Nvidia, a prominent chipmaker, faced a 1% drop in its shares during after-hours trading despite delivering robust third-quarter fiscal 2024 results that exceeded Wall Street expectations. The company’s outstanding performance was tempered by a cautious outlook for the upcoming quarter, attributed to export restrictions impacting sales to Chinese and other international organizations.
In a letter to shareholders, Nvidia’s finance chief, Colette Kress, acknowledged the anticipated decline in sales to these regions in the fourth quarter of fiscal 2024. However, she expressed confidence that this setback would be offset by robust growth in other markets.
During a conference call with analysts, Kress disclosed Nvidia’s efforts to obtain U.S. government licenses for high-performance product sales in the Middle East and China. Despite ongoing attempts to develop new data center products aligning with governmental policies, Kress remained skeptical about their meaningful impact in the next quarter.
Financially, Nvidia outperformed expectations with adjusted earnings of $4.02 per share, surpassing the anticipated $3.37 per share, and revenue of $18.12 billion, exceeding the projected $16.18 billion.
The company experienced a remarkable 206% year-over-year growth in revenue, with net income reaching $9.24 billion, or $3.71 per share, a significant increase from $680 million, or 27 cents per share, in the corresponding quarter of the previous year.
A key driver of this success was Nvidia’s data center segment, which witnessed a staggering 279% increase in revenue, totaling $14.51 billion. Half of this revenue came from cloud infrastructure providers, including major players like Amazon, with the remaining portion derived from consumer internet entities and large corporations.
The gaming segment also contributed significantly, generating $2.86 billion, an 81% increase and surpassing the $2.68 billion consensus estimate.
Looking forward, Nvidia provided guidance of $20 billion in revenue for the fiscal fourth quarter, indicating a remarkable 231% growth in revenue. The company continued its commitment to technological innovation, introducing the GH200 GPU with enhanced memory and an additional Arm processor.
Notably, Nvidia secured a substantial deal with Iris Energy, an Australian Bitcoin mining data center owner, to purchase 248 H100s for $10 million.
Despite challenges, including competition from AMD and export restrictions impacting GPU sales in China, analysts expressed optimism. In a client note, Raymond James analysts Srini Pajjuri and Jacob Silverman underscored the ongoing high demand for GPUs as Gen AI Kingpin adoption expanded across various industry verticals.
Nvidia’s success in diversifying revenue streams, transitioning from gaming GPU sales to substantial earnings in server farms, was highlighted. The rise of generative artificial intelligence capabilities, exemplified by Microsoft-backed startup OpenAI’s ChatGPT, contributed to increased demand for Nvidia’s GPUs.
While challenges persist, including supply chain issues and navigating export restrictions, Nvidia’s stock experienced a remarkable 241% surge this year, far outpacing the S&P 500 index’s more modest 18% gain over the same period.
The market, cautiously optimistic about Nvidia’s trajectory in the dynamic chip technology landscape, continues to watch as the company works towards expanding its supply in the coming year.