Earnings Preview: Zoom, Baidu & NVIDIA

During the penultimate week of August 2023, a multitude of companies are poised to unveil their financial earnings. These companies’ results can potentially provide a comprehensive snapshot of the prevailing market conditions and the broader economic landscape.

From American tech companies to Asian stocks, here are this week’s most anticipated earnings reports and what you can expect from each release:

Will Zoom Ever Get Its COVID-19 Mojo Back?

While many companies and markets may have benefited from COVID's easing, Zoom (ZM) appears to be experiencing the opposite effect. While Zoom was certainly one of the pandemic’s biggest winners as many referred to it as a way of communicating during the lockdowns, its growth rate has notably decelerated with the return to pre-COVID normalcy.

Zoom, which is expected to report its Q2 2023 earnings today, Monday, August 21st, after market close, may find itself at a pivotal juncture. Having weathered a challenging first quarter marked by its most lackluster growth to date, the company now stands on the cusp of revealing its performance for the current quarter, with expectations pointing towards a mere 1% uptick in growth.

This gloomy outlook and less-than-stellar performance may be exacerbated by the fact that fewer people have been using the app as they returned to the office and more competition is on the rise as platforms like Microsoft’s (MSFT) Teams and Cisco’s (CSCO) Slack may be making it harder for Zoom to keep pace. Some analysts even stated that some investors have revealed that they “are worried about further macro pressure and additional competitive pressure from Microsoft hurting numbers, which could result in a lowering of guidance.”

Zoom is expected to report an Earnings Per Share (EPS) of $1.06 and revenue of $1.11 billion. It may also be worth noting that since the beginning of the year, it lost about 0.6% of its value and that in the past two years, Zoom has been able to beat EPS and revenue expectations. 

Moreover, Zoom has been investing heavily in the integration and development of Artificial Intelligence (AI) into its products which may help it regain some of its momentum. Still, it remains to be seen whether Zoom will surprise investors this time around.

What Can Baidu Reveal About China’s Tech & AI Markets?

Another important earnings release this week is Chinese multinational tech giant, Baidu’s (BIDU) Q2 earnings which are expected to be reported on Tuesday, August 2nd, 2023 before the market opens. 

The company has garnered recognition as one of the “most promising Chinese technology players” for pioneering the development of China's native AI chatbot named "Ernie Bot," which resembles ChatGPT. 

Accordingly, while 2023 has certainly been a challenging year for the global economy, in general, and the Chinese economy, in particular, Baidu seems to have performed relatively well as it gained 4.7% since the beginning of the year though it has experienced some volatility as well.

Despite the optimistic outlook and impressive performance, Baidu's “Earnie Bot” might have been underwhelming due to uncertain demand and platform prospects as well as other hurdles. Kai Wang, a Morningstart Inc. analyst even revealed that “expectations have been lowered for the second quarter.” In addition, it appears that Baidu may be facing difficulties that may extend to its operations margins. 

The gloomy outlook and performance are not confined to Baidu only but seem to be extended to China’s AI and advertising industries as one analyst revealed that “given the relatively higher base from last year, together with a recent downward revision of GDP forecast by Citi economists, we conservatively tweak down [revenue forecast for AI and advertising in the third quarter.]”

However, some analysts from Goldman Sachs highlight that despite this, there may be room for optimism in the markets. They point out that Baidu continues to hold the title of China's “best-positioned” internet company even if its AI efforts’ results are yet to be seen. (Source:Bloomberg)

Regarding the upcoming earnings report, according to some analysts, Baidu is likely to post a Q2 revenue of $4.56 billion which would be a YoY increase of 3.2%, while its adjusted EPS is expected to drop to $2.33. As for its full 2023 fiscal year, the estimates point toward a revenue of over $118 billion which would be 5% higher YoY. Traders will have to wait and see to determine if these predictions come to fruition. 

Will NVIDIA’s Earnings Live Up to this Year’s Impressive Performance?

NVIDIA (NVDA) is also expected to report its Q2 earnings this week on Wednesday, August 23rd, 2023 after the ring of the bell and its results can provide much-needed insight into the state of the AI market. 

The GPU giant has made the headlines numerous times this year for its bullish performance as it gained a whopping 202.1% since the beginning of the year. 

This growth is widely credited to NVIDIA's active engagement in the field of AI over the past year, as the company clearly expressed its commitment to integrating AI into a majority of its products. This strategic move notably contributed to enhancing its data center segments. In addition, this year saw a surge in GPU demands from cloud computing companies, which may have also boosted NVIDIA’s stock. 

Still, some note that while AI demand is certainly on the rise and NVIDIA may outperform some of its competitors in that regard, it is “hard to tell when the boom will turn into a bust,” and whether this growth will be able to persist.  

Anticipations for the tech behemoth's Q2 EPS are set at $2.07, which would mark a 305% surge from the figures of last year’s corresponding quarter. Furthermore, the projected quarterly revenue is poised to reach $11.1 billion, which would be a notable increase compared to the $6.7 billion recorded in the same quarter last year. (Source:Forbes)

Traders and analysts alike will have to see how the tech leader will end up performing on Wednesday and how the results might affect its trajectory in the near future. 

Conclusion

In summary, this week holds significant importance for market participants, as major companies from both the US and China are on the verge of revealing their performance during the second quarter of a year that has been widely characterized as economically challenging. What can the reports unveil and how might it affect trading activity?