Nvidia Revenue Guidance Lifts Nasdaq as Analysts Raise Price Targets

A one-stock rally

On Thursday, August 27, Wall Street's main indexes finished higher, and the gain came almost entirely from Nvidia. The Nasdaq Composite rose 1.57% to 26,541.35, the S&P 500 added 0.72% to close at 7,730.99, and the Dow Jones Industrial Average gained 105.56 points, or 0.2%, to 53,569.44.31 Nvidia shares climbed 8.74% to close at $227.98 after the chipmaker reported quarterly results the night before.33

Under the index numbers, the market was weak. Information technology was the only one of the S&P 500's 11 sectors to end the day higher, rising more than 3% while every other sector fell.32 Bloomberg reported that the equal-weight version of the S&P 500 fell 0.3% even as the cap-weighted index went up.40 One market commentator noted that the gain still put the S&P 500 at a record close.37 Charlie Ripley of Allianz Investment Management said Nvidia's results restarted the party, but plainly not every sector was invited.35

Nvidia earned the rally. Seven weeks later, though, the main lesson of that day may be how much the wider market now depends on one company's guidance.

The quarter: a clear beat

Nvidia reported revenue of $96.22 billion for its fiscal second quarter of 2027. That was up 106% from $46.7 billion a year earlier and up 18% from the prior quarter.24 Data center sales reached $89.0 billion, a 117% year-over-year jump that made up about 92% of total revenue.27

The exact size of the beat depends on which consensus you use, and the coverage differs a little. Webull, citing LSEG data reported by CNBC, put the revenue estimate at $92.17 billion and called the result a $4.05 billion beat.23 Other trackers had the consensus at $92.07 billion22 or about $92.3 billion.24 Whichever figure you pick, Nvidia beat Wall Street by about 4% to 4.5%. It also came in roughly 5.7% above its own $91 billion guidance midpoint.22

Earnings followed the same pattern. Adjusted earnings per share were $2.22, compared with consensus estimates of about $2.09 to $2.10.2328 GAAP diluted EPS was $2.46, up 128% from the year-ago quarter.23 GAAP net income reached $59.7 billion. That included a $7.8 billion gain on equity investments, so the headline profit figure overstates how much of the jump came from operations.23 Even so, operating income rose 124% year over year to about $63.7 billion, and operating margin widened to 66.2%.25 Gross margin held at 75.0%, up from 72.4% a year earlier.23

Nvidia's own record is a reminder of how routine these beats have become. Public.com's earnings history shows adjusted EPS beats of 6% to 8% in each of the last four reported quarters.29 One analysis counted this as the fourteenth straight quarter in which revenue topped the company's own outlook.22 The market no longer rewards a beat by itself. What moves the stock is the forecast.

The guidance drove the move

The stock's path after the report shows this clearly. Shares first fell about 3% in after-hours trading on Wednesday. They turned higher once the earnings call began.34 The initial drop came because the third-quarter forecast of $108 billion, plus or minus 2%, fell short of the most aggressive Wall Street estimates.17 Measured against the average estimate, though, the guidance beat. Different sources put the consensus at $103.8 billion22, $104.2 billion23, or roughly $105 billion.32

The forecast that changed sentiment came from finance chief Colette Kress, who said Nvidia expects revenue to grow about 70% in fiscal 2028, which runs from February 2027 to January 2028.31 Chief executive Jensen Huang added that demand is "much greater than 70%" and that supply is what limits growth.31

Estimates of how far that 70% figure topped expectations vary from source to source, but all of them show a large gap. CNBC put the LSEG consensus at 44%.31 One market newsletter cited roughly 45%.37 Morgan Stanley said the consensus was closer to 40%, and that its own estimate of 52% was also well below what Nvidia guided.35 Whichever figure is right, the company guided about 25 to 30 percentage points above Wall Street's models. That matters far more for valuation than a 4% revenue beat on the quarter just ended.

Price targets and estimates move up

Analysts responded quickly. Citi, JPMorgan, Morgan Stanley and UBS all raised their price targets after the report, to $315, $320, $300 and $300 respectively.37 Morgan Stanley was still holding its Overweight rating and $300 target in early October.5 Cantor Fitzgerald repeated its Overweight rating and $350 target on October 1.2

The bigger shift showed up in earnings estimates. Yahoo Finance data show the consensus fiscal 2028 EPS estimate at $15.91, up from $12.84 sixty days earlier. Over the past 30 days, 46 analysts revised that figure up and none revised it down.1 For the current quarter ending in October, the average revenue estimate is $108.98 billion, slightly above the company's $108 billion midpoint. The range runs from $104.94 billion to $116.25 billion.1 Analysts currently expect fiscal 2028 revenue of about $692 billion.1

Targets have risen with those estimates. The average 12-month price target across 62 analysts is $328.72, with a consensus rating of Strong Buy.3 Targets range from $180 to $515.2

The stock has stood still

That brings up a puzzle the August coverage didn't anticipate. Nvidia closed at $228.52 on October 13.3 That is almost exactly where it ended the post-earnings rally on August 27.33 The stock did set records in between, reaching $238.90 on October 5 as its market value approached $6 trillion.6 It has since given that gain back.

So after the price-target increases and the jump in fiscal 2028 estimates, the shares are roughly unchanged since the day of the rally. In effect, the stock has become cheaper as forecasts have risen. Nvidia now trades at about 19 times forward earnings, according to StockAnalysis.3 A 24/7 Wall St. analysis argued that this multiple reflects doubt that the earnings trend keeps contradicting. It put the stock's base-case value at $270, well below the Street's average target.8

The main reason for that doubt is profit margins. Nvidia guided gross margin down to about 74% in the third quarter and to a low of 71% to 72% in the fourth, blaming rising memory prices.13 For fiscal 2028, it guided to only a partial recovery, to 72% to 73%.25 Kress described memory pricing conditions as extreme and said price increases have exceeded earlier expectations.25 Supply commitments also rose to $279 billion.8 Lale Akoner of eToro summed it up: the AI boom has plenty of demand, but delivering that growth is getting more expensive and capital-intensive.35

Why the whole market depends on it

Nvidia's quarterly results now carry well beyond its own shareholders. By September its weight in the S&P 500 had reached about 8%, the highest for any single stock in more than 50 years. The company alone accounts for about 13% of the index's 23% gain since March 30.18 Nvidia, Apple and Microsoft together make up more than 21% of the S&P 500, a record level of concentration.11 Goldman Sachs analysts expect AI infrastructure stocks to provide more than half of S&P 500 earnings growth in the third quarter. They estimate Nvidia and Micron together will account for about a third of it.14

The narrow breadth seen on August 27 has continued. Early in October, the equal-weight S&P 500 ETF was down 3.6% over a month while the cap-weighted index was slightly up.15 On October 12, money moved out of technology: the Nasdaq fell 0.49% while the Dow rose.19

What comes next

The next test is the fiscal third-quarter report. Reported dates differ, with Public.com listing November 1829 and Tickeron listing November 25.24 The bar is clear. A result above $108 billion with gross margin near 74% would support the case that demand for Blackwell Ultra is holding up and that the production ramp for Vera Rubin, Nvidia's next chip platform, is on schedule.6 With consensus already slightly above guidance and 46 analysts raising estimates in a month,1 matching the guidance won't be enough. Nvidia will need another beat.

Our view is that August 27 confirmed Nvidia's demand story but did nothing to make the market less dependent on it. The company beat its quarter, raised its forecasts and showed it has a long growth runway. Investors liked the news but didn't pay more for it: shares are flat seven weeks later, even with estimates sharply higher. Until margins stabilize, that gap between rising forecasts and a flat stock is likely to remain, and the rest of the S&P 500 will keep rising or falling with Nvidia's results.