Nvidia is scheduled to report earnings after the market closes, with Wall Street expecting $78.8 billion in revenue and $1.77 in earnings per share. The company has beaten analysts’ estimates in 21 of the last 23 quarters, reinforcing expectations of another upside result. Attention is not on whether revenue will beat, because a beat is viewed as likely. Instead, investors are watching gross margin, defined as the percentage of each sales dollar kept after production costs. Gross margin indicates pricing power and how much remains for expenses and profit. Nvidia’s gross margin is cited at about 75%, far above typical physical-economy levels.
"Analysts expect revenue of $78.8 billion, almost 80% higher than just a year earlier. Earnings per share are projected at $1.77, nearly double last year. There's ample reason to believe Nvidia will meet those lofty goals: according to data from The Motley Fool, the chipmaker has beaten Wall Street's estimates in 21 of the last 23 quarters, totaling to five years of outperformance."
"So the reason Nvidia's earnings are so closely watched isn't because anyone expects it to suddenly fail. A beat is almost a given. It's because Nvidia is still the big winner of the AI boom, the company at the center of every hyperscaler's capital spending plan and every investor's portfolio anxiety. Its last earnings report in February was a 7% beat on earnings per share. The stock fell 6% that day, and was down 11% a month later, according to 24/7 Wall St."
"What is gross margin? Gross margin is the percentage of every sales dollar a company gets to keep after paying to make its product. So if Nvidia sells a chip for $100 and it costs $25 to make, the gross margin is 75%. The remaining $75 goes toward everything else- profits, salaries, taxes-but the 75% itself shows how much pricing power a company actually has."
"For context of how large that gross margin is, a grocery store runs on gross margins around 25%. Walmart hovers near 24%. Apple, often considered one of the most profitable hardware companies in the world, sits near 46%. Microsoft, which at this point sells mostly software, sits at around 70%. Nvidia, which sells physical chips, runs at 75%, a number you almost never see in the physical economy."
Read at Fortune
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