Nvidia NVDA is set to release its first-fiscal quarter 2026 earnings report on May 28. Here’s Morningstar’s take on what to look for in Nvidia’s earnings and stock.

Key Morningstar Metrics for Nvidia

  • Fair Value Estimate: $125.00
  • Morningstar Rating: ★★★
  • Economic Moat: Wide
  • Morningstar Uncertainty Rating: Very High

Earnings release date

  • Wednesday, May 28, after the close of trading

What to watch for in Nvidia’s fiscal Q1 earnings

China, tariffs, and geopolitics are at the forefront.

  • Nvidia announced a $5.5 billion writeoff of H20 inventory for artificial intelligence chips targeted for China, as subsequent US restrictions have blocked Nvidia’s sale of these parts. We’ll be seeking insight into Nvidia’s revenue headwind from lost China business, as well as next steps (if any) to salvage any China business going forward.
  • On the other hand, the US deals with Saudi Arabia and the UAE should boost AI spending in the years ahead, and we’ll seek insight into these new developments as well.

Investors will still seek a beat-and-raise quarter.

  • Nvidia has been on a healthy streak of reporting results ahead of its quarterly guidance while providing guidance for the upcoming quarter ahead of FactSet consensus estimates, although such “beats” are less impressive than they were at the dawn of AI a couple of years ago. Consensus estimates appear to have caught up with Nvidia’s growth.
  • Supply constraints remain the cap on Nvidia’s earnings in the United States, while we’ll seek insight into China revenue and the future headwinds that may arise due to even tighter restrictions.

Nvidia has the best view of AI.

  • DeepSeek and the rumored end of scaling laws were two technology-related developments that brought some doubt into Nvidia’s prospects a quarter ago. Neither appear to be a severe headwind to date. We don’t anticipate any new technology developments as putting Nvidia’s quarterly revenue at risk, but we think Nvidia sees where “the puck is going” better than any other AI firm, so we’ll appreciate their insights.

We have a $125 fair value estimate and wide moat rating for Nvidia.

  • We don’t see any risk to Nvidia’s moat at the moment.
  • We have a very high fair value uncertainty rating for Nvidia, as generative AI is still in its relative infancy and geopolitics muddy the picture a bit.
  • At $135, shares appear slightly overvalued to us, but acknowledge that there might be more fundamental upside to Nvidia if China becomes less of a concern and/or we foresee brighter AI demand in the US and elsewhere in the long term.

Fair Value estimate for Nvidia

With its 3-star rating, we believe Nvidia’s stock is fairly valued compared with our long-term fair value estimate of $125 per share, which implies an equity value of roughly $3 trillion. Our fair value estimate implies a fiscal 2026 (ending January 2026 or effectively calendar 2025) price/adjusted earnings multiple of 32 times and a fiscal 2027 forward price/adjusted earnings multiple of 26 times.

Our fair value estimate, and Nvidia’s stock price, will be driven by its prospects in the data center, or DC, and AI GPUs, for better or worse. Nvidia’s DC business has achieved exponential growth already, rising from $3 billion in fiscal 2020 to $115 billion in fiscal 2025. DC revenue remains supply-constrained and near-term revenue will rise as more supply comes online. DC revenue exited fiscal 2025 at $35.6 billion in the January 2025 quarter and a $142 billion annual run rate. We model $40 billion of revenue in the April 2025 quarter, in line with guidance, but we reduce our July 2025 quarterly estimate from $44 billion down to $37.6 billion as Nvidia has been blocked from selling its H20 GPUs into China. Thereafter, we model incremental quarterly revenue growth of about $4 billion per quarter in the October 2025 and January 2026 quarters, as we expect additional chip supply to come online to satisfy insatiable AI demand.

Economic Moat Rating

We assign Nvidia a wide economic moat, thanks to intangible assets around its graphics processing units and, increasingly, switching costs around its proprietary software, such as its Cuda platform for AI tools, which enables developers to use Nvidia’s GPUs to build AI models.

Nvidia was an early leader and designer of GPUs, which were originally developed to offload graphic processing tasks on PCs and gaming consoles. Nvidia has emerged as the clear market share leader in discrete GPUs (over 80% share, per Mercury Research). We attribute Nvidia’s leadership to intangible assets associated with GPU design, as well as the associated software, frameworks, and tools required by developers to work with these GPUs. Recent introductions, such as ray-tracing technology and the use of AI tensor cores in gaming applications, are signs, in our view, that Nvidia has not lost its GPU leadership in any way. A quick scan of GPU pricing in both gaming and data center shows that Nvidia’s average selling prices can often be twice as high as those from its closest competitor, Advanced Micro Devices.

Financial strength

Nvidia is in outstanding financial health. As of October 2024, the company held $38.5 billion in cash and investments, as compared with $8.5 billion in short-term and long-term debt. Semiconductor firms tend to hold large cash balances to help them navigate the cycles of the chip industry. During downturns, this provides them with a cushion and flexibility to continue investing in research and development, which is necessary to maintain their competitive and technology positions. Nvidia’s dividend is virtually immaterial relative to its financial health and forward prospects, and most of the firm’s distribution to shareholders comes in the form of stock buybacks.

Risk and uncertainty

We assign Nvidia an Uncertainty Rating of Very High. In our view, Nvidia’s valuation will be tied to its ability to grow within the data center and AI sectors, for better or worse. Nvidia is an industry leader in GPUs used in AI model training, while carving out a good portion of demand for chips used in AI inference workloads (which involves running a model to make a prediction or output).

We see a host of tech leaders vying for Nvidia’s leading AI position. We think it is inevitable that leading hyperscale vendors, such as Amazon’s AWS, Microsoft, Google, and Meta Platforms will seek to reduce their reliance on Nvidia and diversify their semiconductor and software supplier base, including the development of in-house solutions. Google’s TPUs and Amazon’s Trainium and Inferentia chips were designed with AI workloads in mind, while Microsoft and Meta have announced semiconductor design plans. Among existing semis vendors, AMD is quickly expanding its GPU lineup to serve these cloud leaders. Intel also has AI accelerator products today and will likely remain focused on this opportunity.

NVDA bulls say

  • Nvidia’s GPUs offer industry-leading parallel processing, which was historically needed in PC gaming applications, but has expanded into crypto mining, AI, and perhaps future applications too.
  • Nvidia’s data center GPUs and Cuda software platform have established the company as the dominant vendor for AI model training, which is a use case that should rise exponentially in the years ahead.
  • Nvidia is expanding nicely within AI, not just supplying industry-leading GPUs but also moving into networking, software, and services.

NVDA bears say

  • Nvidia is a leading AI chip vendor today, but other powerful chipmakers and tech titans are focused on in-house chip development.
  • Although Cuda is a leader in AI training software and tools today, leading cloud vendors would likely prefer to see greater competition in this space and may shift to alternative open-source tools if they were to arise.
  • Nvidia’s gaming GPU business has often seen boom or bust cycles based on PC demand and, more recently, cryptocurrency mining.

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Terms used in this article

Star Rating: Our one- to five-star ratings are guideposts to a broad audience and individuals must consider their own specific investment goals, risk tolerance, and several other factors. A five-star rating means our analysts think the current market price likely represents an excessively pessimistic outlook and that beyond fair risk-adjusted returns are likely over a long timeframe. A one-star rating means our analysts think the market is pricing in an excessively optimistic outlook, limiting upside potential and leaving the investor exposed to capital loss.

Fair Value: Morningstar’s Fair Value estimate results from a detailed projection of a company’s future cash flows, resulting from our analysts’ independent primary research. Price To Fair Value measures the current market price against estimated Fair Value. If a company’s stock trades at $100 and our analysts believe it is worth $200, the price to fair value ratio would be 0.5. A Price to Fair Value over 1 suggests the share is overvalued.

Moat Rating: An economic moat is a structural feature that allows a firm to sustain excess profits over a long period. Companies with a narrow moat are those we believe are more likely than not to sustain excess returns for at least a decade. For wide-moat companies, we have high confidence that excess returns will persist for 10 years and are likely to persist at least 20 years. To learn about finding different sources of moat, read this article by Mark LaMonica.