NVIDIA’s record quarterly revenue was fueled by record revenue at data centers, where its AI chips are in high demand.
NVIDIA (NASDAQ:NVDA) recorded strong results in its fiscal third quarter, generating record revenue and posting a 111% spike in earnings.
The AI chipmaker, which recently became the most valuable company in the world, posted record revenue of $35.1 billion, up 94% year-over-year and 17% from the previous quarter. This beat the consensus estimate among analysts of $33.1 billion.
Net income spiked 109% year-over-year to $19.3 billion, which was 16% higher than it was in the previous quarter. That resulted in earnings per share (EPS) of 78 cents, which was an 111% increase over the same quarter a year ago and 16% higher than Q2. Wall Street analysts had estimated EPS of 74 to 75 cents.
Expectations are always high for NVIDIA, so the price initially fell in post-market trading after earnings were announced Wednesday afternoon. But NVIDIA shares opened about 2% higher on Thursday at around $149 per share before dropping later in the morning.
“Full steam” ahead for Blackwell chips
NVIDIA’s record third quarter results were fueled, as usual, by data centers. NVIDIA generated $30.8 billion in revenue from data centers, a record for the company. Data center revenue rose 112% year-over-year and 17% from the previous quarter. Data centers accounted for 88% of NVIDIA;’s total revenue in the quarter.
NVIDIA CFO Colette Kress said the data center surge was driven by demand for its Hopper computing platform for training and inferencing of large language models, recommendation engines, and generative AI applications.
Cloud service providers made up roughly 50% of NVIDIA’s data center revenue, with the rest coming from consumer internet and enterprise companies. Data center compute revenue accounted for $27.6 billion of the total, a 132% jump from a year ago, while networking revenue rose 20% year-over-year to $3.1 billion, but was down 15% from the previous quarter.
Kress noted that the company is preparing for its next phase of data center architecture powered by the new next-generation Blackwell chips, which are faster than previous models.
Blackwell production shipments began this quarter, as about 13,000 chips have already been sent to customers, including Microsoft, Oracle, and OpenAI. Shipments will ramp up in the next fiscal year. Kress said that demand for the Blackwell systems is expected to exceed supply for several quarters in the next fiscal year.
“Blackwell demand is staggering, and we are racing to scale supply to meet the incredible demand customers are placing on us,” Kress said on the earnings call.
NVIDIA CEO Jensen Huang added that NVIDIA will deliver more shipments of the Blackwell chips than previously estimated.
“The age of AI is in full steam, propelling a global shift to NVIDIA computing,” Huang said. “Demand for Hopper and anticipation for Blackwell — in full production — are incredible as foundation model makers scale pretraining, post-training and inference.”
Q4 outlook sees slower growth
In the fiscal fourth quarter, NVIDIA anticipates revenue of $37.5 billion, which would be 7% higher than the third quarter. It was slightly above revenue estimates, but the slower growth pace may have caused the stock price to drop slightly on Thursday.
Further, NVIDIA anticipates a gross margin of 73%, and 73.5% on a non-GAAP basis. This is below the 74.6% gross margin in Q3.
Kress explained on the earnings call that this is due to the costs associated with the ramp up of the Blackwell chips. She said to expect gross margins in the low 70s through the first half of the year, gradually moving back to the mid-70 percent range in the second half of the next fiscal year.
The outlook may have been slightly disappointing to some investors, but NVIDIA got several price upgrades from analysts, including Mizuho, which boosted the target to $175, and Evercore, which raised it to $190 per share.
The median target prior to the Q3 release was $150 per share, so we’ll see how that shifts after these upgrades are factored in.
As of mid-morning, NVIDIA stock was down about 1%, after opening slightly higher. The P/E ratio has come down a bit to 57, from 74 in the previous quarter, but it is still much higher than the Nasdaq average. Year-to-date, NVIDIA stock has returned 192%.
