Nvidia reports 122% revenue growth on surging demand for data center chips

Nvidia reported earnings after the bell that beat Wall Street expectations, and provided stronger-than-expected guidance for the current quarter.

Nvidia shares fell 8% in extended trading.

Here is how the company did versus LSEG consensus expectations:

Nvidia said it expects about $32.5 billion in current-quarter revenue, versus $31.7 billion expected by analysts, according to StreetAccount. That would be an increase of 80% from a year earlier.

Revenue continues to surge at the chipmaker, rising 122% on an annual basis during the quarter, following three straight periods of year-over-year growth in excess of 200%.

Net income more than doubled to $16.6 billion, or 67 cents per share, in the quarter, from $6.18 billion, or 25 cents per share, in the year-ago period. 

Nvidia has been the primary beneficiary of the ongoing artificial intelligence boom. Nvidia shares are up more than 150% this year after soaring almost 240% in 2023. Its market cap recently eclipsed $3 trillion, and Nvidia was briefly the most valuable public company in the world, though it is now second to Apple.

Revenue in Nvidia’s data center business, which includes its AI processors, climbed 154% from a year earlier to $26.3 billion, accounting for 88% of total sales. It also topped StreetAccount expectations of $25.24 billion.

Not all of those sales are AI chips. Nvidia said Wednesday that $3.7 billion in revenue came from the company’s networking products.

Much of its business is targeted at a handful of cloud service providers and consumer internet companies including Microsoft, Alphabet, Meta and Tesla. Nvidia’s chips, such as the H100 and H200, are used in the vast majority of generative AI applications, such as OpenAI’s ChatGPT.

Many customers are waiting for Nvidia’s next-generation AI chip, called Blackwell. Nvidia said it shipped samples of Blackwell chips during the quarter, and made a change to the product to make it more efficient to manufacture.

“In the fourth quarter, we expect to ship several billion dollars in Blackwell revenue,” Nvidia Chief Financial Officer Colette Kress said on a call with analysts.

“The change to the mask is complete. There were no functional changes necessary,” Nvidia CEO Jensen Huang said on the call.

“When I said start production in Q4, I mean shipping out. I don’t mean starting to ship,” he continued.

However, Nvidia said it expected the current-generation chip, called Hopper, to increase total shipments for the next two quarters, as opposed to taper off.

“Hopper demand remains strong, and the anticipation for Blackwell is incredible,” said Huang in the press release. Nvidia noted that supply for Hopper is becoming more available while Blackwell is still in short supply.

Nvidia said its gross margin slipped in the quarter to 75.1% from 78.4% in the prior period, though it is still up from 70.1% a year ago. For the full year, the company said it expects gross margins to be in the “mid-70% range.” Analysts were expecting a full-year margin of 76.4%, according to StreetAccount.

Nvidia’s gaming business used to be the company’s primary focus before the data center took off. Gaming revenue increased 16% from a year ago to $2.9 billion, beating StreetAccount’s estimate of $2.7 billion. The company said it was partially due to increased PC gaming card shipments as well as “game console SOCs.” Nvidia provides chips for Nintendo’s consoles.

Nvidia also makes chips for high-end graphic designers as well as cars and robots. The company’s professional visualization business rose 20% and reported $454 million in revenue. Nvidia reported $346 million in automotive and robotics revenue, versus StreetAccount expectations of $344.7 million. 

Nvidia also said it approved $50 billion in additional share buybacks.