It used to be that by this time in earnings season, investor attention would start to wane. After the big retailers like Walmart WMT (which reported this past week) and Home Depot HD (reporting Tuesday) posted numbers, there wasn’t much else to focus on.
But that all changed just under three years ago, when Nvidia NVDA posted its first artificial-intelligence-fueled blockbuster earnings report. While most Big Tech companies (such as Alphabet GOOGL and Amazon AMZN) reported weeks ago, Nvidia is announcing at the tail end of earnings season. The semiconductor giant’s results are due Wednesday, after the close of trading.
What to Watch in Nvidia Earnings
We previewed Nvidia’s earnings with thoughts from Morningstar senior equity analyst Brian Colello. Among the most critical items to watch will be its guidance on capex. Here are two other numbers Colello says he’ll be watching:
- Revenue: “We’ll always be looking at whether they beat their revenue guidance this quarter and/or exceed consensus next quarter. Those figures are USD 65.0 billion, which was management’s guidance, for the January 2026 quarter, and USD 71.7 billion, which is the FactSet consensus estimate, for the current quarter ending in April.”
- Gross margins: “The final number that’s interesting is adjusted gross margin guidance of 75%. That will indicate strong pricing power and/or whether costs are rising in the near term.”
Additionally, the FactSet consensus calls for fourth-quarter 2025 earnings per share of USD 1.52 on revenue of USD 65.7 billion. That would make for year-over-year earnings growth north of 70%.
Nvidia’s Outsized Market Impact Continues
Even investors who aren’t tracking Nvidia’s earnings closely have reason to care about its performance. The firm’s massive rally since 2023 has made it one of the largest weights in major market indexes, giving it an outsized influence on many mutual funds. Take the State Street SPDR S&P 500 ETF Trust SPY, where Nvidia makes up nearly 8% of the portfolio.
Even the Morningstar US Market Index, a broader benchmark that reflects the overall stock market, counts Nvidia as an almost 7% weighting. (The next-largest stocks are Apple AAPL at just under 6%, and Microsoft MSFT, which weighs in just shy of 5%.)
With this large weighting, Nvidia has been a key reason that stock investors have enjoyed such healthy gains over the last few years. The US Market Index counts 1,170 constituents, but over the last three years, Nvidia is responsible for 10.51 points (14%) of its cumulative 73.85% return (all returns in this article are measured on a US dollar basis). For the past 12 months, Nvidia is responsible for 2 percentage points of the market’s 12.84% return (15%).
However, with the weakness in technology stocks, including Nvidia, over the past few months, the stock has notably disappeared from the ranks of the top contributors. In fact, Nvidia has been lagging, rising 0.75% over the last three months vs. the 3.99% return on the US Market Index.
Key Trends In Q4 Earnings
With the end of the fourth-quarter earnings season in sight, “the numbers are generally good,” says David Lefkowitz, head of US equities for UBS Global Wealth Management. UBS reckons that earnings are clocking in at a 14% rate of growth, above their expectations for 12%. He calls that “pretty healthy.”
Here are five key takeaways from Lefkowitz:
Resilient Consumer, but a K-Shaped Economy
“Visa, MasterCard, the banks, the largest retailers—which we really haven’t heard from, aside from Walmart—they all say the same thing: The consumer is resilient, but the lower end has been struggling for some time and continues to struggle. It plays into that K-shaped economy narrative ... But if one thing has changed, it’s that there is a little bit of improvement in cyclical areas.”
Housing Weakness Persists
“Housing continues to be disappointing. That’s a really big market from a cyclical perspective, a very meaningful part of the cyclical side of the economy. It has a big multiplier effect. It’s appliances and furniture and a lot of indirect effects. And that’s still relatively subdued.”
Confidence Wavers After Big Tech’s Capex Binge
“The capital spending guidance from Alphabet, Amazon, and Meta was quite a bit higher than what we and markets were thinking. When you add up the big four (Microsoft, Amazon, Alphabet, Meta) plus Oracle, for the calendar year, we’re on pace to hit USD 700 billion [in capex], and it’s going to basically consume all of those companies’ cash from operations.
“In the last two weeks, we downgraded [ratings on] tech and comm services … from attractive to neutral. The balance of risks, in our view, is slightly shifting. The level of spending has become higher than what we expected, and [it’s harder to have] confidence that companies can earn an attractive return on that investment.”
The ‘Real Economy’ Benefits from the AI Buildout
“We’re definitely seeing this money flow beyond data centers to other tech equipment. You can look at the order books of GE Vernova GEV, which makes gas turbines. You can look at order books for transformers, HVAC systems, data centers, and power agreements. It’s very clear [that the AI buildout] is having a tangible impact on the whole ecosystem.”
Missing: AI’s Impact on GDP
The initial reading on fourth-quarter GDP released Friday came in a bit weaker than expected at a 1.4% rate of growth for the economy. Some of that softness was attributed to the government shutdown. But Pimco economist Tiffany Wilding offered another explanation, concerning how the government does (and doesn’t) account for the AI buildout. Here’s what she had to say:
The miss was largely due to another surge in AI infrastructure related components, which aren’t captured well by the inventory and investment categories.
A similar thing happened in the first quarter, when net exports of IT components shaved 1.8 percentage points off top-line real GDP, and similarly, in the fourth quarter, the drag was 1.4 points. Otherwise, the report was in line with our expectations. The government shutdown reduced real GDP by 0.9 ppt (and boosted the deflator by a similar amount), and consumer spending was again solid (despite weak real income growth), reducing the savings rate to 3.6%, and AI-related investment masked otherwise-stagnant investment trends.
