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Nvidia Corp., the world's most valuable company, reported its third quarter results that beat analyst expectations but its guidance, though higher than the average analyst expectation, was below the highest estimate.
However, the stock recoveredafter an initial 3.5% drop in extended trading post the results announcement.
Revenue for the quarter surged by 94% on a year-on-year basis to $35.08 billion, higher than estimates of $33.16 billion and higher than the company's own guidance of $32.5 billion, which it had shared in the previous quarter. Despite a 94% revenue growth, the figure is still lower for the fourth quarter in a row, having grown 122%, 262% and 265% in the three previous quarters.
Earnings Per Share (EPS) for the quarter also stood at $0.81, higher than the estimate of $0.75.
For the fourth quarter, Nvidia expects sales to be $37.5 billion plus or minus 2%. While this is higher than the average analyst estimate of $37.1 billion, it was lower than the highest estimate as they ranged to as high as $41 billion. The revenue guidance implies a revenue growth of 70% from the previous year, signalling further potential slowing of the growth momentum.
Nvidia has been a big beneficiary of the ongoing Artificial Intelligence boom and investors have piled into the stock owing to the frenzy with shares having tripled so far in 2024, making it the most valuable company in the world with a market capitalisation of over $3.6 trillion.
Most of the sales are now being driven by Nvidia's data centre business, which accounted for $30.8 billion of the total sales, a growth of 112% from last year, higher than the analyst expectations of $28.82 billion.
But networking revenue within that unit declined sequentially, and the business is more dependent than ever on a small group of customers: cloud service providers. That cohort, which includes companies such as Microsoft Corp. and Amazon.com Inc.’s AWS, accounted for 50% of data center revenue, up from 45% in the prior period.
Investors want that number to go down, to show that the use of AI is spreading across the economy.
Chief Executive Officer Jensen Huang said that Nvidia’s new lineup, called Blackwell, is now in “full production.” Demand for the highly anticipated products is expected to exceed supply for several quarters. And there’s still an appetite for Hopper, the previous design, Huang added.
But manufacturing challenges have slowed the Blackwell rollout. For now, Nvidia can’t fill all the orders it’s receiving, the company has said. After production improves, supplies will be plentiful, according to Huang.
Nvidia warned again of supply constraints for Blackwell on Wednesday.
“Critical questions around Blackwell’s production ramp and customer concentration remain key concerns,” Emarketer analyst Jacob Bourne said in a note. “There’s little room for execution missteps in 2025.”
Even with a disappointing outlook, Nvidia’s growth over the past two years has been staggering. Its sales are poised to double for a second year in a row, and it now notches more money in profit than it used to generate in total revenue.
(With Inputs From Agencies.)
