The days leading up to any company's earnings announcement is high anxiety time, for both management and shareholders. Each new quarter brings with it new, and usually heightened, expectations. For graphics chipmaker NVIDIA (NAS: NVDA) , its Q3 earnings announcement scheduled for this afternoon is borderline critical.

As a Foolish investor, you know better than to base investment decisions on the results of a single quarter. That's short-term thinking in a long-term world. But the fact of the matter is, NVIDIA's pending fiscal Q3 has a little different feel to it, like there's more riding on the results than usual. Though NVIDIA is hardly in a make or break situation, Q3 is a big one, for a couple of reasons.

Why the angst?
It's still too early to determine the impact Google's (NAS: GOOG) Nexus and Microsoft's (NAS: MSFT) Surface tablets will have on NVIDIA revenue in the long term, but Q3 will give us an inkling of what NVIDIA shareholders can expect going forward. Though Apple (NAS: AAPL) continues to rule the mobile computing world, the new players are already cutting into market share, as Rick Munarriz points out in a recent article. And the sales figures Rick cites don't include the Nexus or Surface tablets yet.


NVIDIA's longtime partnership with Microsoft goes back nearly 20 years, and has been a successful one. Now, with the release of Windows 8 and the Surface tablet, the stakes for both Microsoft and NVIDIA just went up a notch.

Microsoft, like Google, isn't the sort to enter a new market halfway -- that's just not its style. As for the highly lucrative, and ultra-competitive, tablet market, you can bet both behemoths are in it to win it. NVIDIA stands to benefit from the success of either tablet, or better still, both, since each uses NVIDIA's highly acclaimed Tegra 3 processors. The question is what impact can NVIDIA shareholders expect from two of the most-hyped mobile products of the season?

If early results are to be believed, the Nexus and Surface tablets have both hit the ground running. Since its launch in June, Google's Nexus tablet sales have steadily climbed, and hit about 1 million units in the past month. Microsoft, as is its way, hasn't released specific Surface tablet sales numbers, but the early news suggests the Surface is selling, and selling well.

The early tablet sales estimates must be music to NVIDIA's ears, and the likelihood is it's going to get better, a lot better. According to a recent report from Gartner, smartphone and tablet sales should hit the 1 billion mark next year, and you can bet Microsoft and Google intend on eating away at Apple's slice of that massive pie -- to the benefit of NVIDIA.

Earnings expectations
As fellow Fool Seth Jayson noted a few days ago, analyst expectations are that NVIDIA will grow revenue by 11.6% and earnings by 3.4% compared to Q3 of last year. Though there haven't been any notable changes in analysts' estimates for NVIDIA in the past month, the $0.30 a share in earnings is way up from three months ago. At that time, analysts were figuring NVIDIA would earn $0.22 a share. So what changed? Two things come to mind: Google's selling 1 million tablets a month, and Microsoft released Surface.

If the last week's stock price movement is any indication, NVIDIA investors expect the same solid results as the analysts. NVIDIA is up nearly 3% the past week, 1.5% out of the gate leading up to the earnings announcement. Even with the rise in share price, NVIDIA remains a solid growth opportunity. At 16.8 times trailing earnings, improving gross margins, and $3.3 billion in cash (and only $20 million in long-term debt), NVIDIA puts rival Texas Instruments (NAS: TXN) to shame from a value perspective.

Texas Instruments' nearly 3% dividend is a big differentiator, and something I'd like to see NVIDIA remedy. With all that cash on the balance sheet, it's not outlandish to hope NVIDIA offers up a dividend to its shareholders in the near future.

The third quarter announcement isn't "do or die" for NVIDIA -- it's doing too much right for that. NVIDIA CEO Jen-Hsun Huang and team have a huge market for its Tegra 3 processor. Beyond the tablets, the industry's first cloud-based GPU was recently introduced, and let's not forget all that cash. The question isn't whether or not NVIDIA will remain a significant entity -- it will. The question is, will NVIDIA become a major player in an exploding market? Even if it doesn't swat a walk-off home run, NVIDIA will at least hit for extra bases in Q3.

NVIDIA certainly has a lot riding on Microsoft's Surface -- almost as much as Microsoft itself. In this brand-new premium report on Microsoft, our analyst explains that while the opportunity is huge, the challenges are many. He's also providing regular updates as key events occur, so make sure to claim a copy of this report now by clicking here.

The article What to Expect as NVIDIA Steps to the Plate originally appeared on Fool.com.

Fool contributor Tim Brugger has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple, Google, Microsoft, and NVIDIA. Motley Fool newsletter services recommend Apple, Google, Microsoft, and NVIDIA. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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