The Nvidia Earnings Train Keeps on Rolling

Adam

Summary:

Nvidia beat earnings expectations with \$46.7B revenue, 72% margins, and \$60B buybacks. Data centers drive 88% of sales. Despite strong growth, shares dipped as investors locked gains after a major market rally.

Once again, Nvidia continues to see its earnings and revenues grow at astonishing rates. Consider the following:

EPS was $1.08, handily beating estimates of $1.01. At $46.7 billion in revenue, it beat estimates by over half a billion dollars. More impressive was the fact that revenues did not include any sales of its H2O chips to China.

Nvidia raised its revenue guidance by $1.2 billion for the current quarter, despite assuming no sales of H2O chips to China.

Its gross profit margin rose from 61% to 72%. This figure is abnormally high and speaks to Nvidia’s moat in the AI/data center chip market.

Data center revenue was $41.1 billion. While that is up 56% over the year, it was slightly shy of estimates due to the lack of sales to China.

Data center-related revenue accounts for 88% of Nvidia’s total revenue.

Nvidia approved $60 billion more in share buybacks. For context, it purchased just under $10 billion in the last quarter.

CFO Colette Kress said they expect $3 to $4 trillion of AI-related infrastructure spending by the end of the decade.

As we noted, data center revenue is driving Nvidia’s fantastic earnings and revenue growth. Helping maintain this growth is its Blackwell GPU architecture. In the last quarter, the new Blackwell products saw a 17% jump in revenue. As production ramps up for this new product, revenue growth is likely to follow.

Despite the seemingly great news, Nvidia shares opened lower. Some analysts were underwhelmed as they only marginally beat expectations. Given that the stock is up 35% year to date and has seen multiples of that over the last few years, some investors may be taking advantage of the results and locking in gains.

It’s Been An Amazing Recovery

Since the lows in April, the market has been on a meteoric rise. The graphic below, courtesy of Michael Kantrowitz, provides context to that statement. It shows that in the 141 days since the April 8 lows, the S&P 500 is up nearly 30%.

As his graph highlights, only four other recoveries since the 1960s have been more substantial. It’s worth noting that the two most recent recoveries, in 2009 and 2020, occurred after the financial crisis and the COVID-19 lows, which involved significantly steeper declines than those seen in April. Furthermore, both periods were the start of an economic recovery from a recession.

Source: investing

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