The Zhitong Finance App learned that on the eve of the release of Nvidia (NVDA.US)'s high-profile quarterly results, Franklin Templeton fund manager Sara Araghi said that the chip giant not only needed to hand over profit data that exceeded expectations, but also needed to provide the market with specific details on capital allocation and maintenance of investment plans.
“The market needs to see more details about these investments and how much value they can actually bring.” Araghi said in an interview on Tuesday.
Araghi specifically pointed out that there is a clear divergence between Nvidia's forward price-earnings ratio (currently around 21 times) and the expected increase in revenue and profit. She believes that this reflects that the market has taken into account expectations of slowing growth, even though the current expansion momentum is still strong.
“Nvidia's growth is truly phenomenal, but the slowdown is coming, and the market is looking ahead and is already looking ahead to next year.” she analyzed.
In this context, Araghi emphasized the importance of being able to continue to hand over the report card of profit growth. This is not only to appease Wall Street, but also to prove that the company has sufficient free cash flow to support subsequent investments. “Moreover, they also need to spend part of the money on share buybacks.” she added.
In terms of gross margin, Araghi believes that Nvidia remains at about 75% of the “seven letters” level. This is rare among hardware companies, so it is bound to be strictly scrutinized by the market, especially under the pressure of rising upstream costs. She mentioned that Nvidia has hedged the impact of rising storage costs by increasing prices.
Earlier, it was reported that Nvidia has issued price adjustment notices to core customers such as Microsoft, Google, and Oracle. Due to the sharp rise in memory chip costs, the price of servers equipped with its AI chips has generally risen by more than 15%, covering flagship systems such as Vera Rubin and Grace Blackwell, which will take effect from early 2027.
Nvidia will announce its results for the second quarter of the 2027 fiscal year after the market on Wednesday. The market expects revenue to increase 96% year over year to US$92 billion, with adjusted earnings per share of US$2.09. Analysts also pointed out earlier that in the current market environment, a routine “performance exceeding expectations+upward guidance” may not be enough to significantly boost investor sentiment. Over the past four quarters, Nvidia's stock price fell on the first trading day after the results were announced.
It is worth mentioning that Nvidia's stock price closed up 2.19% on Tuesday, ending the previous seven consecutive trading days of decline. This is also the longest losing streak since 2022.