we will capture the next, powerful move higher in AI as we closely track key companies. However, given we our portfolio carries a higher beta profile, we tend to be more cautious on timing. With tech, you should not have to accept increased risk to buy – as the buys take care of themselves when a trend is in play and “all systems are a go.”
If Nvidia does well on Wednesday – great, we are clearly participating with a heavy allocation to AI semis. If Nvidia stumbles with a Q1 outlook, then we are prepared for that too and will hedge our AI semis. That’s all you can ask for as an investor – is to have a plan!
Lead Tech Analyst Beth Kindig and Equity Analyst Royston Roche contributed to this analysis.
Please note: The I/O Fund conducts research and draws conclusions for the company’s portfolio. We then share that information with our readers and offer real-time trade notifications. This is not a guarantee of a stock’s performance and it is not financial advice. Please consult your personal financial advisor before buying any stock in the companies mentioned in this analysis. Beth Kindig and the I/O Fund own shares in NVDA at the time of writing and may own stocks pictured in the charts.
Recommended Reading: