Wednesday night, NVIDIA (NVDA) reported numbers that beat Wall Street expectations for a fourth consecutive quarter. EPS of $1.87 beat Wall Street consensus estimates of $1.77, while revenue of $81.6 billion came in ahead of the $79 billion consensus. Meanwhile, gross margins were inline with Wall Street estimates at a juicy 75% while Q2 forward guidance came in slightly above consensus at $89.1 billion to $92 billion versus $87 billion consensus.
The biggest news to break from the report is that NVIDIA will split into two reporting segments: data center and edge computing. NVIDIA’s reason for the transition is to better reflect where its growth is actually coming from. The move highlights how NVIDIA is transitioning to beyond just a GPU company. Instead, it’s becoming a full infrastructure powerhouse. One prominent example is that data center networking revenue bolted to $14.8 billion, up 199% from a year ago and 35% sequentially.
CEO Jensen Huang noted that while supply chain capacity has scaled beautifully over the last few quarters to meet demand, the appetite for high-performance cluster computing is staying ahead of supply. Additionally, Vera Rubin and Blackwell, NVIDIA’s next-generation platforms are progressing rapidly, ensuring that the company remains the dominant player in the space.
Despite another blockbuster quarter, NVIDIA shares were little changed in after-hours trading. The reason for this is threefold in my view:
1. Size: With a market cap of more than $5 trillion, it’s difficult to move the needle.
2. Expectations Priced In: By now, the story of extreme spending on AI infrastructure and GPUs is well known on Wall Street and thus priced in.
3. Pre-EPS Run: NVDA shares ran from the mid-160s to $230 prior to earnings.
In addition to its high-quality earnings, NVIDIA authorized a large $80 billion share buyback program, demonstrating confidence in its ongoing cash generation.
Bottom Line
NVIDIA remains the undisputed AI leader. That said, due to high expectations and its sheer size, it’s no longer the fastest horse. Nevertheless, the long-term bull case remains firmly intact.
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