Morgan Stanley on NVIDIA's Upcoming Earnings: Another 'Beat & Raise' Possible, But Market May Not Be Satisfied

NVIDIA (NVDA-US) will face a major earnings test next Thursday. Against a backdrop of sustained strong demand and continuous improvements on the supply side, Morgan Stanley anticipates the company could once again deliver a 'beat and raise' performance—exceeding expectations and raising forward guidance. However, unlike previous quarters, simply beating estimates may no longer be sufficient to propel share price gains.

Morgan Stanley maintains its 'Overweight' rating on NVIDIA with a $288 price target and continues to list it as a 'top pick.' The firm forecasts revenue of $91.1 billion for the quarter ending July and $102.3 billion for the October quarter. It also believes that 4nm wafer input volumes for Blackwell have improved, suggesting current earnings estimates still have upside potential.

Yet stronger results bring higher market expectations. NVIDIA has seen its stock decline the day after earnings for four consecutive quarters, reflecting a shift in investor focus from "can they still beat?" to "can the beats continue?" Morgan Stanley argues that long-term variables—market share, gross margin, circular financing models, and Rubin ramp-up—are now key to whether NVIDIA's valuation can expand further, and these cannot be fully resolved by a single earnings report.

The firm projects Q2 FY27 (July quarter) revenue at $91.1 billion and Q3 FY27 (October quarter) at $102.3 billion, with corresponding EPS of $2.07 and $2.34—largely in line with consensus estimates of $2.08 and $2.36.

On the surface, Morgan Stanley’s profit forecast isn’t significantly above consensus. But the firm emphasizes that supply-side signals are more telling. During an Asia survey in June, Morgan Stanley observed rising 4nm wafer input volumes for NVIDIA’s Blackwell chips, suggesting current supply assumptions in models may still be conservative. In other words, while the market sees 'demand remains strong,' what NVIDIA can actually deliver may become a future source of upward revisions.

Thus, Morgan Stanley expects NVIDIA to likely continue its 'beat and raise' pattern. However, because the market has already priced in recent supply-side improvements for the October quarter, the biggest near-term upside may lie not in the next quarter but in the January quarter.

By then, Rubin is expected to begin large-scale shipments. The Rubin product line remains on track. NVIDIA has confirmed Rubin shipments will start in Q3, and Morgan Stanley estimates around 150,000 units shipped in Q3, generating approximately $9 billion in revenue, or about $60,000 per unit.

Recently, KYEC, one of NVIDIA’s key testing partners, lowered its full-year guidance and pushed much of its AI-related revenue into Q4 2026 and 2027, sparking concerns over Rubin’s shipment timeline.

However, Morgan Stanley’s Asia semiconductor analyst Charlie Chan believes this reflects a lengthening of the testing cycle rather than a reduction in volume. The firm’s updated model keeps full-year Rubin test volume unchanged but shifts more weight from Q3 to Q4.

More importantly, even if Q3 Rubin shipments fall short, the impact on NVIDIA’s overall performance would be relatively limited. Morgan Stanley’s current estimate of 150,000 units is already well below revised industry estimates, so short-term testing delays are unlikely to alter the company’s overall revenue trajectory.

### Three Key Questions That Will Shape Post-Earnings Stock Performance

For NVIDIA, the real challenge has shifted from "can the earnings beat?" to "can valuation find a new upward logic?" Morgan Stanley identifies profitability, circular financing, and market share as the three most debated topics among investors, and the upcoming earnings call may still fail to provide definitive answers.

First, **profitability**. Morgan Stanley expects management to reaffirm its fiscal 2027 gross margin guidance of 'mid-70s.' However, the firm remains skeptical of the consensus view that margins will rebound in the second half of fiscal 2028.

Cost pressures from DRAM, front-end wafers, packaging, and substrates may persist, meaning margins could face further downward pressure. If NVIDIA lowers its margin outlook, it would undoubtedly weigh on the stock in the short term. Yet from a valuation perspective, a margin cut could also serve as a sentiment-clearing event.

Second, **circular financing model**. Jensen Huang previously explained via blog post the rationale behind NVIDIA’s $500 billion partnership framework with collaborators. Morgan Stanley expects no major changes in management’s messaging during the earnings call.

Third, **market share**. With ASIC competition intensifying and AMD steadily advancing its AI chip business, the market is watching whether NVIDIA can maintain its lead. Morgan Stanley expects management to emphasize Rubin’s significant economic improvements over Blackwell in AI factory efficiency.

But since Rubin is still in early production, the market needs more shipment data and customer feedback to assess its true competitiveness against ASICs and AMD.

### Is the Market Still Underestimating 2027?

If short-term earnings lack strong catalysts, longer-term growth expectations may instead be the key to further valuation expansion.

Morgan Stanley argues that the market’s expectations for NVIDIA in 2027 remain too low. The firm forecasts fiscal 2027 revenue of $393 billion and fiscal 2028 revenue of $598.8 billion—significantly above the consensus of $562.4 billion.

Jensen Huang previously stated at GTC that the company has visibility into $1 trillion in combined demand for Blackwell and Rubin from 2025 to 2027. This figure includes networking but excludes Groq, standalone CPUs, RTX, and software.

Morgan Stanley notes that the current consensus implies around $1.054 trillion in data center revenue, while its own forecast stands at $1.09 trillion. Given that 2025 data already includes about $30 billion in Hopper-related networking revenue, the firm sees no unusually high bar set by its projection.

Meanwhile, inference demand is accelerating, with growing interest from frontier labs, enterprises, and sovereign clients. Combined with Rubin’s ramp-up and potential revenue-sharing models, Morgan Stanley believes NVIDIA’s actual business scale in 2027 could significantly exceed current market expectations.

Therefore, next week’s earnings might present a familiar scene: another beat, another raise, but no major stock surge.

Four consecutive post-earnings declines already signal a shift in how the market prices NVIDIA. As the performance base grows, 'beat and raise' is evolving from a stock catalyst into a baseline market expectation.

Morgan Stanley remains bullish on NVIDIA’s long-term fundamentals, believing Blackwell demand, Rubin ramp-up, and inference growth will continue supporting results. But for short-term stock movement, what the market truly awaits is clarity on whether NVIDIA can defend its market share, stabilize margins, and prove its leadership in the next wave of AI infrastructure.

In short, the focus of next week’s report may not be whether NVIDIA delivers another strong result—but whether that result is strong enough to convince investors to pay higher valuations.