Danny Vena, The Motley Fool
6 min read
In This Article:
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After more than two years of phenomenal gains, Nvidia stock has been treading water in 2025.
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The company's technology underpins the AI revolution, but investors have become increasingly cautious.
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There's a large body of evidence that suggests Nvidia will likely climb higher, but not in a straight line.
Advances in the field of artificial intelligence (AI) have taken the world by storm over the past few years, but much of the initial hype has since subsided. Investors are looking for evidence that the adoption of AI still has legs. Nvidia's (NASDAQ: NVDA) graphics processing units (GPUs) quickly became the gold standard for training and running generative AI models. The company generated five consecutive quarters of triple-digit revenue and profit growth, but as its growth rate began to decelerate, investors got nervous.
The company is scheduled to release the results of its fiscal 2026 first quarter after the market closes on Wednesday, May 28, and shareholders -- and indeed Wall Street at large -- will be sitting on the edge of their seats for clues as to where AI goes from here.
Let's review the company's most recent results, see what the available evidence suggests about the company's future prospects, and whether Nvidia stock is a compelling opportunity ahead of its highly anticipated financial report.
For its fiscal 2025 fourth quarter (ended Jan. 26), Nvidia reported revenue of $39.3 billion, which soared 78% year over year and 12% sequentially. Strong sales drove robust earnings per share (EPS) of $0.89, which surged 82%. Lest there be any doubt, it was the continuing adoption of AI that fueled the results, as revenue in its data center segment jumped 93%.
Nvidia expects its strong growth to continue. For its fiscal 2026 first quarter (ended April 28), management is guiding for revenue of $43 billion, which would represent growth of 65%. Wall Street is equally bullish, with analysts' consensus estimates calling for revenue of $43.15 billion and adjusted EPS of $0.73. While this would mark a minor deceleration compared to last quarter's robust sales performance, it would be remarkably strong nonetheless. Nvidia has a long history of issuing conservative guidance, so the actual results could well be higher.
The popular narrative suggests the rapid buildout of AI-centric data centers by the major cloud and tech companies is showing cracks, but the evidence suggests otherwise.
Amazon Web Services, Microsoft Azure, and Alphabet's Google Cloud, the "Big Three" in cloud computing, have announced plans to boost infrastructure spending this year. Not surprisingly, the vast majority of that spending is earmarked for additional data centers to support demand for AI. Not to be outdone, Meta Platforms has already announced plans for higher capex spending than it originally envisioned. The totals are intriguing:
