Pando ETF Holdings Series: Earnings Soar by $68.1 Billion, Yet Stock Price Plummets 9%: Why Didn't NVIDIA's Earnings Report Lead to a Rally?

NVIDIA (NASDAQ: NVDA)Last week, the company released its Q4 earnings report for the fiscal year 2026 (ended January 2026). Both the results and the guidance for the next quarter exceeded expectations, but the stock price declined for two consecutive days, with a cumulative drop of more than 9%. This trend contradicted the expectations of most investors—what exactly is the market still scrutinizing about this top-performing company?

Pando believes that the main reason for the divergence between performance and stock price lies in the overly concentrated 'consensus trade' on Wall Street previously, coupled with concerns over the sustainability of AI capital expenditures, which has led some investors to adopt a wait-and-see attitude. Despite short-term pressures, NVIDIA remains a company worth holding for the long term, with a clear development path ahead, and the current valuation provides some downside protection.

1. Fourth Quarter Performance Review

Even in the face of heightened investor expectations, NVIDIA’s recently announced Q4 2026 (ended January 2026) results were satisfying.

– Revenue scale:Revenue for the quarter reached $68.1 billion, representing a 73% year-over-year increase, significantly surpassing market expectations of $65.8 billion and also exceeding the company’s previous guidance.

– Core Engine:The Data Center business was the core growth engine, contributing $62.3 billion in revenue, accounting for 91% of total revenue. This indicates that the global AI computing power arms race is not only ongoing but intensifying.

– Profitability:Gross margin and operating profit margin were 75% and 67.7%, respectively, slightly higher than market expectations. Management guidance suggests that the gross margin for the entire next fiscal year can be maintained at around 75%. Despite significant price increases in components such as memory, NVIDIA has managed to sustain this level of profitability, showcasing its strong bargaining power over the supply chain and the economies of scale from large advance purchases.

– Future guidance:The midpoint of the revenue expectation for the next quarter is $78 billion, far exceeding market expectations of $72.1 billion. Management explicitly stated that in the fiscal year 2027, quarterly revenue will maintain sequential growth.

Image source: APP ECONOMY INSIGHTS

2. Why does the stock price “not rise on good news”?

Despite stellar earnings, the stock price has seen a noticeable pullback recently, even experiencing a “sell-the-news” type of decline.

Chart: NVIDIA's stock price performance over the past month, rapidly declining after earnings, image source: Bloomberg, as of March 2.

This phenomenon may stem from the previous market's overly concentrated one-sided positions: bullish on AI hardware, bearish on software. As a result, after NVIDIA’s earnings report “fully priced in the positive news,” it neither rose on good news nor fell on bad news; instead, representative companies in the AI hardware sector, including Taiwan Semiconductor (TSM) and AMD, all declined together, while the previously battered software sector showed resilience.

After positions became overly concentrated, NVIDIA is no longer an “optional allocation” but a “must-have allocation.” When everyone’s chips are piled here, there is a lack of incremental funds in the market to drive further stock price increases.

The main concern for investors on the sidelines is that NVIDIA's revenue may peak in fiscal year 27. NVIDIA's revenue is closely tied to the capital expenditure (Capex) of Hyperscalers, with its annual revenue consistently accounting for over 50% of the combined Capex of the four largest CSPs (Amazon, Microsoft, Google, Meta) in the past three years (see table below). If the cash flow of major CSPs becomes insufficient to sustain their Capex growth, it would significantly impact future expectations for NVIDIA's revenue.

3. Why do we remain strongly optimistic?

Even though concerns about chip positioning and industry cash flow may lead to repeated short-term stock price corrections, we still believe NVIDIA is a company worth holding long-term. NVIDIA’s competitive advantage is shifting from pure hardware leadership to a more comprehensive AI ecosystem. There will be multiple catalysts over the next year, and current valuations are well-supported.

1. GTC Conference

The upcoming GTC conference in mid-March is a key catalyst. Jensen Huang has already hinted at “groundbreaking announcements,” which could reveal details of large-scale deployments in collaboration with Meta, the next-generation chip architecture Feynman, or iteration upgrades related to Groq LPU.

2. The logic on the demand side remains unchanged

Although there are concerns about tight CSP cash flow, Q2 earnings reports often serve as a window for Hyperscalers to revise their Capex upwards. With non-listed giants like OpenAI and Anthropic completing new rounds of massive funding, their willingness to spend from the remainder of 2026 into 2027 will become clearer.

3. Limited downside implied by valuation

NVIDIA's one-year forward P/E ratio has now reached 21x, close to the lows seen during last year’s extreme conditions, offering an attractive risk-reward ratio.

Image source: Bloomberg, as of March 2.

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This article contains information and analysis related to NVIDIA (NVDA), a stock included in the ETF portfolio managed by Pando Finance Limited. Please note the following: 1. The ETFs managed by Pando Finance Limited hold a position in NVDA. Therefore, Pando Finance Limited may have a financial interest in the performance and success of NVDA. This should be considered when evaluating the information provided in this document. 2. The analysis and information provided in this article focus solely on NVDA and its financial and business performance. It does not constitute a comprehensive review of the ETF portfolio or investment strategy managed by Pando Finance Limited. 3. Certain statements in this document may be considered forward-looking. However, actual results may differ materially from those expressed or implied in these forward-looking statements, and there is no guarantee that NVDA's future performance will meet Pando Finance Limited’s expectations. 4. Investing in any security (including NVDA) involves inherent risks. Investors should conduct their own due diligence and carefully consider their investment objectives, risk tolerance, and financial situation before making any investment decisions related to NVDA or the ETFs managed by Pando Finance Limited. 5. This document is for reference only and should not be considered as investment advice. Pando Finance Limited advises investors to seek guidance from a qualified financial advisor before making any investment decisions.

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