While some investors consider earnings reports to be boring events, this sentiment changes if the company’s reporting has a large influence on the direction of the market. Right now, artificial intelligence (AI) is arguably the most influential theme in the market, so when the AI ​​leader reports, investors better pay attention.

Nvidia (NASDAQ: NVDA) is the undisputed leader in AI investment. Its graphics processing units (GPUs) are the computing muscle behind almost every innovative AI model being developed, and it benefited significantly from this trend.

Nvidia reports results for the third quarter of fiscal 2025 on November 20, making it a huge day for the market and the stock. But stocks are known to rise or fall dramatically after earnings reports, so investors want to know, “Is Nvidia a buy before November 20?”

Revenue growth is a key metric for Nvidia

Stocks fall or rise after earnings reports because the information investors get is just a few glimpses we get into a company each year. Waiting a full quarter of an hour to hear an update from a giant like Nvidia is a long time, because the landscape shifts so much during that period.

However, the change from the second to the third quarter will not be as large as it used to be.

In last year’s third quarter of 2024 (ending October 29, 2023), Nvidia’s revenue increased by an incredible 206% year-over-year. This year, it is expected to increase turnover by 80%. While that’s a huge drop, 80% revenue growth is still impressive, especially considering Nvidia’s size.

When a company is growing as fast as Nvidia, it’s better to look at quarter-to-quarter revenue growth, as long as the company doesn’t show seasonality (revenues rise and fall based on the seasons, like a ski resort or water park might). Nvidia doesn’t have this problem, and in Q3 FY2025 it expects revenue growth of 8.3% quarter-on-quarter. This number will be one to watch, as a miss on this number will show that demand is not growing as fast as it was just a few months ago. But if it succeeds, it’s clear that companies are still increasing their AI spending.

I think it’s more likely than not that Nvidia will beat this number, as we’ve heard language from other major tech companies on their conference calls that calendar year 2025 will be a year of increased spending on AI infrastructure. While some of that spending will go to custom chips these companies have developed, a large portion of it will go Nvidia’s way, setting the stage for a big quarter, at least on the revenue side.

The marginal side may be a different story.

Nvidia needs to maintain its margins to justify its price tag

Part of Nvidia’s rise gets lost in the mix of unreal revenue growth: margin expansion. As Nvidia’s GPUs were in high demand, their margins increased dramatically compared to their historical levels.

NVDA Profit Margin (Quarterly) data of YCharts

While Nvidia’s revenue growth was impressive, profit growth was even more dramatic.

NVDA’s operating income (quarterly year-on-year growth) data of YCharts

This effect occurred because Nvidia’s margins increased along with revenue growth, but if you look closely at the first chart, you can see that Nvidia’s margins started to decline slightly. This decline could have just been a small bump in the road, but investors need to watch out for a larger trend.

Nvidia’s stock is already very highly valued, and it needs to maintain its earnings levels to justify its 66 times trailing earnings and 49 times term valuation. If it can maintain this trend or at least deliver a very small decline, this should put Nvidia in the clear, at least until after this earnings report.

So, should you buy Nvidia stock before it reports earnings? It depends. If you believe the company will maintain margins and beat its revenue growth forecasts, then it’s likely the stock could pop after earnings. However, at the valuation Nvidia is trading at, it will need to beat expectations on all levels to rise post-earnings. That’s why I’ll just look at the report, and if an opportunity comes up (although waiting has been a bad strategy historically), I can take a stand.

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Keith Drury has no position in any of the shares mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has one disclosure policy.