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Nvidia, the chip-making titan, has been riding the AI wave like no other company. But its latest earnings report hints at a deceleration. While the numbers are still impressive, they reveal that the breakneck growth Nvidia has enjoyed might be settling into a steadier pace. Let’s break it down.
The Big Picture
For the third quarter ending October 27, Nvidia smashed expectations for both earnings and revenue. Adjusted earnings per share came in at 81 cents, beating the 75 cents analysts had projected. Meanwhile, revenue surged to $35.08 billion, comfortably ahead of the $33.16 billion estimate. And for the current quarter, Nvidia has guided a revenue forecast of $37.5 billion, plus or minus 2%.
Now, these figures are nothing short of spectacular. Year-on-year revenue growth hit 94%. However, that’s a noticeable slowdown from the triple-digit growth rates Nvidia posted in the past three quarters—122%, 262%, and 265%, respectively.
The market wasn’t thrilled. Nvidia’s shares slipped 2% in after-hours trading. Investors seem to be grappling with the reality that while Nvidia is still growing at an exceptional rate, sustaining the lofty expectations set by its AI dominance is becoming harder.
The AI-fueled Data Center Juggernaut
Nvidia owes its meteoric rise to the AI revolution. The company’s data center business, which includes its powerful AI processors, generated a whopping $30.8 billion in revenue for the quarter. That’s a 112% jump compared to last year. Analysts had expected $28.82 billion, but Nvidia breezed past that.
Interestingly, not all of this came from chips. About $3.1 billion of data center revenue was attributed to networking parts—a critical component for building out AI infrastructure.
The star of the show? Nvidia’s next-generation AI chip, Blackwell. It’s in full production, and 13,000 samples have already been shipped to major clients like Microsoft, Google, and Meta. Demand for Blackwell is so high that Nvidia expects sales for the chip to exceed supply well into fiscal 2026. In fact, Nvidia CFO Colette Kress revealed that the company expects “several billion dollars” in Blackwell revenue in Q4 alone.
However, challenges remain. Blackwell chips have faced reports of overheating in servers, and Nvidia has been dealing with supply constraints at its manufacturing partner TSMC. While CEO Jensen Huang dismissed concerns about overheating and highlighted ongoing improvements in production yields, it’s clear that scaling up Blackwell’s supply will be a significant task.
NVIDIA Q Fiscal Earnings Report
- NVIDIA has announced its Q3 results revealing record revenue driven by surging for AI and data center solutions.
- The company’s Q3 results in 2024 showed revenue of over $ 35 billion, marking a 17% sequential growth and a 94% increase year-over-year.
- Following the announcement, NVIDIA shares saw fluctuations due to broader market trends, even as NVIDIA stock remains a strong performer in the AI sector.
Gaming and Beyond
While AI hogs the spotlight, Nvidia’s gaming segment continues to be a steady performer. Revenue here hit $3.28 billion, surpassing expectations of $3.03 billion. This growth was driven by demand for GPUs in PCs and laptops and increased chip sales for gaming consoles like the Nintendo Switch.
Meanwhile, Nvidia’s smaller business segments—automotive and professional visualization—also showed strong growth. Automotive sales rose 72% year-on-year to $449 million, buoyed by demand for self-driving car chips. Professional visualization, which includes chips for high-end workstations, saw a 17% increase, generating $486 million.
The Profitability Game
Net income for the quarter stood at $19.3 billion, up from $9.24 billion a year ago. Gross margins rose to 73.5%, slightly above expectations. Nvidia attributes this to its focus on higher-margin data center chips. Adjusted gross margins came in at 75%, as expected.
However, the rollout of Blackwell is expected to dent margins in the short term. The initial gross margins for Blackwell are in the low 70% range but are expected to improve as production ramps up.
Stock Performance and Industry Trends
- Nvidia’s stock exhibited post-earnings volatility, largely influenced by border market reactions to Alphabet’s earnings report and other major tech sector trends.
- The stock increase earlier in the year was fueled by growing AI adoption, but rising costs have posed new challenges.
- AI investments are also impacting other markets, with gaming company stocks in India seeing varied responses based on AI integration in their business models.
The Slowdown
Despite the impressive numbers, Nvidia’s growth rate is undeniably slowing. For the current quarter, the company expects 69.5% year-on-year growth—a sharp drop from the 94% posted this quarter.
Part of the issue is the sky-high expectations Nvidia has set for itself. As Carson Group strategist Ryan Detrick put it, “When the bar is this high, it makes things just that much tougher.”
Another factor is supply chain bottlenecks. TSMC’s limited capacity for advanced manufacturing techniques has constrained Nvidia’s ability to meet surging demand. And while the company is working on fixing these issues, growth will likely remain somewhat tempered in the near term.
What Lies Ahead
Nvidia remains a critical player in the AI revolution. The company’s chips are the backbone of the massive data centers powering generative AI models. With big tech companies like Microsoft and Meta pouring billions into AI infrastructure, Nvidia is positioned to reap the rewards.
But the path forward isn’t without challenges. Supply chain issues, intensifying competition, and the sheer difficulty of maintaining sky-high growth rates will test Nvidia’s resilience.
For now, Nvidia’s story is still one of remarkable growth, innovation, and dominance. But as the AI boom matures, the company will need to navigate a new reality—one where expectations are as colossal as its achievements.
- The Q3 results showed a profit beat, but analysts are now looking ahead to the Q4 results 2024 date.
- Q4 results are expected to be strong, with revenue projected to be $37.5 billion, reflecting continued momentum in AI-driven demand.
Conclusion
NVIDIA’s Q3 earnings showcase strong revenue growth, however, market reactions suggest concerns over sustainability. While AI demand remains high, rising production costs and macroeconomic factors could impact future momentum. The company’s long-term prospects still look promising, but investor caution is growing. The coming quarters will determine whether AI growth continues at its current pace or begins to stabilise.
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