Nvidia witnessed a remarkable 262 per cent surge in revenue last quarter, driven by unprecedented sales of artificial intelligence chips, and announced a stock split that propelled shares over 6 per cent in after-hours trading, surpassing the $1,000 per share milestone for the first time.
“Nvidia has pulled out the big guns yet again, with a strong set of results that has clearly hit the mark. The main concern going into the numbers was that given recent capex guidance from the hyperscale businesses, detailing strong demand for Nvidia’s products, and its next-gen product range (Blackwell), expectations were hugely elevated,” said Chris Weston, Head of Research at Pepperstone.
“We can also add to the mix the fact that Nvidia is a core holding for almost all investment funds, so it is well-owned and rightly so, AI is the biggest theme to hit the tech world in 20-odd years, and it’s only getting bigger as we look to price futures earnings based on where this could evolve to in 5-10 years.”
Looking ahead, Nvidia has forecasted a revenue of $28 billion for the fiscal second quarter, surpassing analysts’ earlier estimates of $26.66 billion.
The first quarter already showcased the company’s phenomenal performance, with revenue hitting $26.04 billion, a monumental leap of 262 per cent from the previous year, surpassing estimates of $24.65 billion. Moreover, the net income witnessed an astounding surge of 628 per cent, reaching $14.88 billion.
The surge in demand for Nvidia’s graphics processing units (GPUs), essential for powering AI applications, has been a significant driver behind this surge in sales.
Major players in the tech industry, including Google, Microsoft, Meta, Amazon, and OpenAI, have collectively invested billions in these advanced and high-value chips.
Sales within Nvidia’s data centre segment, its primary revenue generator, soared by 427 per cent to $22.6 billion in the first quarter, surpassing expectations.
While Nvidia anticipates a slightly lower adjusted gross margin of 75.5 per cent for the second quarter compared to the analyst consensus of 75.8 per cent, it still demonstrates a robust performance compared to competitors like AMD.
Excluding certain items, Nvidia’s earnings per share for the first quarter stood at $6.12, surpassing expectations of $5.59. The company’s quarterly earnings report has become a key barometer for investors, offering insights into the strength of the ongoing AI boom in the market.
On a positive note, chipmaker Analog Devices also experienced a surge in its shares by 10.86 per cent after projecting higher-than-expected revenue for the third quarter.
With Nvidia shares already witnessing a meteoric rise of over 90 per cent since the beginning of the year, the announcement of a 10-for-1 stock split has further energized investor sentiment following the impressive quarterly results.
“We raise our fair value estimate to $1,050 from $910 as we model stronger data centre revenue growth over the next several quarters while maintaining our longer-term growth rates from a higher installed base of AI equipment,” said Brian Colello, Strategist at Morningstar.
“Shares were up about 6 per cent on the earnings report, and we think the reaction is justified and view shares as fairly valued.”
Jefferies analysts also raised their price target for Nvidia to $1350 from $1200, stating that it “remains a top pick with upside to estimates as capacity rises.”