Nvidia Could Grow Revenue 97% and Still Disappoint Wall Street on Aug. 26

Nvidia Could Grow Revenue 97% and Still Disappoint Wall Street on Aug. 26

Johnny Rice, The Motley Fool

Tue, August 25, 2026 at 11:00 PM GMT+3 4 min read

• NVDA -1.59%

Nvidia (NASDAQ: NVDA) could nearly double its revenue year over year when it reports earnings on Wednesday, Aug. 26, and still see its stock fall following the release. While that might sound strange, the fact is that Wall Street has become so accustomed to Nvidia beating targets that an otherwise extraordinary result now tends to land as plain ordinary.

Nvidia beat Q1 estimates by $2.8 billion -- and the stock fell 5% anyway

Nvidia's revenue guidence for for its upcoming fiscal 2027 Q2 earnings is set at $91 billion, but Wall Street expects more -- $92.18 billion. The company generated $46.74 billion in the same quarter last year, so hitting the consensus estimate comes in at roughly 97% growth year over year.

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That is objectively incredible growth, especially for a company operating at this scale. The problem is that expectations tend to dominate the stock market, and merely hitting the consensus target (even beating it) isn't enough. The market tends to expect more.

Take last quarter, for example. In May, the chip designer reported Q1 revenue of $81.62 billion, handily beating Wall Street's analyst consensus of $78.86 billion, according to FactSet.

The stock fell nearly 5% in the week that followed.

Nvidia, it seems, has become a victim of its own success. Repeatedly beating expectations has trained investors to expect that it will do just that, so a number that would thrill shareholders of any other company now feels underwhelming. That's the setup for Aug. 26.

The real number to watch: Nvidia's 75% gross margin

The most likely scenario is that Nvidia once again beats Wall Street's sales and earnings targets, and once again, the stock wobbles. But that's not what I would pay attention to.

I think the number to watch is gross margin. There's not a lot of headroom here. Nvidia is already operating at an incredible 75% gross margin, so there isn't much upside left. But there could be a downside. The question is whether Nvidia's margins are being squeezed by skyrocketing memory prices, which have sent memory-maker stocks like SK Hynix and Micron soaring over the last year. Nvidia outsources memory components in its chipsets and thus can be affected by rising prices.

At the end of the day, I wouldn't read too much into the stock's initial move after the report. If history is a guide, it's likely the stock will move lower initially unless the sales beat is beyond extraordinary. Of course, for long-term investors, the short-term ups and downs hardly matter. What matters is looking for clues that might hint at trends that the headline numbers hide. Shrinking margins could be that clue.

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Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends FactSet Research Systems, Micron Technology, and Nvidia. The Motley Fool has a disclosure policy.

Nvidia Could Grow Revenue 97% and Still Disappoint Wall Street on Aug. 26 was originally published by The Motley Fool