Record Quarterly Revenue, Profits For Second Straight Quarter

Topline

Nvidia reported another period of blockbuster results Tuesday afternoon, as the Silicon Valley chip titan’s exponential growth continues amid the artificial intelligence explosion.

Nvidia’s headquarters in Santa Clara, California. Nvidia is the hottest stock on the S&P 500 this … [+] year.

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Key Facts

Nvidia brought in $18.1 billion in revenue for the three-month period ending Oct. 29, shattering last quarter’s record sales of $16.2 billion and coming in 206% above the same period last year.

Profits also boomed, as Nvidia raked in $4.02 earnings per share and $9.2 billion in net income, similarly shattering the record $2.48 earnings per share and $6.2 billion profit set during the second quarter.

Average analyst forecasts for earnings per share and sales were $3.37 and $16.2 billion, according to FactSet.

Largely driving Nvidia’s earnings growth was expansion in its AI-heavy datacenter unit, which brought in $14.5 billion of revenue last quarter, a year-over-year increase of 279%.

The company said it expects fourth-quarter revenue to come in at about $20 billion, topping analyst estimates of $18 billion.

Despite the strong results and guidance, Nvidia stock slipped in afternoon trading as investors appeared to latch onto perhaps the sole blemish in the earnings report: a cautionary note from Nvidia’s Chief Financial Officer Colette Kress warning about a “significant” decline in Nvidia datacenter sales to Chinese firms due to new U.S. regulations.

Big Number

1,259%. That’s how much Nvidia’s profit expanded last quarter on an annual basis.

Crucial Quote

Nvidia “stands in a league of its own when it comes to software and AI solutions,” Rosenblatt analyst Hans Mosesmann wrote in a Monday note previewing earnings. Mosesmann’s $1,100 12-month price target for Nvidia shares is the highest of any analyst tracked by FactSet, projecting the stock to more than double from its $499 closing price Tuesday.

Contra

As implied by Nvidia’s nearly $900 billion explosion in market capitalization this year, there are few outspoken skeptics of the company’s ability to further translate the AI boom into shareholder value. But Nvidia’s valuation remains lofty: Its roughly 120 share price to 12-month earnings ratio before Tuesday’s market close was far higher than the average S&P 500 companies’ price-to-earnings ratio of about 20. To further put into perspective, the $1 trillion American company with the next highest price-to-earnings ratio is Microsoft, at about 35.

Key Background

Nvidia sells the semiconductor chips powering much of the generative AI technology, including the Microsoft-backed ChatGPT maker OpenAI. Nvidia first went public in 1999 during the dot-com boom, and its valuation has surged by roughly 40,000% over the past two decades from below $3 billion to $1.2 trillion. Jensen Huang, Nvidia’s co-founder and CEO of three decades, has accordingly enjoyed a meteoric rise in his net worth, last estimated by Forbes at north of $44 billion, the 46th-largest in the world.

Tangent

Nvidia earnings come during a particularly eventful few days in AI. On Friday, OpenAI’s board of directors fired its CEO Sam Altman to the surprise of employees, investors and Microsoft alike. Microsoft announced Monday that Altman will lead a new AI unit at Microsoft, though Bloomberg reported Tuesday that Altman may still rejoin OpenAI as CEO after 95% of OpenAI’s employees threatened to resign over Altman’s ouster.