Nvidia beats earnings expectations as investors eye demand for Blackwell AI chips

Nvidia has reported a surge in third-quarter profit and sales as demand for its specialised computer chips that power AI systems remains robust

Nvidia on Wednesday reported a surge in third-quarter profit and sales as demand for its specialised computer chips that power artificial intelligence systems remains robust.

For the three months that ended October 27, the tech giant based in Santa Clara, California, posted revenue of $35.08 billion, up 94% from $18.12 billion a year ago.

Nvidia said it earned $19.31 billion in the quarter, more than double the $9.24 billion it posted in last year’s third quarter. Adjusted for one-time items, it earned 81 cents a share.

Wall Street analysts had been expecting adjusted earnings of 75 cents a share on revenue of $33.17 billion, according to FactSet.

Investors took the results in stride, however, and Nvidia’s high-flying stock slipped about 1% in after-hours trading. Shares in Nvidia Corp. are up 195% so far this year. Nvidia said it expects fourth quarter revenue to grow to $37.5 billion, plus or minus 2%. Analysts are expecting, on average, $37.09 billion.

“The age of AI is in full steam, propelling a global shift to Nvidia computing,” Jensen Huang, founder and CEO of Nvidia, said in a statement.

Nvidia’s third-quarter data center revenue was $30.8 billion, up 112% from a year ago. That growth was driven by demand for the Hopper computing platform for large language models, recommendation engines and generative AI applications, the company said.

Analysts’ were eyeing Nvidia’s guidance on its Blackwell graphics processor unit, a next-generation artificial intelligence chip that's seen demand from companies like OpenAI and others building AI data centers.

Nvidia Chief Financial Officer Colette Kress said Blackwell production shipments are scheduled to begin in the fourth quarter of fiscal 2025 and will continue to ramp into fiscal 2026.

On an earnings call Wednesday, Kress told investors that both Hopper GPU and Blackwell systems “have certain supply constraints, and the demand for Blackwell is expected to exceed supply for several quarters in fiscal 2026.”

“Every customer is racing to be the first to market,” Kress said. “Blackwell is now in the hands of all of our major partners, and they are working to bring up their data centers.”

The company, seen as a bellwether for AI demand, will deliver “more Blackwells than we had previously estimated” this quarter, Huang added.

Nvidia has led the artificial intelligence sector to become one of the stock market’s biggest companies, as tech giants spend heavily on the company’s chips and data centres needed to train and operate their AI systems.

The company carved out an early lead in AI applications race, in part because of Huang’s successful bet on the chip technology used to fuel the industry. The company is no stranger to big bets. Nvidia’s invention of graphics processor chips, or GPUs, in 1999 helped spark the growth of the PC gaming market and redefined computer graphics. The company's third-quarter gaming revenue rose to $3.3 billion, an increase of 15% from a year ago.

Nvidia's fourth-quarter guidance was “a little bit disappointing,” said David Volpe, senior fund manager at Emerald Insights Fund, but the company still had “a tremendous quarter."

“There’s nothing touching it in terms of the growth,” Volpe said.

Demand for generative AI products that can compose documents, make images and serve as personal assistants has fueled sales of Nvidia’s specialised chips over the last year. Nvidia, the most valuable publicly traded company by market cap as of Wednesday morning, is now worth over $3.5 trillion, with analysts closely monitoring Nvidia's path to $4 trillion.

Dan Ives, an analyst with Wedbush Securities, said the earnings report shows “the AI Revolution is still in the early innings of playing out.”

“We view this as a Nvidia earnings press release that should be hung in the Louvre,” Ives said. “Blackwell demand is just beginning. Any sell off (in Nvidia's stock) we would view as short lived, with our view this is a $4 trillion market cap in 2025 as the Godfather of AI Jensen (Huang) drives this spending wave.”

Through the year’s first six months, Nvidia’s stock soared nearly 150%. At that point, the stock was trading at a little more than 100 times the company’s earnings over the prior 12 months. That’s much more expensive than it’s been historically and than the S&P 500 in general.

“The age of AI is upon us," Huang said on the call. "And it’s large and diverse.”

Published - November 21, 2024 09:21 am IST