Nvidia (NASDAQ: NVDA) is under pressure following its fiscal fourth-quarter earnings report, despite delivering a double beat on revenue and earnings per share (EPS).
The semiconductor giant posted $39.33 billion in revenue and an adjusted EPS of $0.89, surpassing analyst expectations of $38.05 billion and $0.84 EPS. The company also guided for $43 billion in revenue for the first quarter, exceeding the $42.3 billion expected by analysts.
While the results initially appeared strong, investor sentiment soured after Nvidia issued a weaker-than-expected gross margin forecast, triggering an 8.5% selloff on February 27—the stock’s steepest single-day decline in over a month. The downturn erased nearly $250 billion from Nvidia’s market cap, pushing it below the $3 trillion mark.
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At press time, NVDA shares were trading at $120.15, up modestly by 0.07% over the past 30 days. However, the semiconductor giant remains in the red, down 13% since the start of the year.
The sell-off rippled through the semiconductor sector, with Micron Technology (NASDAQ: MU), a key supplier of high-bandwidth memory (HBM) for Nvidia’s GPUs, slipping 6%. The U.S.-listed equity of Nvidia’s contract manufacturer, Taiwan Semiconductor Manufacturing Company (NYSE: TSM), also sank nearly 7%.
Why Nvidia’s stock slid despite beating estimates
The primary trigger for the sell-off was Nvidia’s first-quarter gross margin forecast of 71%, which came in below Wall Street’s expectation of 72.1%.
While a 1% miss on gross margins may seem minor, it raised concerns about higher production costs, market saturation, pricing pressures, and the impact of Nvidia’s aggressive ramp-up of its Blackwell AI GPUs.
Colette Kress, Nvidia’s CFO, highlighted that gross margins would remain in the low 70s during the initial ramp-up of Blackwell, as the company focuses on expediting manufacturing to meet strong customer demand. However, she noted that as production scales and efficiencies improve, margins are expected to return to the mid-70s later in the fiscal year.
“During our Blackwell ramp, our gross margins will be in the low 70s. At this point, we are focusing on expediting our manufacturing, to make sure that we can provide to customers as soon as possible.” — Colette Kress
Analysts’ reaction to Nvidia’s earnings report
Despite the post-earnings selloff, analysts remain largely optimistic, pointing to strong AI demand, rapid Blackwell GPU adoption, and the company’s continued dominance in AI model inference as key drivers of long-term growth.
However, concerns over margin pressures, regulatory challenges, and increasing competition continue to weigh on the outlook.
BofA Securities reiterated its ‘Buy’ rating and raised its price target to $200, emphasizing Nvidia’s leadership in AI despite headwinds from DeepSeek, the Blackwell transition, and China restrictions.
Analysts highlighted Blackwell’s rapid adoption, with $11 billion in Q4 sales exceeding estimates, strengthening confidence in the product. However, BofA noted that the cost of ramping up Blackwell is weighing on gross margins, likely keeping them flat through Q2 before recovering in the second half of the year.
Similarly, Piper Sandler maintained its ‘Overweight’ rating with a $175 price target, pointing to Nvidia’s strong Q1 performance and overwhelming demand for Blackwell AI chips. The firm noted that Blackwell contributed $11 billion in data center revenue, highlighting demand that has likely left the company sold out through 2025.
Despite the short-term hit to profitability, margins are expected to rebound to the mid-70% range by year-end, with Piper Sandler calling Nvidia a ‘must-own stock’ during the Blackwell ramp.
Truist Securities also reaffirmed its ‘Buy’ rating on Nvidia, raising the price target to $205 and urging investors to focus on key operational updates rather than modest earnings beats.
The firm highlighted the successful rollout of GB200 NVL72 chips, increased customer demand following DeepSeek’s AI model launch, and positive operating expense trends supporting sales growth. In line with this, the firm raised its 2026 EPS estimate to $5.87, maintaining confidence in the company’s long-term growth.
Meanwhile, Morgan Stanley held its ‘Overweight’ rating with a $162 price target, describing Nvidia’s growth as ‘remarkable’ despite a transitional quarter. Analysts noted that Hopper still accounted for two-thirds of data center revenue, while Nvidia navigated the complex shift to Blackwell AI chips.
Despite these challenges, revenue grew 18% quarter-over-quarter, beating guidance by nearly $2 billion. While gross margin pressures persist due to production challenges with GB200, Morgan Stanley expects conditions to improve throughout the year. While short-term profitability remains under scrutiny, analysts note that Blackwell demand remains ‘exceptional through the end of the year’.
Featured image via Shutterstock
