On November 20, these are the two figures I'll focus on during Nvidia's earnings announcement.
On November 20, these are the two figures I'll focus on during Nvidia's earnings announcement.
Tech giant Nvidia (NVDA 3.08%) is all set to release its fiscal 2025 third-quarter earnings on November 20th. There are a couple of aspects from the report that I'll be keeping a close eye on as we approach the earnings announcement.
Let's delve into what I'm most intrigued about as we edge closer to Nvidia's earnings report, and what these factors could imply for investors.
1. How's the $50 billion share buyback program progressing?
Over the first half of 2025, Nvidia purchased 162.1 million shares of common stock for $15.1 billion. Under its remaining share repurchase program, the company has authorization to buy back an additional $7.5 billion worth of shares.
Beyond the $7.5 billion mentioned earlier, Nvidia's board of directors approved an additional $50 billion for buybacks in August.
At first glance, an expansion of Nvidia's share buyback program could be taken as a positive sign for investors. Corporations usually engage in stock buybacks when they believe shares are undervalued. In this scenario, I'm eager to discover the extent to which the $50 billion authorization has been utilized for buybacks.
Given the past two years, Nvidia's stock has traded below its average price-to-earnings (P/E) and price-to-free cash flow (P/FCF) multiples as of this writing.
Considering the imminent success of Nvidia's new "Blackwell" GPU, there's a strong possibility that the stock is on the brink of a major surge. Such a move would be accompanied by an expansion in valuation and, consequently, a more expensive stock.
For these reasons, I'll be closely scrutinizing whether Nvidia repurchased any stock during the third quarter at more reasonable valuations, prior to any Blackwell-driven growth momentum. If Nvidia hasn't done so, I can't help but harbor doubts about the authenticity of the $50 billion buyback program – or as Our Website contributor Sean Williams so eloquently put it, a "smoke-and-mirrors campaign."
2. The Blackwell GPU conundrum
The enthusiasm surrounding Nvidia's new Blackwell GPU is palpable. CEO Jensen Huang has asserted that demand for Blackwell is "insane," while Morgan Stanley analysts anticipate that the product launch could generate as much as $10 billion in revenue in fiscal 2025 alone.
However, despite the promising outlook, there could be a hurdle lurking in the background. Super Micro Computer, a company specializing in advanced chip architecture and data center storage clusters, is a close partner of Nvidia and is expected to benefit significantly from the upcoming Blackwell launch. But recent events could complicate things.
Over the last few months, Supermicro has been embroiled in a scandal following a short report from Hindenburg Research, which accused the company of accounting violations. Most recently, it lost its auditor, Ernst & Young. In the midst of the controversy, reports suggest that Nvidia has begun shifting Blackwell orders away from Supermicro and toward alternative vendors.
Although I view this move as a prudent decision on the part of Nvidia's management, it's unclear how it will impact supply-and-demand dynamics in the short term. As a result, Supermicro's challenges could potentially spawn near-term challenges for Nvidia's growth trajectory.
In conclusion
It's essential to clarify that even if Nvidia hasn't started repurchasing shares under its new $50 billion buyback program, or if the growth trajectory of Blackwell is more gradual than initially anticipated, I won't be overly concerned in the short term.
Following its impressive performance over the past couple of years, Nvidia stock is likely to continue its uptrend for the next year or so due to tailwinds generated by Blackwell. Since this could make Nvidia stock more expensive, it's natural to wonder when and at what price range management would consider stock buybacks a financially sound decision.
- Given the approaching earnings report, I'm interested to see if Nvidia has allocated any part of its $50 billion share buyback program for investments in the third quarter, as smart use of this financing opportunity could indicate a strong financial strategy.
- As investors, we'll be keeping an eye on how Nvidia has managed its funds, including investments in research and development, to ensure that the company is effectively utilizing its financial resources, especially with the anticipated growth from the Blackwell GPU launch.