Nvidia Earnings Day Has Arrived, and This Metric Will Determine If It's Incredible or Terrible News (Hint: It's Not Sales or EPS)

Core Insights - The rise of artificial intelligence (AI) represents a multitrillion-dollar global opportunity, with Nvidia currently leading the market [1][2] - Nvidia has added $4 trillion in market value since the end of 2022, primarily due to its GPUs powering AI-accelerated data centers [2] Financial Performance - Nvidia is expected to report $46 billion in second-quarter sales for fiscal 2026 and $1.01 per share in EPS, having surpassed consensus EPS projections in the previous four quarters [5][4] - The company's GAAP gross margin has increased significantly, peaking at 78.4% in the first quarter of fiscal 2025, driven by high demand for its Hopper chip [13][12] Market Dynamics - The Trump administration's recent approval for Nvidia to export its H20 chip to China may positively impact the company's full-year sales guidance [6] - Nvidia's CEO Jensen Huang aims to introduce a new AI-advanced chip annually, with updates expected on the ramp-up of Blackwell Ultra shipments and future chip developments [7][8] Competitive Landscape - Nvidia faces increasing competition from both external players like AMD and Huawei, and internal competition from major customers developing their own AI-GPUs [17][18] - The aggressive innovation cycle may risk depreciating the value of previous-generation AI-GPUs, potentially affecting upgrade cycles and gross margins [19][20] Key Metrics to Watch - The GAAP gross margin is a critical metric for investors, indicating whether AI-GPU scarcity persists and if Nvidia can maintain its premium pricing power [21][12]