Earnings preview: Nvidia, and Zoom Communications

Nvidia Q3 earnings

Tuesday 21 November

While we’re late into the third quarter earnings season, Thursdays NVIDIA release represents one of the most important of all the stocks in the S&P 500. The reliance on the so-called magnificent seven to drive wider market gains does highlight the importance of this technology giant. The boost provided to big tech through anticipated artificial intelligence revenues does highlight a need to turn expectations into reality. Fortunately, last quarter saw a huge outperformance compared to market estimates, with NVIDIA seeing earnings more than double. Subsequent concerns over the relationship between the US and China let the stock lower in recent months. Efforts to get around the US restrictions on AI technology exports into the Chinese market remains a key issue for investors to follow on Thursday, with Nvidia having attempted to provide alternate products in a bid to serve that massive market.

With Nvidia at the forefront of the AI boom, the expansion in adoption for the technology should help benefit this company in particular. As such, the importance of the company as a provider of both AI hardware and software should mean that their earnings are a key barometer of global tech spending on AI. While many will baulk at the huge valuation the business enjoys, forecasts do point towards expectations of a dramatic ramp-up in both earnings and revenue in the quarters ahead. Quite how big this technology will become remains to be seen, but those seeking exposure to its growth will see Nvidia as perhaps the best route to its expansion without having to try and pick the winner in a likely ever-changing space.

Summary of global analyst recommendations:

• 18 analysts hold ‘strong buy’ recommendation
• 33 analysts hold ‘buy’ recommendation
• 2 analysts hold ‘hold’ recommendation
• 0 analysts hold ‘sell’ recommendation
• 0 analysts hold ‘strong sell’ recommendation

^{Source: Eikon}

Estimates

• Revenues: $16.123 billion
• Earnings: $3.36 per share

^{Source: Eikon}

Zoom Communications Q3 earnings

Tuesday 21 November

Zoom carried on its downward trajectory over recent months, despite an impressive second quarter that saw the company outperform on the earnings front once again. The ability of zoom to beat estimates should not be overlooked, although the benefit has been questionable given the decline into record lows in late October. The stock has been staging a recovery as we head into the third quarter earnings, with shareholders hoping that this pandemic darling can bring about fresh grounds for optimism. The encouraging outperformance seen in the second quarter did come alongside a somewhat downbeat outlook for the second half of the year, with management tempering expectations around both online and enterprise business. Difficulties stimulating extended sales, international demand and renewal optimization do raise significant questions as we head into the third quarter earnings. Perhaps these questions could feed into the trend of beating relatively weak market expectations, although shareholders will note that those beats have counted for little thus far.

Summary of global analyst recommendations:

• 2 analysts hold ‘strong buy’ recommendation
• 6 analysts hold ‘buy’ recommendation
• 23 analysts hold ‘hold’ recommendation
• 0 analysts hold ‘sell’ recommendation
• 0 analysts hold ‘strong sell’ recommendation

^{Source: Eikon}

Estimates

• Revenues: $1.12 billion
• Earnings: $1.08 per share

^{Source: Eikon}