Nvidia (NASDAQ:NVDA) shares have had a rough few weeks, falling sharply from their October peak. Meanwhile, the Nasdaq 100 has slipped into correction territory – a drop of more than 10% from its recent high.
So can the upcoming Q3 results (17 November) change the story? Personally, I’m not overly optimistic – but they might provide some clarity.
The semiconductor business is still booming, but investors are increasingly worried about the enormous cost of building AI infrastructure.
Selling chips is one thing – the harder question is whether buyers can convert their processing power into profit.
What the market expects
Nvidia’s fiscal third-quarter 2027 results will cover the three months to 25 October and analysts expect revenue of about $109bn and adjusted earnings per share of $2.47.
The GPU giant has guided for revenue of $108bn, plus or minus 2%, with gross margin of about 74%. That guidance excludes China data centre compute revenue, which makes the expected growth even more striking.
These aren’t small numbers. Even if it only lands near the middle of its range, revenue would rise by roughly 12% from the $96.2bn reported in the previous quarter.
The key question is can that growth can continue?
A beat may not be enough
After years of outstanding results, Nvidia investors now expect a lot. Last quarter, it reported $96bn of sales and adjusted earnings per share of $2.22, ahead of forecasts.
But the market’s far beyond simply beating expectations. It wants to know whether cloud providers and AI developers can keep funding the data centres, power supplies and chips needed to run modern AI.
That matters because Nvidia’s revenue depends on other companies’ spending plans. If those companies start questioning the return on their investment, demand for AI hardware like semiconductors, GPUs could slow.
Personally, I’d rather see cautious guidance and a strong beat than aggressive guidance that later needs revising. A company that promises less and delivers more tends to earn more trust.
Three things to watch
These are areas I’ll keep an eye on 17 November:
- Q4 guidance: any sign of fresh demand, or just existing orders that were already booked?
- Gross margin: guidance is 74%, plus or minus 50 basis points. Pricing pressure will matter.
- Data centre revenue: the engine of the story. Last quarter, revenue rose 117% to $89bn.
The revenue number will dominate the headlines but the guidance and margins will tell us more about the next 12 months.
What would get me interested
I don’t expect 17 November to be groundbreaking or validate the excessive AI spending. It should show whether Nvidia’s executing well, but that’s a long shout from proving that AI is on route to becoming profitable.
If gross margins fall, or management hints that customers are delaying purchases, I’d be worried. However, strong guidance and confident comments on supply and demand would pique my interest. Any sign the recent sell-off reflects positioning rather than deteriorating demand would be bullish for AI.
In that situation, I’d say Nvidia’s still worth considering, even at today’s high price. But I wouldn’t make decisions before the update.
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Mark Hartley does not hold any positions in the companies mentioned.
This story originally appeared on Motley Fool
