Nvidia Corp. NVDA delivered yet again by reporting forecast-beating third-quarter results Tuesday.
The top- and bottom-line results exceeded Street expectations, as data center revenue rose to a record, thanks to a broader industry transition from general purpose to accelerated computing and generative artificial intelligence.
The company issued upbeat revenue guidance for the fourth quarter but the stock slipped in after-hours trading, likely due to Nvidia’s commentary on the impact of the U.S. government’s China import restrictions.
Nvidia’s Key Q3 Numbers: Santa Clara, California-based Nvidia reported third-quarter earnings of $4.02 per share, compared to the $3.36-per-share consensus estimate. The bottom line improved from the year-ago quarter’s 58 cents per share and preceding quarter’s $2.70 per share.
Revenue increased 206% year-over-year and 34% sequentially to $18.12 billion, exceeding the Street forecast of $16.12 billion.
When Nvidia reported its June quarter results in late August, it guided third-quarter revenue to $16 billion, plus or minus 2%.
The non-GAAP gross margin came in at 75% vis-a-vis the guidance of 72.5%, plus or minus 50 basis points. This marked an improvement from the second quarter’s 71.2% and the year-ago quarter’s 56.1%.
“Our strong growth reflects the broad industry platform transition from general-purpose to accelerated computing and generative AI. Large language model startups, consumer internet companies and global cloud service providers were the first movers, and the next waves are starting to build,” said CEO Jensen Huang.
“NVIDIA GPUs, CPUs, networking, AI foundry services and NVIDIA AI Enterprise software are all growth engines in full throttle. The era of generative AI is taking off.”
See Also: How To Buy Nvidia (NVDA) Stock
Nvidia’s Q3 Performance By Segment: The data center business flourished again in the third quarter thanks to strong demand coming on the back of the development of large language models and generative artificial intelligence. The segment’s revenue rose to a record $14.51 billion, up 279%.
The gaming segment, which has been on an upward revenue trajectory after bottoming at $1.57 billion in the third quarter of 2023, continued to march higher. It recorded revenue of $2.86 billion.
Revenue | Y-o-Y Growth | Q-o-Q Growth | |
Data Center | $14.51B | +279% | +41% |
Gaming | $2.86B | +81% | +15% |
Prof. Viz | $416M | +108% | +10% |
Auto | $261M | +4% | +3% |
Data courtesy of Nvidia.
Nvidia’s Shareholder Returns: Nvidia said its next quarterly dividend amounting to 4 cents per share will be payable on Dec. 28 to shareholders of record as of Dec. 6.
Nvidia’s Guidance: Nvidia guided to fourth-quarter revenue of $20 billion, plus or minus 2%. Analysts, on average, expected revenue of $16.38 billion and earnings per share of $3.45.
The non-GAAP gross margin will likely to come in at 75.5%, plus or minus 50 basis points, the company said.
Raymond James analyst Srini Pajjuri said ahead of the earnings report that Nvidia will weather the mixed cloud capex trends seen in the third quarter and China export controls. The analyst predicts GPU demand will outpace supply through 2024 as AI adoption broadens across industries.
Despite competition, Nvidia will likely maintain more than 85% share in generative AI accelerators in 2024, Pajjuri said. The analyst expects the company to benefit from the mix shift from the A100 to H100 and the expected volume ramp-up of the H200, which will likely have about a 3% average selling price premium over H100.
KeyBanc Capital Market analyst John Vinh forecast upside in the second half, thanks to the ramp of L40S, its powerful data center GPU, and the incremental supply for CoWoS, an advanced packaging technology Nvidia sources from Amkor Technology, Inc. AMKR and Taiwan Semiconductor Manufacturing Co. Ltd. TSM for its high-performance processors.
Nvidia warned that sales to China and other destinations impacted by the U.S. export restrictions, which contributed about 20-25% of Data Center revenue over the past few quarters, will decline significantly in the fourth quarter. The decline will be more than offset by strong growth in other regions and Gaming revenue, it added.
Analysts do not view the China export restrictions as a handicap to Nvidia. Vinh said Nvidia will be able to backfill with the rest-of-the-world backlog, given extended lead times on H100, and also develop China-compliant chips.
NVDA Stock: Nvidia shares have gained some momentum since bottoming in late October as risk appetite, especially toward big tech, improved amid positive economic cues. The stock broke above the $500 psychological barrier on Monday and ended at a record high of $504.09.
The stock has outperformed both the S&P 500 Index and the tech-heavy Nasdaq Composite Index this year and is the best-performing S&P 500 component with a year-to-date gain of 242%.
After ending Tuesday’s session down 0.92% at $499.44, Nvidia stock fell 0.62% to $496.32 in after-hours trading, according to Benzinga Pro data.
Read Next: NVIDIA, Best Buy And 3 Stocks To Watch Heading Into Tuesday
Photo courtesy of Nvidia.
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