NVIDIA (NVDA) earnings report was eagerly expected by the market. There were fears that the current AI bull run was only a fad without any business reasoning behind. A miss would have affected the market and especially the technology companies that were the backbone of the current market rally, writes eToro analyst for Romania, Bogdan Maioreanu.
But late last night, the financial reports of NVIDIA dispelled this fear. The company exceeded expectations, with revenue climbing to 13.5 billion dollars, up more than 100% year-over-year, whilst earnings jumped by more than 400% to 4.29 dollars per share. NVIDIA’s share price increased by almost 10% after hours, exceeding 500 USD.
The market had expected NVIDIA’s revenue from the Data Centers to exceed 8 billion dollars. This was important to validate the thesis that AI is not only a nice tool like Chat GPT or Midjourney but also generates an increasing need of performance hardware capable of fast data processing especially in Data Centers. NVIDIA exceeded expectations, posting record Data Center revenue of 10.32 billion dollars, up 141% from Q1 and up 171% from a year ago.
NVIDIA’s GPUs (Graphic Processing Unit) handle a range of tasks in data centers, including machine learning training and operating machine learning models. Organizations also use NVIDIA GPUs to speed up calculations in supercomputing simulations. Currently, the AI market is relatively homogenous at the server infrastructure level, with NVIDIA holding about 95% of the GPU market for machine learning.
But this situation did not happen overnight. Jensen Huang, now the chief executive of NVIDIA, was one of its founders back in 1993. Then, NVIDIA was focused on making graphics better for gaming and other applications. In 2007, NVIDIA announced CUDA, a software layer allowing general computing using the GPU. This happened after Stanford University researchers found in 2006 that GPUs can accelerate mathematics operations in a way computer processor units cannot. This was the beginning of “accelerated computing.” Today, what started as CUDA became the backbone of AI.
While Gaming was NVIDIA’s main target at the beginnings of the company, from a revenue standpoint now it is second. In the last quarter, Gaming revenue was 2.49 billion dollars, up 11% from the previous quarter and up 22% from a year ago.
But the road ahead is not simple for NVIDIA as it will face stiffer competition from other companies like AMD, Qualcomm and Intel. And this means that maintaining current supremacy will require increasing R&D expenses. Meanwhile, the latest data is showing a clear domination of the accelerated computing field with the company increasing their total revenue guidance to 16 billion dollars with gross margins over 70% in the current quarter.
These results affirm that AI isn’t just hype and ultimately marks a pivotal moment not just for NVIDIA, but for the broader tech sector. Enterprises globally are spending big on AI and NVIDIA is reaping the rewards for this unprecedented demand. The bottom line is that the AI train isn’t slowing down and results today reassure investors that this isn’t just a flash in the pan or a one-time thing.
For individual investors NVIDIA is one of the top companies, being globally the ninth most held stock on eToro social investing platform and 11-th most held stock by Romanian investors. The share price increased this year by almost 230%.
