Date
August 27, 2025
Category
Nvidia’s Q2 Earnings: A Crucial Test for the AI Powerhouse
On Wednesday August 27, artificial intelligence (AI) powerhouse Nvidia will release its Q2 FY2026 earnings after the closing bell. This report will be closely analyzed by investors worldwide, as the stock has surged since April and the chip designer now commands a market capitalization of around $4.3 trillion, making it the largest business in the S&P 500 index.
Here, we are going to take a look at the setup for Nvidia stock going into the Q2 earnings print. We’ll also cover revenue and earnings forecasts and highlight some key Q2 focus points for investors.
Stock Setup and Investor Sentiment
Nvidia’s share price has experienced a meteoric rise since its April lows, climbing from below $100 to over $180. This rally has been fueled by the insatiable demand for its chips, which are the backbone of the generative AI revolution. At one stage, in July, the stock looked quite “overbought” as it was sporting a relative strength index (RSI) in excess of 70. However, in recent weeks, it has experienced a small pullback, and the RSI has fallen to a more neutral 56.
Despite the substantial share price rise since April, analyst sentiment remains overwhelmingly positive. Ahead of the Q2 earnings, many Wall Street analysts have increased their price targets. At present, a number of firms1 – including TD Cowen, Morgan Stanley, UBS, Wedbush, and KeyBanc – have price targets above $200. Loop Capital currently has the highest price target at $250, with analyst Ananda Baruah saying that he expects spending on AI to increase significantly in the years ahead and that Nvidia essentially has a monopoly on critical technology.
Interestingly, recent analysis by Morgan Stanley2 revealed that Nvidia is the most under-owned mega-cap tech stock among institutional investors relative to its S&P 500 weight. This “striking anomaly,” as Morgan Stanley calls it, could be a powerful catalyst for a “technical pull higher” as active managers rebalance their portfolios, providing a potential tailwind for the stock’s next leg up, according to the firm. It’s worth noting here that while the stock looks a little expensive right now on a forward-looking price-to-earnings (P/E) ratio of 41, it doesn’t look particularly expensive taking a medium-term view. Using the FY2027 earnings per share forecast of $6.03, the P/E ratio falls to around 29.5.
Q2 Expectations
Nvidia’s guidance for Q2 revenue was between $44.1 billion and $45.9 billion, and analysts are currently expecting revenue to come in at the high end of that range, at $45.83 billion. This would represent growth of 52% year on year. While that is a deceleration from the Q1 growth rate, it’s still an impressive figure, especially considering the impact of export control limitations on H20 chip sales to China, which have cost the company billions in revenue. The consensus forecast for earnings per share is $1.004.
While growth in Nvidia’s Data Center segment, which accounts for over 80% of sales, is expected to moderate from Q1’s blistering 73% to a still strong 54%, growth in the company’s Automotive and Robotics segment is expected to accelerate. This division is projected to see growth of 80% year on year, powered by new products like the NVIDIA Halos safety systems for autonomous vehicles and Isaac, the company’s humanoid robot foundation model. Note that in Q1, Nvidia’s gross margins took a hit due to H20-related charges. Analysts and investors will be looking for a rebound to around 72% in Q2, as this is what the company guided to in Q1.
Key Investor Focus Points
Beyond the headline numbers, investors will be focused on several key areas during the earnings call. Updates on China exports are likely to be one major area of focus. Recently, Nvidia agreed to share 15% of revenues from AI chip sales to China with the US government in exchange for export licenses. This could help the company preserve its dominant position in the Chinese market – which could be worth up to $50 billion5 in AI sales according to CEO Jensen Huang – and investors will be keen to find out how the company sees this playing out. Furthermore, investors will be listening for any updates on a new, more powerful China-specific chip, tentatively named the “B30A.” This chip, which will reportedly be more powerful than the currently approved H20 model, could be a game-changer for Nvidia in China.
Investors will also be looking for updates on Nvidia’s Blackwell and Rubin products. Blackwell is the company’s current AI chip and investors will be keen to obtain clarity on the production and ramp up of these chips. Ultimately, the speed of the Blackwell rollout could determine whether Nvidia keeps its stranglehold on the AI GPU market or leaves the door ajar for competitors such as AMD. Similarly, any news on the next-generation Rubin chip, which has recently entered trial production at TSMC, will be important for investors.
Finally, guidance for Q3 will be crucial. Here, analysts are currently looking for Nvidia to guide for revenue of $50 billion6 or more. They’re also expecting to see another “beat and raise” as this narrative has characterized the company’s recent earnings reports. A strong outlook would most likely assuage fears that the AI demand cycle is peaking while a weak outlook could trigger a sell-off in the stock and potentially hurt other names in the AI sector.
Footnotes:
1 Tipranks, Nvidia (NVDA) Stock Forecast & Price Target, as of August 22, 2025
2 Yahoo Finance, Nvidia is the most underowned megacap stock, Morgan Stanley says, as of August 19, 2025
3 IG, How will AI growth and US-China deal shape NVIDIA’s Q2 results?, as of August 25, 2025
4 Pepperstone, Nvidia Q2 2026 Earnings: Key Expectations and Market Implications, as of August 25, 2025
5 CNBC, Nvidia CEO says being locked out of China AI market would be ‘tremendous loss’, as of May 6, 2025
6 Yahoo Finance, Why this is a must-watch in Nvidia’s earnings report, as of August 21, 2025
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