Nvidia 2021 earnings preview: 3 things to note

• Nvidia Corp's (NASDAQ: NVDA) share price is up nearly 8% so far in 2021
• US’ largest semiconductor company is expected to release its Q4 and full-year earnings for fiscal 2021 later today
• Analysts are expecting a nearly 50% increase in adjusted EPS for the quarter
• Meanwhile, its acquisition deal of Arm remains under investigation
• Trade NVDA shares, long or short, with a live or demo IG account

Nvidia Corp is scheduled to report its fourth quarter of fiscal 2021 ending 31 January 2021, after market close on Wednesday (24 February 2021).

Nvidia’s share price is up 7.8% on a year-to-date basis. Shares closed at US$565.68 on Tuesday (23 February).

Below are three things to consider ahead of the earnings report.

1. Analysts predict EPS of US$2.81 against US$1.89 a year prior

Wall Street brokers polled by Refinitiv are expecting adjusted earnings per share (EPS) to hit US$2.81, up 48.7% from the US$1.89 recorded in the same quarter in fiscal 2020.

For the full year, analysts forecasted an EPS of US$9.71, up 67.7% from an actualised EPS of US$5.79 in the previous financial year.

Sales in the fourth quarter of FY2021 are also expected to grow 55% year-over-year, which will take quarterly revenue close to the US$5 billion mark.

For the full year, analysts have given a consensus estimate of US$16.5 billion. Reported sales for the whole of fiscal 2020 came in at US$10.9 billion, in line with Wall Street estimates of US$10.8 billion.

Nvidia itself has said that it is expecting a revenue of US$4.8 billion in the last reporting fiscal quarter (plus or minus 2%), which is in line with analysts’ expectations of US$4.8 billion and US$4.9 billion, according to the latest data.

2. Nvidia posted ‘record’ sales in the previous quarter

The largest semiconductor firm in the US reported ‘record’ revenue for the third quarter ended 25 October 2020, of $4.73 billion, which was up 57% from $3.01 billion a year earlier, and up 22% from $3.87 billion in the previous quarter.

GAAP (unadjusted) earnings per diluted share for the quarter were US$2.12, up 46% from $1.45 a year ago, and up 114% from US$0.99 in the previous quarter.

Non-GAAP (adjusted) earnings per diluted share were US$2.91, up 63% from US$1.78 a year earlier, and up 33% from US$2.18 in the previous quarter.

By segment, data centre and gaming both hit record revenues in the third quarter.

Data centre’s Q3 revenue was US$1.90 billion, up 8% from the previous quarter and up 162% from a year earlier. Gaming’s Q3 sales was US$2.27 billion, up 37% from the previous quarter and up 37% from a year earlier.

Nvidia paid out US$99 million in quarterly cash dividends in the third quarter.

3. Nvidia’s acquisition deal of Arm still under investigation

During the third quarter, the company also announced a definitive agreement to acquire UK chip designer Arm Limited from SoftBank Capital Limited and SVF Holdco (UK) Limited in a transaction valued at US$40 billion.

The transaction ― which is expected to be immediately accretive to Nvidia’s non-GAAP gross margin and non-GAAP earnings per share ― was initially expected to close in the first quarter of calendar 2022.

However, the deal has hit a road bump in recent months, with antitrust regulators in the US, UK, European Union, and China currently investigating the acquisition.

Last week, Qualcomm, Microsoft and Google also raised concerns regarding the deal, stating that a merger would harm competition in the industry.

Sources close to the matter had told CNBC that Qualcomm has opposed the deal because it ‘doesn’t think Nvidia will be able to fully capitalise on the acquisition without crossing certain lines that people are worried about’.

Nevertheless, the Federal Trade Commission’s (FTC) investigation of the deal has reportedly progressed to a ‘second phase’, with the US regulator now probing SoftBank, Nvidia, and Arm for more information.

Nvidia remains optimistic for now, based on recent comments to CNBC.

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