Can Nvidia keep beating earnings estimates?

Every day, scores of Wall Street analysts devote hours of their life to spreadsheets, tinkering with assumptions in their model as they try to estimate what public companies will report in their upcoming quarterly earnings. By definition, those estimates are pretty much always wrong, but they’re typically only wrong in a relatively small way — a few percent here or there.

However, last summer, the best of Wall Street was really wrong on Nvidia, as the chip company blew analysts estimates out of the water, beating revenue forecasts by 21% and profit by nearly 30% for the three months that ended in July 2023. That quarter was the first indication of what was to come: one of the biggest bull-runs in stock market history, which is showing no signs of letting up.

Indeed, Nvidia briefly got its hands on the “world’s most valuable company” crown again last week, as its market cap touched $3.53 trillion, slightly above Apple’s $3.52 trillion, before it fell back below the iPhone-maker. Nvidia’s recent performance remains exceptional compared to its chipmaking peers, and the rest of the Magnificent Seven, many of whom are Nvidia’s biggest customers.

That performance suggests that investors are once again expecting another blowout quarter for Nvidia when it reports earnings on November 20th. But, now more than a year into the company’s revelation that it was printing billions of dollars from its Data Center business, can it keep surprising the market?

Interestingly, tracking the surprise on revenue and earnings through FactSet reveals that Wall Street’s analysts have generally been getting closer and closer in the last few quarters. In the last 5 quarters, Nvidia has beaten expectations on revenue by: 21%, 12%, 8%, 6%, and 5%. The earnings surprises have similarly narrowed: 30%, 19%, 12%, 9%, and 5%. Can Jensen Huang and Nvidia surprise everyone once again? Given the way the stock has traded in the last month — up 16% — investors seem confident.

Related reading: Why Nvidia is the Bo Jackson of the stock market.