Nvidia Beat Expectations in the Third Quarter. History Says the Stock Will Do This Next.

Nvidia (NVDA -3.22%) stuck to tradition when it reported third-quarter earnings last week. By this, I mean the tech giant went on to once again beat earnings expectations -- it's done this for at least the previous four quarters. It's easy to understand why Nvidia has been delivering such excellent surprises to investors quarter after quarter. The company is the leader in one of today's hottest markets: artificial intelligence (AI).

Nvidia dominates the AI chip market, holding 80% share, but also has built an AI empire, selling a wide variety of products and services. All of this has helped Nvidia generate triple-digit data center revenue growth over the past several quarters. The company also is highly profitable, with margins of more than 70%. Nvidia's shares have followed this momentum, soaring in recent years -- and this year is no exception, with the stock heading for a gain of almost 200%.

Now, you may be wondering what's next for this high-flying stock. Will it rise or fall? Is now a good time to invest, or is it too late? Let's use history as a guide.

Nvidia's earnings report

First, though, let's consider Nvidia's recent earnings report. The company, as mentioned, beat both earnings per share (EPS) and revenue expectations in the fiscal 2025 third quarter. It announced diluted EPS of 81 cents versus estimates of 75 cents and record revenue of more than $35 billion versus estimates of about $33 billion.

Nvidia's total revenue growth slowed from the triple digits in previous quarters to a 94% gain in this quarter -- but it's important to keep in mind that comparison quarters have become very difficult considering Nvidia's meteoric revenue growth in recent times. So, it's logical that the pace of growth isn't the same as it was a year ago -- and this shouldn't be seen as a warning sign.

To further illustrate my point, we should look at demand for Nvidia's upcoming release, its Blackwell architecture and chip. Demand exceeds supply, and the company expects this trend to continue into next year. It's clear customers are flocking to Nvidia for their AI needs -- and maybe even to a greater degree than ever as some, such as Meta Platforms, have spoken of boosting their AI investing budgets.

And speaking of Blackwell, Nvidia is ramping up production this quarter and expects to record billions of dollars of revenue from the platform during this period. So, Blackwell should be a catalyst for Nvidia in this current fourth quarter and beyond.

What history shows us

Now, let's see what history says about share performance ahead. Following the past four earnings reports -- prior to the one just out last week -- the stock has climbed each time in the double digits in the two months to follow. After the first- and second-quarter reports in this fiscal year, Nvidia rose 30% and 11%, respectively. And after the third- and fourth-quarter reports of last fiscal year, the stock climbed 19% and 12%, respectively.

All of this suggests that if Nvidia follows its recent historical trend, the stock could climb over the coming two months.

Does this make the stock a buy? I consider Nvidia a great AI stock to buy now -- but not for this reason. It's important to remember that stocks won't always follow historical trends, so we can't be certain Nvidia will indeed rise over the next two months. And buying a stock with the hope of a short-term gain is highly risky and won't set you off on the right path to wealth.

Nvidia's long-term potential

Instead, it's better to consider Nvidia's long-term potential. Does the stock have what it takes to advance in the years to come? And here, the answer is "yes." Nvidia is the leader in a high-growth market and pledges to innovate to stay ahead -- it's already shown us its ability to do this through launches in recent years, from the Hopper architecture to the recent H200 GPU.

Today's $200 billion AI market is forecast to reach $1 trillion by the end of the decade, and Nvidia is likely to benefit from this growth.

All of this means that whether history is right and Nvidia advances in the coming weeks or if the stock stagnates or falls, it really doesn't matter. What's most important is what happens over the coming years -- and over that time frame, there's reason to be optimistic about this AI giant.