The earnings release from Nvidia NVDA is the true highlight of this week’s earnings docket, though there are a few other bellwethers on deck to report results as well, including Costco COST, Salesforce.com CRM, and Ulta Beauty ULTA. We have close to 100 companies reporting results this week, including 14 S&P 500 members.
It is no exaggeration to say that Nvidia has emerged as a leader of the broader artificial intelligence (AI) ecosystem, with its chips running the models. The stock has struggled this year, as sentiment on the AI space soured in the aftermath of the DeepSeek announcement in January. There had already been some angst in the market about the ever-rising AI-focused spending by Mag 7 players like Alphabet, Amazon, and Microsoft, with the issue becoming front and center following the DeepSeek announcement.
The chart below shows the year-to-date performance of Nvidia shares relative to the S&P 500 index and the Mag 7 group.
Zacks Investment Research
Image Source: Zacks Investment Research
Nvidia is expected to bring in 85 cents in EPS on $42.6 billion in revenues, representing year-over-year changes of +39.3% and +63.7%, respectively. Estimates have been under pressure, with the current 85 cents estimate down from 87 cents a week ago and 93 cents two months back.
A big contributing factor to the pressure on estimates has been worries among analysts that Nvidia’s near-term margins may face some squeeze as it transitions to the new Blackwell GPU from the Hopper unit. There had been some concern over the last couple of quarters about Nvidia’s ability to ramp up Blackwell production efficiently, but all indications are that the ramp-up is proceeding smoothly and the demand for the unit is significantly above what had been experienced in the comparable period the year before for Hopper.
Jensen Huang, the Nvidia CEO, noted at a recent industry conference that Blackwell demand from the four largest hyperscalers was running three times as much as was the case from the same customers for Hopper at the comparable period in 2024. The company has outlined a Blackwell Ultra version to follow the full Blackwell ramp-up.
While hyperscaler demand over the near-to-medium-term is expected to remain robust, it will eventually taper off. But the recent announcements of major datacenter deals with sovereign wealth funds in the UAE and Saudi Arabia suggest that Nvidia likely has a big runway ahead of it.
In terms of valuation, Nvidia shares aren’t cheap, but they are hardly the nose-bleed valuation of a couple of years back, as the chart below shows.
Zacks Investment Research
Image Source: Zacks Investment Research
With Nvidia as the only Mag 7 member that has yet to report Q1 results, earnings for the group are on track to +27.2% from the same period last year on +12.2% higher revenues.
You can see this Q1 earnings growth in the chart below, which also shows the deceleration in the Mag 7 group’s earnings growth over the coming periods.
Zacks Investment Research
Image Source: Zacks Investment Research
Beyond Nvidia, the earnings focus will remain on big-box retailers, with Costco coming out with results. Costco has been a true category leader, with a higher-income customer group that is loyal to the company’s value offerings.
Costco is better positioned to navigate the uncertain tariff environment than many other retailers. The company’s U.S. business accounts for more than 70% of its revenues, and two-thirds of the merchandise in Costco U.S. is sourced domestically. Of the imported merchandise, roughly one-third of the total comes from China, Mexico, and Canada combined, and no one country is a dominant supplier.
Costco is expected to report $4.25 per share in earnings on $63.1 billion in revenues, representing year-over-year changes of +12.4% and +7.9%, respectively. Estimates have inched up since the quarter got underway, with the current $4.25 estimate up from $4.24 a month back and $4.23 two months ago. Costco’s earnings and revenues in the current fiscal year (ends in August 2025) are expected to increase +11.5% and +7.9% from the preceding year’s levels, respectively.
The company remains well-positioned to sustain this growth momentum in the following year as well on the back of mid-single-digit comp growth and growth in membership fee income in high-single digits. No doubt, the stock has been a standout performer, handily outperforming the broader market (+10.3% vs. -1.2%) in the year-to-date period.
With respect to the Retail sector 2025 Q1 earnings season scorecard, we now have results from 28 of the 33 retailers in the S&P 500 index. Regular readers know that Zacks has a dedicated stand-alone economic sector for the retail space, unlike the placement of the space in the Consumer Staples and Consumer Discretionary sectors in the Standard & Poor’s standard industry classification.
The Zacks Retail sector includes Costco, Walmart, other traditional retailers, online vendors like Amazon AMZN, and restaurant players. Total Q1 earnings for these 28 retailers that have reported are up +11.2% from the same period last year on +5% higher revenues, with 60.7% beating EPS estimates and only 57.1% beating revenue estimates.
The comparison charts below put the Q1 beats percentages for these retailers in a historical context.
Zacks Investment Research
Image Source: Zacks Investment Research
As you can see above, the EPS and revenue beats percentages for these companies are tracking significantly below the historical averages for this group of companies.
Concerning the elevated earnings growth rate at this stage, we like to show the group’s performance with and without Amazon, whose results are among the 28 companies that have reported already. As we know, Amazon’s Q1 earnings were up +42.6% on +8.6% higher revenues, beating EPS and top-line expectations.
As we all know, the digital and brick-and-mortar operators have been converging for some time now. Amazon is now a decent-sized brick-and-mortar operator after Whole Foods and Walmart is a growing online vendor. This long-standing trend got a huge boost from the COVID-19 lockdowns.
The two comparison charts below show the Q1 earnings and revenue growth relative to other recent periods, both with Amazon’s results (left side chart) and without Amazon’s numbers (right side chart).
Zacks Investment Research
Image Source: Zacks Investment Research
As you can see above, earnings for the group outside of Amazon are down -5% on a +3.8% top-line gain, which points to margin pressures for the group.
The Q1 Earnings Scorecard
Through Friday, May 23rd, we have seen Q1 results from 478 S&P 500 members or 95.6% of the index’s total membership. With less than two dozen S&P 500 members still to report results at this stage, the Q1 reporting cycle has actually ended for 10 of the 16 Zacks sectors, with just a few companies still left to report for each of the remaining 6 sectors.
Earnings for these 478 index members that have reported results are up +11.6% from the same period last year on +4.3% revenue gains, with 74.3% of the companies beating EPS estimates and 63% beating revenue estimates.
The comparison charts below put the Q1 earnings and revenue growth rates for these index members in a historical context.
Zacks Investment Research
Image Source: Zacks Investment Research
The comparison charts below put the Q1 EPS and revenue beats percentages in a historical context.
Zacks Investment Research
Image Source: Zacks Investment Research
As you can see here, the EPS and revenue beats percentages are tracking below historical averages, with the Q1 EPS beats percentage of 74.3% comparing to the average for the same group of 78.3% over the preceding 20-quarter period (5 years). The Q1 revenue beats percentage of 63% compares to the 5-year average for this group of index members of 71.1%.
Is the Turnaround in Estimates for Real?
Looking at Q1 as a whole, combining the actuals from the 478 S&P 500 members with estimates for the still-to-come companies, the expectation is that earnings will be up +12.3% from the same period last year on +4.6% higher revenues, which would follow the +14.1% earnings growth on +5.7% revenue gains in the preceding period.
The chart below shows current earnings and revenue growth expectations for 2025 Q1 in the context of where growth has been over the preceding four quarters and what is currently expected for the following three quarters.
Zacks Investment Research
Image Source: Zacks Investment Research
We have been flagging consistently in recent weeks that estimates for the current period (2025 Q2) have been coming down, as you can see in the chart below.
Zacks Investment Research
Image Source: Zacks Investment Research
The magnitude of cuts to 2025 Q2 estimates since the start of the period is bigger and more widespread relative to what we have become used to seeing in the post-COVID period. But you have likely noticed in recent weeks that we have been pointing to signs of stabilization in Tech sector estimates, both for Q2 as well as full-year 2025.
The chart below shows how Tech sector earnings estimates for the period appear to bottom in the second half of April, but may have started coming down again.
Zacks Investment Research
Image Source: Zacks Investment Research
We see this same trend at play in annual estimates as well. The chart below shows the Tech sector’s evolving earnings expectations for full-year 2025.
Zacks Investment Research
Image Source: Zacks Investment Research
We knew something was up, as the early signs of these revision trends started showing up in the data. It may be premature to say that the trend has completely reversed. But it nevertheless shows that the revisions trend has stabilized.
The chart below shows the overall earnings picture on a calendar-year basis.
Zacks Investment Research
Image Source: Zacks Investment Research
For more details about the evolving earnings picture, please check out our weekly Earnings Trends report here >>>> A Closer Look At Retail Earnings
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
