Nvidia earnings preview: Munster says 2026 growth estimates too low

Gene Munster of Deepwater Asset Management believes Wall Street's calendar year 2026 growth estimates for Nvidia are too conservative, projecting revisions from 27% to 30-35% ahead of earnings. He anticipates $5 billion in catch-up China revenue for the October quarter, with Nvidia offsetting a new 15% U.S. government revenue share via an 18% price increase on new Blackwell chips. Munster points to an implied 79% July quarter growth when adjusting for lost China revenue, alongside increased capital expenditure from major tech firms and an underappreciated networking business, signaling sustained AI investment will drive stronger performance than current Street expectations.

Analysis

Deepwater Asset Management presents a bullish case for Nvidia (NVDA), arguing that current Wall Street growth estimates for calendar year 2026 are overly conservative. The analysis projects that consensus top-line growth expectations of 27% will be revised upward to a 30-35% range following the company's upcoming earnings. This optimism is underpinned by several factors, including a nuanced view of the China market, where a new U.S. export license requires a 15% revenue share with the government. Deepwater anticipates Nvidia will mitigate this through an 18% price increase on its new China-specific Blackwell chips, a move designed to preserve gross profit dollars while causing only a modest dip in gross margin from 71% to approximately 69.3%. Furthermore, the analysis highlights robust underlying demand, suggesting that the July quarter's expected 53% growth actually implies an adjusted rate of 79% when excluding an estimated $8 billion in lost China revenue. This demand is corroborated by strong capital expenditure signals from major tech clients; Meta has guided to 47% capex growth, and Deepwater forecasts that Amazon, Microsoft, and Alphabet will ultimately revise their current 7% average capex growth guidance to 25%. Finally, the firm identifies Nvidia's networking business, currently 11% of revenue, as an underappreciated driver projected to grow to 15% of revenue in five years, implying a 20% annual growth rate for the segment.

Key Decisions for Investors

• Investors should consider that consensus estimates for Nvidia's CY26 growth may be conservative, presenting a potential catalyst for the stock if the company's guidance or analyst revisions align with Deepwater's more bullish 30-35% growth forecast.
• Monitor Nvidia's gross margin guidance closely, as its ability to offset the 15% U.S. government revenue share in China via an 18% price hike is a critical test of its pricing power and will directly impact profitability.
• Pay close attention to the capital expenditure outlooks from key customers like Amazon, Microsoft, and Alphabet, as any upward revisions toward the forecasted 25% growth would serve as a strong validation of the sustained AI demand thesis.
• Evaluate Nvidia's networking segment as a distinct growth vector, as its projected 20% annual growth represents a potentially underappreciated component of the company's long-term value proposition beyond its core GPU business.