Visible Alpha Technology

Earnings preview

Expectations into Q2 have remained stable throughout the quarter. Last quarter, Netflix (NASDAQ: NFLX) guided to a stable outlook, in line with consensus. Visible Alpha consensus is expecting $11.1 billion for Q2 and $44.5 billion for FY 2025. Revenues are expected to be supported by continued new membership and monetization. Offering a range of pricing and plans combined with continuing growth in the ads business is expected to further increase monetization. Consensus expects the operating margin to increase to 33.2% in Q2 and to 29.6% for FY 2025.

The company expects to grow revenues by increasing engagement trends and reducing churn while offering a more diverse entertainment offering. Gaming and the growth of ads could be key drivers in 2025. According to consensus, analysts now expect the company to generate a 29.6% margin, up from 28.3% previously estimated, on expected revenue of $44.5 billion and $13.2 billion in operating profit in FY 2025.

Last quarter, Management highlighted that the Ad Tier enables lower prices. The Company stated in the earnings call that they expect that ads revenue will roughly double year-over-year again in FY 2025. Since the beginning of 2025, the ad-supported revenue estimate has been moving higher into the Q2 earnings release. While expectations are still below the initial forecast of $1.4 billion back in early 2024, the trend is improving.

Netflix remains upbeat about the long-term opportunity, given the size of its user base. Co-CEO Gregory Peters explained that 2025 will be the year that the ads business will step up to the plate to swing. Currently, consensus projects total ad-supported revenue for FY 2027 to expand to $6.7 billion, but down from the expected $8.5 billion last quarter. There is a significant range of views on the magnitude of growth. For FY 2027, the analyst estimates range has narrowed from $3.5 billion to $17 billion to now $3.5 billion to $9.2 billion.

Based on Visible Alpha consensus, the operating profit margin is expected to grow from 26.7% in FY 2024 to 34.4% in FY 2027, an increase of 70bps since last quarter. Currently, consensus estimates the operating margin to approach 32% by the end of FY 2026. There is significant debate among analysts with respect to FY 2027 margin estimates, which range from 31% to 37%, an expansion of 100bps since last quarter. This margin growth is expected to take FY 2024 expected diluted EPS from $20.22/share to $37.77/share or 33x FY 2027 P/E, significantly higher than the 25x it traded at last quarter. The current consensus target price remains at close to $1330 or nearly 7% upside from the current levels.

Apple (NASDAQ: AAPL) made several new announcements during its Worldwide Developers Conference (WWDC) keynote on June 9, 2025. What happened during the conference and what are analysts expecting?

Apple WWDC 2025

Last year, the arrival of Apple Intelligence at WWDC 2024 suggested that Generative Al (GAl) was positioning to get embedded into workflows with Apple hardware. Since then, Apple has
lagged in the space, and now the company is trying to drive enthusiasm around its latest software updates and next generation upgrades.

This year at WWDC 2025, Al has started to pivot more toward consumers by trying to appeal to Apple’s massive installed base and ecosystem. Consumers have been slow to upgrade their Apple hardware, especially iPhones, over the last year to benefit from Apple Intelligence. Looking ahead, the popularity of Apple’s new messaging and CarPlay tools and elevated camera and gaming capabilities will likely dictate the magnitude of its earnings potential going forward. The more users get hooked on these, the more likely they are to upgrade their hardware and subscribe to more lucrative services. However, with the upgrade cycle slower than initially expected, Apple needs to get the Al trends right. If they do, profitability may start to come faster than current expectations and drive a wave of upward revisions over the next few years. If they do not, then Apple may face a more challenging situation, especially for its hardware.

Apple Intelligence: Will this drive an upgrade cycle and grow Services?

Apple’s on-device Al will now integrate live translation, a multimodal feature, summarization and customization capabilities. The move toward these upgrades suggests that these tools are table stakes in the Al trend. In addition, third-party developers will be able to access Apple’s on-device LLM s, potentially creating more integration across its Apple ecosystem. The popularity of these new tools and enhancements could be a catalyst for a new iPhone, iPad and Mac replacement cycle.

Given the enormous installed base of iPhones, Pre-15 Pro users may be motivated to upgrade their earlier version phones and both expand and extend the pace of the new upgrade cycle. Based on Visible Alpha consensus, iPhone unit sales for the full year have bounced back up to 227 million after WWDC from 223 million after their earnings release in May, which may be a positive signal.

In addition to a potential hardware replacement cycle, Apple Intelligence may help to fuel a surge in Services growth. Services sales are expected to grow 12% this fiscal year, up from 9% in FY 2023 and to maintain double-digit growth through FY 2026. However, if the new Al tools gain in popularity and usage, more users may be inclined to subscribe to more Apple Services, like iCloud, Games and Apple Pay. Increases in Services revenue is impactful to the bottom line, since this segment is expected to generate a 74.7% gross margin, over 2x the projected 36.4% gross margin of hardware products this year.

The success of Apple Intelligence has the potential to drive a hardware replacement cycle, in tandem with increased usage of lucrative Services. This possible dual impact on sales and operating profit could fuel earnings revisions over the next two years, if the upgrades take off with consumers. However, if they do not, Apple’s valuation, market cap size, and lack of growth may pose challenges for the stock.

Nvidia Corp. (NASDAQ: NVDA) will report fiscal Q1 2026 results on Wednesday, May 28, 2025, after the market close. Here are the key numbers that we’re watching.

Nvidia Q1 2026 earnings preview

According to Visible Alpha consensus, total revenues of $43.2 billion are expected for Fiscal Q1 2026. Overall revenue growth continues to be driven by optimism about the strength of Nvidia’s Data Center segment. This segment has seen its expected top-line performance for Q1 increase from $21.6 billion in January 2024 to its current projection of $39.1 billion, up almost 50%. However, recently, the Data Center segment’s expected revenues for Q1 moderated since the November quarter. Based on Visible Alpha consensus, Data Center revenue estimates in Q1 2026 range from $34.8 billion to $42.1 billion.

The expected revenue growth continues to be driven by strong demand for its GPUs from cloud service providers, and the move to accelerated computing in the data centers for AI. However, there are questions around the outlook for Nvidia’s new solution, Blackwell, that claims to significantly reduce energy consumption and cost for customers. There have been concerns about the timing of Blackwell’s growth and the total addressable market (TAM) for this solution. The debate is captured in the large range of revenue estimates for the new B-series. From 11 sources, these forecasts range from $2.5 billion to $24.4 billion in Q1 with consensus at $11.9 billion, in line with last quarter’s $11 billion. In last quarter’s earnings call, CEO Jensen Huang called out that Blackwell demand is “strong”.

Due to differing views about the potential for Blackwell, there is significant debate about the performance of the Data Center segment going forward. Blackwell revenue is expected to jump from $7.2 billion last year to $82.4 billion this year, but consensus ranges from $21.1 billion to $141.7 billion. It will be important to see Q1’s Blackwell performance and outlook for Q2 and the rest of FY 2026. While the FY 2026 B-series expectations have been moving higher, total Data Center revenues for FY 2026 of $181.9 billion have been moving down from $188.6 billion last quarter. This may be due to the higher 27 source count for the Data Center revenues, compared to the 11 sources that provide estimates for the B-series, suggesting some analysts may simply reflect Blackwell in their Data Center estimate instead of breaking it out separately.

For Q1 2026, Visible Alpha consensus for the gross profit of this segment has decreased $1.5 billion from last quarter’s peak Q1 consensus of $29.2 billion to now $27.7 billion. It is worth noting that the consensus gross profit margin for the Data Center segment for FY 2026 has continued to decrease, falling to 74.1%, down over 100bps from the 75.2% estimated at the end of last quarter, reflecting lower expectations from the 78% levels of FY 2024 and FY 2025. In addition, the operating profit margin for FY 2026 and FY 2027 is also projected to move lower from last year’s 66.5%, a shift from last quarter’s expectations of continued increases. These dynamics in consensus margins are causing the expected FY 2026 consensus P/E to be 31x and to range from 27x to 39x.

The stock has traded up 3.3% since the last release but is down 7.1% since the November release. Nvidia stock price is up around 174% since January 2024. Could the Q1 release provide the next positive catalyst for the stock or are expectations largely priced in for now?