Valuation Concerns Weigh on Nvidia Stock Ahead of Earnings Report

2026-02-25 companies

Santa Clara, Wednesday, 25 February 2026.
Despite a 93% probability of beating earnings, Nvidia shares drift lower, signaling investor caution regarding the company’s $4.7 trillion valuation ahead of today’s critical financial report.

Market Jitters Despite Strong Fundamentals

As of Wednesday, February 25, 2026, investors are bracing for Nvidia’s (NVDA) fourth-quarter and full-year fiscal 2026 earnings report, scheduled for release after the market close [3][7]. Despite the semiconductor giant’s dominant position, shares have exhibited a divergence from rising earnings forecasts, with the stock drifting lower as valuation concerns mount [2]. Nvidia currently trades at a price-to-earnings ratio of approximately 48 times earnings [3][6], supporting a massive market capitalization that stands at $4.7 trillion [3] to $4.83 trillion depending on intraday fluctuations [6]. While the stock opened up 1.6% today ahead of the report [6], the broader hesitation suggests the market demands substantial justification for these multiples following an extended AI-driven rally [2].

Analyzing the Expectations Gap

The financial targets for this quarter are set aggressively high. Nvidia’s own guidance for fiscal Q4 revenue is approximately $65.0 billion, plus or minus 2% [3][7]. Achieving this target would represent a significant year-over-year expansion compared to the $39.3 billion reported in the same quarter last year, implying a growth rate of 65.394% [3]. However, analyst consensus estimates have crept even higher to approximately $66.1 billion [1]. This discrepancy between company guidance and market whispers creates a high bar for performance; merely meeting guidance may not suffice to assuage investors who are wary of a potential deceleration in the hyperscaler capital expenditure that fuels Nvidia’s revenue [7].

Critical Metrics: Margins and Inventory

Beyond the headline revenue figures, analytical attention is laser-focused on profitability metrics and supply chain management. In the previous fiscal Q3, Nvidia reported a GAAP gross margin of 73.4% [3], and guidance for Q4 suggests non-GAAP gross margins will hover around 75% [1][7]. Any deviation below this ~75% range could be interpreted as a warning sign of margin compression during the transition to the Blackwell architecture [7]. Furthermore, inventory levels are under scrutiny after rising sequentially from $15.0 billion to $19.8 billion in the previous quarter [7]. Investors will look for clarity on whether this increase represents strategic stockpiling for upcoming product ramps or a sign of accumulating unsold chips.

Future Roadmap and Market Sentiment

Looking forward, the company’s product roadmap remains a central pillar of its valuation thesis. The Blackwell Ultra is currently ramping, with the next-generation Vera Rubin AI system on track to launch in 2026, followed by Rubin CPX later in the year and Rubin Ultra in 2027 [1]. Additionally, CEO Jensen Huang is expected to provide updates on the ‘Feynman’ architecture slated for 2028 [1]. Despite this clear trajectory, prediction markets reflect a cautious near-term outlook. Data from Polymarket indicates a 93% probability that Nvidia will beat earnings expectations today, yet only a 25% probability that the stock will close above $200 by the end of February [7]. This suggests that while a beat is widely anticipated, the market remains skeptical that it will trigger an immediate, significant upward re-rating of the stock price [7].

Sources

Stock Valuation Earnings Preview