Nvidia’s earnings report revealed an adjusted EPS of $1.05, surpassing the expected $1.00. Their revenue hit $46.74 billion, above the forecast of $45.51 billion. However, the forecast for Q3 revenue, projected to be between $52.9 billion and $55.1 billion, fell short of the anticipated $53.46 billion. Nvidia also announced a $60 billion share buyback program. The breakdown of revenue showed that data center earnings were at $41.18 billion, slightly missing the estimate of $41.29 billion. Gaming revenue reached $4.3 billion, which was better than the expected $3.828 billion. On the downside, compute revenue dropped to $33.84 billion, falling short of the projected $35.87 billion.

Nvidia’s Outlook

Importantly, Nvidia’s outlook does not include potential H20 shipments to China, as there were no H20 sales to Chinese customers in the second quarter. These factors, along with missing some revenue targets, may be influencing market sentiment, despite the strong EPS performance. The small earnings beat is overshadowed by a conservative Q3 revenue forecast. This creates tension between past performance and future expectations. We think this could lead to a period where prices stabilize or become more volatile, rather than a clear upward or downward trend in the short term. The revenue shortfall in the data center and compute sectors, along with a cautious outlook that excludes new sales to China, strengthens the case for bearish positions. We’ve seen a rise of over 15% in open interest for puts that expire in late September 2025, indicating that traders are either seeking protection or speculating on a price drop towards key support levels from earlier this summer.

Share Buyback and Market Impact

Conversely, the $60 billion share buyback program acts as a strong safety net for the stock price. A similar situation occurred in 2024 when post-earnings weakness was quickly corrected after the buyback started, benefiting those who sold cash-secured puts. Additionally, the strong gaming revenue reflects resilience in the consumer sector. Given these mixed signals, the best approach might be to focus on volatility itself. Implied volatility for NVDA options has surged to its highest level since the Q1 2025 report, making strategies like long straddles or strangles appealing in the upcoming weeks. With the broader market’s VIX index nearing 18, traders are preparing for a significant move once things settle down. It would be wise to monitor price movements for a few sessions to see if a clear trend develops from this uncertainty. This is especially relevant now that the Federal Reserve has indicated it will pause rate changes, making the market very responsive to growth insights from tech companies like Nvidia. Keep an eye on the volume of out-of-the-money weekly options, as that will be the first sign of how institutions are positioning themselves. Create your live VT Markets account and start trading now.

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