NVIDIA Q3 Results

NVIDIA reported impressive Q3 results on Wednesday, driven by surging demand for its AI chips, with revenue nearly doubling. However, its stock dropped 3% in after-hours trading, reflecting investor hesitation despite improved forecasts.

For the quarter ending October 27, the company posted revenue of $35.08 billion, a staggering 94% increase from $18.12 billion in the same period last year. Net income soared to $19.31 billion, more than doubling from $9.24 billion a year earlier. Adjusted earnings per share (EPS) were $0.81, beating Wall Street's estimate of $0.75, while revenue surpassed expectations of $33.17 billion, according to FactSet.

NVIDIA's stock has surged 195% this year, showcasing its pivotal role in the AI boom. The company projected Q4 revenue of $37.5 billion, slightly ahead of analysts' estimates of $37.09 billion, as reported by the Associated Press.

"The era of AI is in full swing, driving a global shift to NVIDIA computing," said NVIDIA's founder and CEO Jensen Huang.

Performance vs. Analyst Expectations

• EPS: Adjusted $0.81 per share, beating the $0.75 estimate
• Revenue: $35.08 billion, exceeding the $33.16 billion forecast

NVIDIA expects Q4 sales of approximately $37.5 billion, plus or minus 2%, compared to the $37.08 billion projected by analysts surveyed by the London Stock Exchange.

Q4 guidance suggests a year-over-year revenue growth of about 70%, lower than the 265% annual growth seen in the same period last year.

Revenue Growth Slowing

While NVIDIA's revenue rose 94% year-over-year in the quarter ending October 27, the pace of growth has decelerated compared to the prior three quarters, which saw increases of 122%, 262%, and 265%, respectively.

AI Leadership

NVIDIA has been a major beneficiary of the AI boom, with its stock nearly tripling in 2024, making it one of the most valuable publicly traded companies.

The growth is driven by NVIDIA’s data center business, which accounted for the bulk of its revenue through AI processor and related component sales. Data center revenue rose to $30.8 billion, a 112% increase from last year, surpassing StreetAccount analysts’ estimate of $28.82 billion. About $3.1 billion of data center sales came from networking components.

Net income for the quarter surged to $19.3 billion, or $0.78 per share, from $9.24 billion, or $0.67 per share, a year earlier. Gross margin rose to 73.5%, slightly above analysts’ expectations, driven by higher sales of data center chips.

Blackwell Chips and Future Supply

Many of NVIDIA's key customers, such as Microsoft, Oracle, and OpenAI, have begun receiving its next-generation Blackwell AI chips. CFO Colette Kress revealed during a call with analysts that 13,000 samples of the chip had already been delivered to customers. CEO Jensen Huang confirmed in a statement that Blackwell is now in "full production."

Kress mentioned that Blackwell's Q4 revenue may exceed prior "multi-billion-dollar" expectations as the company ramps up supply.

"Every customer is racing to secure their market position," said Kress. "All major partners have now adopted Blackwell and are working to build their data centers."

Blackwell shipments are expected to significantly increase next year, with Kress reiterating that the company is on track to achieve "multi-billion-dollar" Blackwell revenue in Q4. NVIDIA also noted that sales of its current-generation H200 AI chips saw a sharp increase during the quarter.

Kress acknowledged supply constraints for both Hopper and Blackwell systems, predicting demand for Blackwell to outstrip supply well into fiscal 2026.

Gaming Business

NVIDIA’s gaming revenue reached $3.28 billion, exceeding StreetAccount’s forecast of $3.03 billion. The growth was attributed to increased demand for GPUs in PCs and laptops, as well as higher sales of gaming console chips. NVIDIA’s chips power the Nintendo Switch.

Outlook on AI Leadership

Analysts see the Blackwell chips as critical to NVIDIA maintaining its AI leadership. Early adopters, including companies like OpenAI, demonstrate robust demand. Huang emphasized that NVIDIA would deliver more Blackwell chips this quarter than initially expected, highlighting the strong market appetite.

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