Nvidia, Walmart Earnings to Conclude Strong Season Amid Inflation Watch

Tech Giants and Retail Bellwethers Close Earnings Season

Nvidia ($NVDA) and Walmart ($WMT) are poised to deliver their first-quarter fiscal 2025 earnings reports this week, concluding a reporting season that has largely defied earlier recessionary fears and demonstrated robust corporate profitability across the S&P 500. Nvidia, the dominant force in AI accelerators, is projected by LSEG consensus to report revenue of $24.6 billion, a staggering 241% increase from the prior year, alongside adjusted earnings per share of $5.59. Walmart, the nation's largest retailer, is anticipated to announce revenue of $159.5 billion for its first fiscal quarter, with adjusted EPS expected at $0.52.

Investors are keenly focused on forward guidance from both companies, particularly for any commentary regarding persistent inflation and its impact on pricing power, consumer spending, and operational costs. The broader S&P 500 ($SPX) has seen aggregate earnings growth of 6% for Q1 2024, with 78% of companies beating EPS estimates as of May 17, according to LSEG data. This strong performance has fueled a 10.6% year-to-date rally in the $SPX, with the index closing above 5,300 for the first time on May 17.

Market Impact

Nvidia's earnings release, scheduled for May 22, holds significant sway over the technology sector and broader market indices. Its shares have already climbed an extraordinary 92% year-to-date, adding over $1.1 trillion to its market capitalization, which now stands above $2.3 trillion. A beat on revenue and, more critically, an upbeat forecast for its data center division, could propel the stock to new highs, potentially challenging its all-time high of $974 recorded in March 2024. Conversely, any hint of decelerating AI demand or increased competition could trigger a substantial pullback, given its elevated valuation with a forward price-to-earnings ratio exceeding 35x.

Walmart's report on May 16 will offer crucial insights into the health of the U.S. consumer and the retail landscape. Its shares have advanced 15% year-to-date, outperforming the S&P 500 Consumer Staples sector ($XLP), which is up 7.5% over the same period. Analysts will scrutinize same-store sales growth, particularly in general merchandise, to gauge discretionary spending trends. Strong grocery sales might indicate consumers are trading down or prioritizing essentials, while weakness in higher-margin categories could signal broader economic slowdown. A conservative outlook on full-year sales or profit margins due to wage inflation or supply chain costs could pressure $WMT shares and reverberate across the retail segment.

What Analysts Are Saying

"Nvidia's upcoming earnings are arguably the most anticipated event of the quarter, given its pivotal role in the AI revolution and its outsized influence on market sentiment," noted Dan Ives, Managing Director at Wedbush Securities, in a client note dated May 15. "We expect another robust beat and raise, driven by insatiable demand for Hopper and Blackwell GPUs, which should continue to fuel the tech rally. However, any miss on data center guidance would be met with severe skepticism and could trigger a correction across the AI ecosystem."

Analysts at JPMorgan highlighted the dual narrative for Walmart. "Walmart remains a bellwether for the resilient, yet cost-conscious, American consumer," stated Matthew Boss, a senior analyst at JPMorgan, in a May 13 report. "While grocery strength is likely to persist, we are closely watching for signs of discretionary spending fatigue and the company's ability to manage ongoing inflationary pressures on labor and logistics, which could compress margins despite strong top-line growth." Goldman Sachs analysts, however, maintain a more bullish stance on Walmart, citing its robust e-commerce growth and strategic investments in automation as key drivers for long-term profitability, projecting a 5% increase in annual EPS.

What to Watch

Investors should closely monitor Nvidia's guidance for its Data Center segment, which constitutes approximately 87% of its total revenue. Any deviation from the projected Q2 revenue of $26 billion could significantly impact the stock. The company's commentary on demand trends from hyperscalers and enterprise customers, as well as its outlook on supply chain capacity for its next-generation Blackwell chips, will be critical.

For Walmart, beyond headline revenue and EPS, key metrics include U.S. comparable sales excluding fuel, which is projected to grow 3.5% according to StreetAccount estimates. E-commerce growth figures and any revisions to full-year guidance for fiscal 2025 will also be paramount. A cautious tone on consumer spending or gross margin compression could signal broader economic headwinds, impacting the consumer discretionary sector ($XLY).

Finally, the market will be listening for any explicit mentions of inflation in both earnings calls. Executives' comments on input costs, pricing strategies, and wage pressures could influence expectations for future Federal Reserve policy actions. Any indication that inflation remains stubbornly high, or that companies are struggling to pass on costs, could dampen enthusiasm for equities and potentially lead to a flight to safety, impacting bond yields and the $USD. The upcoming Personal Consumption Expenditures (PCE) price index, the Fed's preferred inflation gauge, due May 31, will provide further context after these reports.