NVIDIA's strong earnings and guidance could drive further upside in the stock

Overview

This report is Goldman Sachs' earnings review of Nvidia Corp.(NVDA). The report argues that NVIDIA's quarterly results and 1Q guidance were stronger than market expectations and that, even though investors were already looking for a high bar ahead of the print due to upward revisions to hyperscaler capex, the strong 1Q guidance should still support further upside in the stock.

Core views

The key views are: first, quarterly revenue, operating EPS, and data center revenue all exceeded market expectations; second, 1Q revenue and gross margin guidance were above the Street, implying non-GAAP EPS was broadly in line with expectations; third, the data center business guidance indicates that the AI infrastructure spending environment remains solid; and fourth, investors will next focus on 2027 revenue visibility, whether the more than $500bn cumulative 2025-26 data center revenue forecast will be updated, the details of the strategic relationship with OpenAI, and the margin trend in a component-cost inflation environment.

Analysis framework

The report mainly assesses investment implications by comparing earnings and guidance against Goldman Sachs' estimates and Street consensus, combined with analysis of revenue by segment, margins, working-capital metrics, AI capex read-throughs, and industry-chain transmission effects for related semiconductor companies within coverage. The target price uses a P/E valuation framework, based on 30x P/E and a standardized EPS estimate of $8.25.

Methodology notes

• Valuation methodsP/E multiple valuation

  P/E valuation

  Goldman Sachs' 12-month target price of $250 is based on a 30x P/E multiple applied to its standardized EPS estimate of $8.25.

• factor_profileGS Factor Profile

  Goldman Sachs factor profile

  The Goldman Sachs factor profile compares individual stocks with the market and industry peers across growth, financial returns, valuation multiples, and composite indicators; growth, financial returns, and valuation multiples are converted into percentiles from standardized rankings of the relevant forecast metrics.

• m_and_aM&A Rank

  M&A rating framework

  In global coverage, Goldman Sachs uses qualitative and quantitative factors to assess the likelihood that a company becomes a takeover target and assigns an M&A rank from 1 to 3; rank 1 indicates a high probability, rank 2 a medium probability, and rank 3 is typically not included in the target price.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• NVDA.US

  subject_company

  Strengths

  Quarterly earnings and 1Q revenue guidance were above market expectations; data center revenue was strong; Goldman Sachs maintains a Buy rating and a $250 target price.

  Weaknesses

  Gaming revenue was below Goldman Sachs' expectations, and automotive revenue was below both Goldman Sachs and Street estimates; inventory rose 8% sequentially to $21.4bn, and accounts receivable rose 15% sequentially to $38.5bn.

  Comparison

  Revenue of $68.1bn was above the Street estimate of $66.2bn, and 1Q revenue guidance of $78.0bn was well above the Street estimate of $72.1bn.

  Risks

  A slowdown in AI infrastructure spending, share losses due to intensifying competition, margin erosion from competition, and supply constraints.

• AMD.US

  positive_read_across

  Strengths

  Goldman Sachs believes NVIDIA's 1Q data center guidance is the most constructive for AMD and other digital semiconductor names in coverage.

  Weaknesses

  The report does not provide AMD's own earnings or valuation data.

  Comparison

  AMD is a read-through beneficiary of NVIDIA's strong data center guidance rather than a primary covered company in this report.

  Risks

  The positive read-through could weaken if AI spending slows or competition intensifies.

• Broadcom

  positive_read_across

  Strengths

  The report says NVIDIA's data center guidance is most constructive for Broadcom and AMD.

  Weaknesses

  The report does not provide specific financial data for Broadcom.

  Comparison

  Broadcom is one of the digital semiconductor names most exposed to read-through from the AI spending environment.

  Risks

  Changes in AI infrastructure capex could affect the strength of the read-through.

• Marvell and ARM

  secondary_positive_read_across

  Strengths

  The report believes NVIDIA's data center guidance also has some positive read-through for Marvell and ARM.

  Weaknesses

  The positive read-through is less pronounced than for Broadcom and AMD.

  Comparison

  Relative to Broadcom and AMD, the report describes this as 'to a lesser extent'.

  Risks

  The industry-chain transmission is more indirect, so company fundamentals and valuation matter more.

• MU, SNDK, STX, WDC

  second_derivative_read_across

  Strengths

  Strong AI spending could create second-order positive read-throughs for memory and storage companies.

  Weaknesses

  The report does not provide specific data or rating changes for these companies.

  Comparison

  Compared with digital semiconductor companies, this is a more indirect second-order transmission.

  Risks

  Memory cycle dynamics, pricing, and supply-demand changes may affect the degree of benefit.

• LAM, AMAT, KLAC

  third_derivative_read_across

  Strengths

  Strong AI spending could create third-order positive read-throughs for semiconductor equipment companies.

  Weaknesses

  The transmission chain is longer, and the report does not quantify specific order or earnings impacts.

  Comparison

  Compared with memory companies, this is a more indirect third-order transmission.

  Risks

  Capex timing, equipment-order cycles, and supply-chain constraints could affect realization.

Key data

• Quarterly revenue$68.1bnAbove Goldman Sachs' estimate of $67.3bn and the Street estimate of $66.2bn.
• Quarterly gross margin75.2%In line with Goldman Sachs' estimate of 75.2% and slightly above the Street estimate of 75.1%.
• Quarterly operating margin67.7%In line with Goldman Sachs' estimate of 67.7% and slightly above the Street estimate of 67.6%.
• Quarterly operating EPS$1.76Above Goldman Sachs' estimate of $1.59 and the Street estimate of $1.53.
• Data center revenue$62.3bnAbove Goldman Sachs' estimate of $61.3bn and the Street estimate of $60.5bn.
• Gaming revenue$3.7bnBelow Goldman Sachs' estimate of $4.4bn, but above the Street estimate of about $4.0bn.
• Professional visualization revenue$1.3bnWell above Goldman Sachs' estimate of $798mn and the Street estimate of $778mn.
• Automotive revenue$604mnBelow Goldman Sachs' estimate of $649mn and the Street estimate of $651mn.
• 1Q revenue guidance midpoint$78.0bnAbove Goldman Sachs' estimate of $76.8bn and well above the Street estimate of $72.1bn.
• 1Q non-GAAP gross margin guidance75.0%Slightly above Goldman Sachs' estimate of 74.7% and the Street estimate of 74.9%.
• Implied 1Q non-GAAP EPS ex-SBC$1.72Broadly in line with Goldman Sachs' estimate of $1.80 and the Street estimate of $1.67.
• 12-month target price$250Based on 30x P/E and a standardized EPS estimate of $8.25.

Impact & implications

Goldman Sachs believes NVIDIA's strong data center guidance suggests a solid AI spending environment and offers a positive read-through for the digital semiconductor names in coverage, especially Broadcom and AMD, followed by Marvell and ARM; at the same time, stronger AI spending could also create second-order read-throughs for the memory names MU, SNDK, STX, and WDC, and third-order read-throughs for semiconductor equipment names LAM, AMAT, and KLAC.

Risks

• A slowdown in AI infrastructure spending.
• Loss of market share due to intensifying competition.
• Margin erosion from stronger competition.
• Supply constraints.
• Uncertainty around the future margin trajectory in a component-cost inflation environment.

What to watch

• 2027 revenue visibility.
• Whether the company updates its cumulative 2025-26 data center revenue forecast of more than $500bn.
• Details of the strategic relationship with OpenAI.
• Forward-looking margin trends in a component-cost inflation environment.
• Whether data center revenue and AI capex trends can continue to support better-than-expected guidance.