NVIDIA (NASDAQ:NVDA) is scheduled to announce its earnings on February 26, 2025, after the market closes. The semiconductor leader currently holds a market capitalization of $3.3 trillion. Over the past twelve months, NVIDIA reported revenue of $113 billion, with operating profits of $71 billion and a net income of $63 billion. The stock’s reaction post-earnings will largely depend on how the results and future outlook align with investor expectations. Analyzing historical performance can be beneficial for event-driven traders: either by understanding past trends to position themselves before the earnings release or by examining the correlation between immediate and medium-term returns post-earnings to make informed trades the day after the announcement. Specifically, past data suggests the maximum positive 1-day movement post earnings, was a little over 20%. Full analysis below.
NVIDIA’s Historical Odds of Positive Post-Earnings Return
Observations on one-day (1D) post-earnings returns include:
Over the past five years, there have been 20 earnings reports, with 11 positive and 9 negative one-day returns, indicating positive 1D returns approximately 55% of the time.
This percentage increases to 58% when considering data from the last three years.
The median of the 11 positive returns is 4.9%, while the median of the 9 negative returns is -5.9%.
Additional data for observed returns 5-days (5D) and 30-days (30D) post-earnings are summarized in the table below.
Correlation Between 1D, 5D, and 30D Historical Returns
A potentially less risky strategy (though its effectiveness depends on the strength of the correlation) involves understanding the relationship between short-term and medium-term returns post-earnings. Identifying pairs with the highest correlation can guide trading decisions. For instance, if 1D and 5D returns exhibit the highest correlation, a trader might consider a “long” position for the next five days if the 1D post-earnings return is positive. Below is correlation data based on five-year and three-year (more recent) histories. Note that “1D_5D” refers to the correlation between 1D post-earnings returns and subsequent 5D returns.
Is There Any Correlation With Peer Earnings?
At times, the performance of peer companies can influence a stock’s post-earnings reaction, with market adjustments potentially beginning before the earnings announcement. The table below presents historical data comparing NVIDIA’s post-earnings performance with that of peers who reported earnings just before NVIDIA. For a fair comparison, peer stock returns also represent post-earnings one-day (1D) returns.
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