Nvidia Earnings Q2 FY25 results: Key Takeaways

Nvidia recently reported earnings that exceeded Wall Street expectations, along with stronger-than-expected guidance for the current quarter. The company’s performance compared to LSEG consensus expectations is as follows:

Earnings per share: Nvidia reported 68 cents per share (adjusted), beating expectations of 64 cents. This reflects strong profitability for the quarter.

Revenue: Nvidia generated $30.04 billion in revenue, surpassing the expected $28.7 billion. This highlights the company’s robust sales performance.

Source: CNBC, Nvidia

Current-quarter revenue forecast: Nvidia projected $32.5 billion in revenue for the next quarter, ahead of the expected $31.7 billion, indicating anticipated strong growth of 80% year-over-year.

Revenue growth: The company’s revenue surged by 122% annually during the quarter, continuing its impressive growth trajectory.

Net income: Nvidia’s net income more than doubled to $16.6 billion (67 cents per share) from $6.18 billion (25 cents per share) a year ago, showcasing significant profitability growth.

Gross margin: The gross margin slipped to 75.1% from 78.4% in the prior quarter, though it remained above the 70.1% from a year ago, indicating slightly lower profitability per unit sold compared to the previous quarter.

Segment wise performance

Data center revenue: Revenue from Nvidia’s data center business, including AI processors, rose by 154% year-over-year to $26.3 billion, making up 88% of total sales. This underscores the strength of Nvidia’s AI-related business.

Networking products revenue: Nvidia reported $3.7 billion in revenue from networking products, contributing to its overall growth.

Gaming revenue: Nvidia’s gaming revenue increased by 16% year-over-year to $2.9 billion, driven by higher PC gaming card shipments and contributions from game console chips.

Professional visualization revenue: This segment grew by 20%, reaching $454 million, reflecting strong demand in the high-end graphics design market.

Automotive and robotics revenue: Nvidia reported $346 million in revenue from its automotive and robotics segment, in line with expectations.

Additional share buybacks: Nvidia approved $50 billion in additional share buybacks, signaling confidence in the company’s future and returning value to shareholders.

Nvidia’s business is heavily concentrated among a few major cloud service providers and consumer internet companies, including Microsoft, Alphabet, Meta, and Tesla. Nvidia’s chips, such as the H100 and H200, are widely used in generative AI applications, including OpenAI’s ChatGPT.

Many customers are awaiting Nvidia’s next-generation AI chip, called Blackwell. Nvidia indicated that it shipped samples of Blackwell chips during the quarter and made a change to the product to improve manufacturing efficiency. 

Nvidia CFO Colette Kress stated that the company expects to generate several billion dollars in revenue from Blackwell chips in the fourth quarter of fiscal year 2025.

CEO Jensen Huang clarified that production of Blackwell chips will begin in the fourth quarter, and that current-generation Hopper chips will continue to see strong demand.

Nvidia reported a gross margin of 75.1% for the quarter, down from 78.4% in the prior period but up from 70.1% a year ago. The company expects full-year gross margins to be in the “mid-70% range,” with analysts predicting a full-year margin of 76.4%, according to StreetAccount.

Nvidia has also begun shipping samples of its new Blackwell AI chips, with production expected to ramp up in fiscal Q4, ending January 2025. The company anticipates several billion dollars of revenue from Blackwell chips in FY25 Q4.

Although Nvidia faced concerns about potential design flaws in the Blackwell chip that delayed production, the company’s outlook indicates that these issues have been addressed without significant impact on production.

Overall, Nvidia’s results and outlook confirm a likely continuation of AI-driven investment, with the company maintaining its leading market position. The company’s FY26 free cash flow is expected to be around $85 billion, which equates to a 12-month free cash flow yield of approximately 3%.

Why is the share price falling?

Despite this, Nvidia shares declined by 8% in extended trading. 

Its share price declined as its quarterly forecast on Wednesday did not align with the expectations of analysts.

“Here’s the issue,” said Ryan Detrick, Chief Market Strategist at the Carson Group. “The size of the beat this time was much smaller than we’ve been seeing.” He added, “Even future guidance was raised, but again not by the tune from previous quarters. This is a great company that is still growing revenue at 122%, but it appears the bar was just set a tad too high this earnings season.”

Nvidia’s revenue and gross margin forecast for the current quarter were close to analysts’ expectations but didn’t surpass them by the wide margins seen in the past. This overshadowed a beat on second-quarter revenue and adjusted earnings, as well as the announcement of a $50 billion share buyback.

In the last three quarters, Nvidia has posted revenue growth exceeding 200%. However, the company’s ability to surpass estimates is increasingly at risk as Wall Street continues to raise targets with each success.

Shares in other chipmakers, including Advanced Micro Devices (AMD) and Broadcom, fell nearly 4%, while Asian chipmakers like SK Hynix and Samsung also saw declines. 

According to Reuters, Nvidia’s outlook is crucial, given its stock has surged over 150% this year, adding $1.82 trillion to its market value and lifting the S&P 500 to new highs. If after-hours losses hold, Nvidia could lose $175 billion in market value.

This forecast has sparked concerns about the slow payoffs from generative AI investments, with some investors fearing that tech giants might rethink the billions of dollars they’re spending on data centers. Nvidia’s biggest customers—Microsoft, Alphabet, Amazon, and Meta Platforms—are expected to incur more than $200 billion in capital expenditures in 2024, most of which is meant for building AI infrastructure.

“It’s a reflection of growing investor jitters about the long-term viability of the generative AI market, with the entire market seemingly hinging on Nvidia’s performance,” said eMarketer analyst Jacob Bourne.

Nvidia is also facing regulatory scrutiny about its practices. The company revealed in its quarterly filing that it has received requests for information from regulators in the U.S. and South Korea regarding “sales of GPUs, our efforts to allocate supply, foundation models, and our investments, partnerships, and other agreements with companies developing foundation models.” Previously, the company had noted inquiries only from the EU, UK, and China. 

Last month, Reuters reported that France’s antitrust regulator was set to charge Nvidia with alleged anticompetitive practices. Additionally, there are reports that U.S. regulators are probing whether Nvidia was trying to bundle its networking equipment with its sought-after AI chips.

Why Nvidia Earnings Are So Important for the Market

Nvidia Corporation is a multinational technology company that introduced and innovated the graphics processing unit (GPU). The company has continued to deliver leading-edge graphics developments through its groundbreaking GPU efforts, evolving into a full-stack (from front-end to back-end) computing infrastructure company that is reshaping how complex computing for diverse purposes is accomplished. 

Nvidia designs and manufactures GPUs for gaming, cryptocurrency mining, and professional applications, as well as chip systems for use in vehicles, robotics, and other tools. AI has become a major focus, and the Compute and Networking business segment, which includes AI, has become the source of its greatest revenue.

It is the primary beneficiary of the artificial intelligence boom as it holds 90% market share in AI chip segments, and Nvidia has seen its market cap expand by about ninefold since the end of 2022. However, its growth has not been linear, after reaching a record high in June and briefly becoming the world’s most valuable public company, Nvidia proceeded to lose almost 30% of its value over the next seven weeks, shedding roughly $800 billion in market cap. Currently, it’s in the midst of a rally that’s pushed the stock within about 6% of its all-time high.

Any indication that AI demand is waning or that a leading cloud customer is modestly tightening its belt could translate into significant revenue slippage. “It’s the most important stock in the world right now,” EMJ Capital’s Eric Jackson told CNBC’s “Closing Bell” last week.

Nvidia’s October-quarter forecast was critical for justifying the company’s stock price. Analysts were looking for 71 cents in earnings per share on $31.8 billion in sales, which would be about 77% annual revenue growth. 

Investors will also wanted to hear when Nvidia’s next-generation Blackwell AI chips will launch. Earlier this year, Nvidia CEO Jensen Huang said the company will see “a lot” of revenue from the new chips this year, but analysts and media reports suggest that the new chips may be delayed. Even with a potential Blackwell delay, that revenue could be pushed into a future quarter while boosting current-generation Hopper sales, especially the newer H200 chip.

Nvidia is “the most important stock on planet Earth,” the Goldman Sachs trading desk once said. Nvidia is expected to hit $28.7 billion in revenue for the second quarter of fiscal year 2025, which ended on July 30—a 112.6% increase from the $13.5 billion reported last year. Analysts also predict that Nvidia will post earnings per share of $0.65 compared to $0.27 last year.

Lukman Otunuga, senior market analyst at trading broker FXTM, Otunuga says that Nvidia faces challenges like competition from AMD and Intel and recent shipment delays to one of its new AI chips. Nvidia has grown over 1,000% since October 2022, but that growth hasn’t been linear. After reaching the top of the market cap charts in June and becoming the most valuable company in the world, Nvidia plunged in value and lost about $900 billion in market cap over the next seven weeks.

The stock has since rebounded and added hundreds of billions of dollars in market value, but its volatility remains a concern for Wall Street. Nvidia’s top clients also include other members of the “Magnificent Seven,” a group of top-performing tech companies including Meta, Amazon, and Google that rely on Nvidia for AI chips. This means Nvidia’s performance could affect its peers.

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