What Did NVIDIA’s, Foot Locker’s & Peloton’s Earnings Reveal?

On Wednesday, August 23rd, a wealth of crucial information emerged for several major players in the market, as NVIDIA, Foot Locker, and Peloton unveiled how they have fared over the past quarter.

Delving into the details of the earnings reports from that day and gauging the subsequent market responses may be helpful for both traders and consumers. So here’s what you need to know about yesterday’s earnings reports and how the markets reacted in response:

Wednesday’s Star: NVIDIA's Earnings Surpass Expectations

NVIDIA (NVDA), reported Q2 on Wednesday after market close, and its results certainly made it to the headlines. It seems that the GPU leader has gone beyond already elevated expectations mainly fueled by the Artificial Intelligence (AI) boom.

Accordingly, whereas analysts predicted revenue of $11.04 billion, the tech giant recorded a revenue of  $13.51 billion, thus marking a whopping rise of 101% from last year’s numbers. Moreover, the company’s adjusted Earnings per Share (EPS) stood at $2.70 which is an increase of 429% from last year’s figures.

But that’s not all, NVIDIA’s current quarter’s revenue guidance was also well above Wall Street’s expectations, which were already deemed “lofty.” As such, the quarter’s revenue guidance came in at $16 billion, in contrast to the projected $12.5 billion.

As mentioned above, the stellar performance seems to be the product of the company’s ongoing AI advancements as it seems that NVIDIA may be at the forefront of the AI race. Some even note that NVIDIA’s results “had been seen as a key test for the ongoing AI hype cycle.” Yet, amid the surge of companies adopting AI, it seems that none have experienced the extent of NVIDIA's staggering success. NVIDIA’s CEO, Jensen Huan, called this “a new computing era.” 

In addition, NVIDIA’s data center and gaming revenues also exceeded expectations as they came in at $10.3 billion and $2.5 billion respectively. Huang explained that in the quarter “major cloud service providers announced massive NVIDIA H100 AI infrastructures. Leading enterprise IT system and software providers announced partnerships to bring NVIDIA AI to every industry.” He also added that “the race is on to adopt generative AI."

Interestingly, it appears that NVIDIA's endeavors to push forward in the field of AI this year have garnered significant notice, capturing the interest not only of traders but also of Tesla's CEO, Elon Musk. In July, Musk stated that Tesla (TSLA) would adopt NVIDIA's hardware as fast as possible, and expressed his “tremendous respect” for both the company and its CEO, Huang. (Source:Yahoo Finance)

Consequently, it may not come as a surprise to learn that NVIDIA’s stock surged more than 3% on Wednesday in light of yesterday’s positive earnings. This further extends the upward trajectory that the stock has maintained since the start of the year as it soared by over 229%.

Peloton Struggles to Keep Pace

While NVIDIA surpassed expectations on Wednesday, American exercise and media company, Peloton (PTON) reported earnings that were below predictions that day. 

The results for Peloton’s fiscal fourth quarter showed an EPS decrease of 68 cents whereas the expectations stood at 38 cents. Additionally, revenue came in at $642.1 million vs. the predicted $639.9 million. The company's sales also exhibited a lackluster performance, registering at $642.1 million, which marked a decline from the previous year's $678.7 million.

According to CEO Barry McCarthy, the results are a reminder of the fact that the company “operates a seasonal business.” This is because, in the summer period, historical data shows that fitness retailers, in general, tend to experience slower demand as people are often traveling or on their summer vacation. 

Back in May, McCarthy also explicitly stated that the company's Q4 would be one of the “most challenging” quarters in terms of growth. Nonetheless, despite the sluggish demand and the emphasis on seasonality, Barry revealed that eight weeks ago the company’s hardware sales began to rebound.

Besides this, the company seems to attribute this slowdown to May’s bike seat recalls. As Peloton’s bikes had a tendency to detach and break during use, about 15,000 to 20,000 customers paused their monthly subscriptions as they awaited seat post replacements. This greatly affected the company as 2 million Bikes were affected and a cost of $40 million was incurred. 

Nonetheless, despite the dreary results, McCarthy says that he’s “never been more optimistic, more excited about the future of the business.”  (Source:CNBC)

Following Wednesday’s earnings, Peloton’s stock slid by over 22% hence extending the overall drop of over 33% experienced since the beginning of 2023. 

Foot Locker’s Underwhelming Earnings 

Peloton is not the only company to have struggled in the past couple of months as Foot Locker’s earnings on Wednesday revealed that the American sportswear retailer may be struggling during the quarter that ended July 29. 

Whereas analysts expected Foot Locker (FL) to report a revenue of $1.88 billion, the company reported a revenue of $1.86 billion while its adjusted EPS aligned with the expected 4 cents. Sales also decreased from last year as the company reported sales of $1.86 billion, which is 9.9% below last year’s $2.07 billion. 

In addition, forecasts were lowered as the company expects further drops in sales for the year. Foot Locker also adjusted its forecast for adjusted earnings, revising it to be within the range of $1.30 to $1.50 per share, down from the earlier estimate of $2.00 to $2.25 per share.

CEO Mary Dillon explained the downtrend by saying “we did see a softening in trends in July and are adjusting our 2023 outlook to allow us to best compete for price-sensitive consumers.”

Accordingly, following the release, Foot Locker dropped by 28.2% while it lost over 55% since the beginning of the year. 

Conclusion

Wednesday’s earnings releases may have provided much-needed guidance for traders, analysts, and consumers as to where the markets may be headed in the near future. While market unpredictability and volatility remain constant, the results may suggest that the AI trend continues to capture attention in the meantime. We’ll have to wait and see what the future ushers forth and how the aforementioned stocks will perform.