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5 Things to Watch When Nvidia Reports Earnings on Thursday

Three months ago, Nvidia Corp. (NVDA - Get Report) soundly beat its July quarter (fiscal second quarter) estimates and issued above-consensus October quarter sales guidance. Yet with the stock up about 60% on the year going into earnings, shares sold off the next day.

But that selloff didn't last long: Nvidia is now up 22% from where it traded prior to the July quarter report, and sports a whopping $125 billion market. That spells a pretty high bar for its October quarter report, which arrives after the close on Thursday, Nov. 9.

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On average, analysts polled by FactSet expect quarterly revenue of $2.37 billion and adjusted EPS of $0.95. And the consensus for January quarter sales stands at $2.44 billion. But given how much Nvidia has been consistently beating estimates in recent quarters, higher numbers will likely be needed for the stock to rally post-earnings.

Here are a few other things to keep an eye on as Nvidia reports:

Gaming GPU sales

Nvidia's total gaming product revenue rose 52% annually to $1.19 billion in the July quarter. For the October quarter, the consensus is for revenue to rise a modest 3% to $1.28 billion, thanks partly to tough comparisons caused by the year-ago ramp of Nvidia's Pascal-architecture gaming GPUs.

Also potentially impacting growth: AMD Inc.'s (AMD - Get Report) Vega desktop GPUs, which put the company on better high-end footing, launched in August. But the performance of the first Vega parts trails that of Nvidia's two most powerful desktop GPUs, the GeForce GTX 1080 Ti and Titan XP, and the chips are relatively power-hungry. Meanwhile, total PC gaming hardware demand appears to be strong, as is demand for Nintendo's Nvidia-powered Switch handheld console.

Volta's data center sales

Nvidia began shipping its powerful Tesla V100 server GPU, the first chip based on its next-gen Volta architecture, in late July. Cloud giants and others have been expected to avidly use V100s to power systems meant to train AI/deep learning algorithms. In addition, Amazon Web Services (AWS) is two weeks removed from making V100-powered cloud computing instances available to customers; it could be just a matter of time before Microsoft (MSFT - Get Report) and Alphabet/Google (GOOGL - Get Report) make similar announcements.

Strong V100 sales are expected to help Nvidia's Datacenter segment revenue rise 92% annually to $461 million. Google's use of its home-grown Tensor Processing Unit (TPU) to handle some (though not all) of its AI training work could be a slight headwind.