California-based software company Nvidia exceeded both revenue and earnings expectations in the latest quarter, achieving a new top-line record of $18 billion. The company also provided a revenue forecast of $20 billion at the midpoint for the current quarter, surpassing the $18 billion consensus view and aligning with some analysts' expectations prior to the report.
Following its earnings call on Tuesday, Nvidia shares saw a 1.7% decline in after-hours trading, likely influenced by the high expectations set before the report. At the time of writing on Friday, Nvidia stock remained down 1.5% on the week, trading around the $477.50 level in premarket hours.
Compared to $5.9 billion from the previous year, Nvidia’s revenue saw a substantial increase to $18.1 billion, exceeding the FactSet consensus of $16.2 billion. Nvidia's sales for the quarter set a new record, surpassing the $13.5 billion revenue reported in its fiscal second quarter.
Nvidia's data-center business experienced a remarkable 279% year-over-year revenue increase, reaching a record-breaking $14.5 billion and blowing by the FactSet consensus of $13.0 billion. This segment has witnessed surging growth in the era of artificial intelligence, with companies extensively utilizing Nvidia's hardware for AI model training.
Before the report, analysts were already extending their focus beyond the current quarter, pondering whether the company would offer insights into the trajectory leading up to 2025. As noted by Marketwatch correspondent Emily Bary, there are concerns on Wall Street about the possibility of customers having to absorb the cumulative impact of their purchases over time.
“We absolutely believe that data center can grow through 2025,” CEO Jensen Huang said on the earnings call. He noted that the company’s supply is improving, and it’s also benefiting from growing customer adoption in more regions.
Despite its impressive performance, Nvidia faces near-term challenges. Recently implemented U.S. export restrictions on advanced chip technologies bound for China did not significantly impact Nvidia's latest quarter due to the timing of the rules. In prepared remarks, Chief Financial Officer Colette Kress highlighted that approximately 20% to 25% of data-center revenue in recent quarters came from sales to China and other affected regions now covered by the restrictions.
“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,” she added.
Addressing the anticipated negative impact on China sales during Nvidia's earnings call, Kress said the company does “not have good visibility into the magnitude of that impact even over the long term.”
In the fiscal third quarter, Nvidia reported $2.9 billion in gaming revenue, surpassing analysts' expectations of $2.7 billion. Professional visualization revenue reached $416 million, exceeding the modeled $391 million, while automotive revenue totaled $261 million, slightly below the $263 million FactSet consensus.
For the fiscal third quarter, the company reported a net income of $9.2 billion, or $3.71 per share, compared to $680 million, or 27 cents per share, in the same period last year. On an adjusted basis, Nvidia earned $4.02 per share, a significant increase from 58 cents per share the previous year, surpassing the FactSet consensus of $3.37 per share.
As of November 24, NVDA stock held a consensus Strong Buy rating according to 39 analysts surveyed by TipRanks, with the average price target coming in at $657.17 (a potential 34.90% upside from the last closing price of $487.16).
The highest Nvidia target price quoted by TipRanks stands at $1,100, while the lowest estimate is $560.00.
Nvidia shares have surged by approximately 235% this year, blowing by the 18% rise of the U.S. benchmark S&P 500 index.
At the time of writing, Nvidia stock was down close to $11 (2.24%) in premarket trading on Friday.
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