The chipmaker Nvidia’s earnings call reported fiscal third-quarter results that surpassed Wall Street’s predictions that lead to its shares falling down 1% in extended trading on Tuesday. But Nvidia earnings call also projected negative impact in the next quarter because of export restrictions affecting sales to organizations in China and other countries.
“We expect that our sales to these destinations will decline significantly in the fourth quarter of fiscal 2024, though we believe the decline will be more than offset by strong growth in other regions,” Nvidia’s finance chief, Colette Kress, said in a letter to shareholders.
Nvidia stock rebound
Nvidia’s earnings for Q3 exceeded expectations, prompting an initial 2.5% decline and later a rebound to close at just under $500.
Nvidia’s earnings for Q3 revenue of $18.12 billion, 12.5% above expectations, was driven by robust growth in the data center and gaming segments.
As per Nvidia’s earnings call despite potential Q4 challenges, it remains optimistic, with analysts forecasting upward revisions. This along with a consensus Nvidia share price target of $642.
Nvidia’s earnings report
Here’s how the company did, compared to the consensus among analysts surveyed by LSEG:
- Nvidia’s Earnings: $4.02 per share, adjusted, vs. $3.37 per share expected
- Revenue: $18.12 billion, vs. $16.18 billion expected
Nvidia’s revenue grew 206% year over year during the quarter ending Oct. 29, according to a statement. Net income, at $9.24 billion, or $3.71 per share, was up from $680 million, or 27 cents per share, in the same quarter a year ago.
Nvidia’s revenue in all segments
The company’s data center revenue totaled $14.51 billion, up 279% and more than the StreetAccount consensus of $12.97 billion. Half of the data center revenue came from cloud infrastructure providers such as Amazon, and the other from consumer internet entities and large companies, Nvidia said.
Healthy uptake came from clouds that specialize in renting out GPUs to clients, Kress said on the call.
The gaming segment contributed $2.86 billion, up 81% and higher than the $2.68 billion StreetAccount consensus.
With respect to guidance, Nvidia called for $20 billion in revenue for the fiscal fourth quarter. That implies nearly 231% revenue growth.
Nvidia’s new additions
During the quarter, Nvidia announced the GH200 GPU, which has more memory than the current H100 and an additional Arm processor onboard. The H100 is expensive and in demand. Nvidia said Australia-based Iris Energy, an owner of bitcoin mining data centers, was buying 248 H100s for $10 million, which works out to about $40,000 each.
Computing instances based on the GH GPUs are coming soon to Oracle’s cloud, Kress said on the call.
As recently as two years ago, sales of GPUs for playing video games on PCs were the largest source of Nvidia’s revenue. Now the company gets most revenue from deployments inside server farms.
Nvidia’s GPU demand rose
The introduction of the ChatGPT chatbot from Microsoft-backed startup OpenAI in 2022 caused many companies to look for ways to add similar generative artificial intelligence capabilities to their software. Demand for Nvidia’s GPUs strengthened as a result.
Nvidia faces obstacles, including competition from AMD and lower revenue because of export restrictions that can limit sales of its GPUs in China. But ahead of Tuesday report, some analysts were nevertheless optimistic.
“GPU demand continues to outpace supply as Gen AI adoption broadens across industry verticals,” Raymond James’ Srini Pajjuri and Jacob Silverman wrote in a note Monday to clients, with a “strong buy” recommendation on Nvidia stock. “We are not overly concerned about competition and expect NVDA to maintain >85% share in Gen AI accelerators even in 2024.”
Nvidia is still working on its plan to grow supply throughout next year, Kress said on the call.
Nvidia stock update
Excluding the after-hours move, Nvidia stock has gone up 241% so far this year, vastly outperforming the S&P 500 index, which is up 18% over the same period.
