Keeping a lid on investor optimism is a hard task for all fast-growing companies. But what about when you are dubbed the world’s ‘most important’ stock and are coming off three consecutive quarters of 200 percent-plus revenue growth?
If expectations keep rising, eventually you will come up short – if only a little – and that’s what happened to NVIDIA this week, when the AI chip maker announced second-quarter earnings that beat analyst expectations, but not by enough.
When the hype is this major, things start to get surreal. In the run-up, tech analyst Dan Ives of Wedbush called NVIDIA president and CEO Jensen Huang the ‘godfather of AI’ and said the company’s Q2 results could be the most important for the market in years.
In New York, around 30 people gathered for an ‘earnings watch party’ in an Irish bar, playing financial news channels on the big screens and taking it all in like a major sports event. ‘Longs, shorts and anyone else welcome,’ announced the invitation on X.
Meanwhile, on social media sites, NVIDIA memes flew back and forth. One user on Reddit pondered whether the decision by Huang to appear on TV without his customary leather jacket was a sell signal.
In the end, NVIDIA reported quarterly revenue of $30 bn, versus a consensus figure of $28.7 bn, and announced a new buyback program of $50 bn. But the share price fell around 7 percent in after-hours trading. CNBC noted that the buy-side ‘whisper number’ for revenue – the unofficial expectation of institutional investors – was higher, at $33 bn or $34 bn, helping to spur the sell-off.
‘Here’s the issue – the size of the beat this time was much smaller than we’ve been seeing,’ Ryan Detrick, Carson Group’s chief market strategist, told Reuters.
‘Even future guidance was raised but, again, not by the tune from previous quarters. This is a great company that is still growing revenue at 122 percent, but it appears the bar was just set a tad too high this earnings season.’
Ultimately, there is only so much companies can do to keep a handle on market expectations. And in a situation as extreme as NVIDIA’s Q2 numbers, the lack of greater volatility in the stock suggests things were handled well.
How do you manage excessive market exuberance? And has anyone ever thrown a watch party for your results announcement? Get in touch and let us know at [email protected] or on LinkedIn.
