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Nvidia's Q125 earnings - welcoming in a new phase of growth

Chris Weston
Head of Research
22 May 2024
Nvidia has pulled out the big guns yet again, with a strong set of results that has clearly hit the mark. The main concern going into the numbers was that given recent capex guidance from the hyperscale businesses, detailing strong demand for Nvidia’s products, and its next-gen product range (Blackwell), expectations were hugely elevated.

We can also add to the mix the fact that Nvidia is a core holding for almost all investment funds, so it is well-owned and rightly so, AI is the biggest theme to hit the tech world in 20-odd years, and it's only getting bigger as we look to price futures earnings based on where this could evolve to in 5-10 years.

Nvidia's Q1 sales printed $26b, which was well ahead of its own prior guidance and where the consensus had modelled sales numbers, and they guided to $28b in Q225, give or take 2% - the key issue here is the revenue numbers were exactly where the market was positioned, as we know that they always beat. Data centre sales grew 23% q/q vs 16% expected, with gaming down 8%, which was somewhat disappointing. China's revenue was lower, although that won't surprise given the regulations.

Gross margins were spectacular at 78.9% and nicely ahead of consensus, although they are expected to moderate towards 75% in Q2, where they should hold that level for the quarters ahead. The announced 10-1 stock split was a surprise to some and may entice a new wave of smaller shareholders into the mix, but it also means the 10c dividend as a sweetener will be 1c.

Shares have responded well, currently sitting up 6% in the post-market session, having been as high as $1023 and modestly below the implied move in options pricing of -/+7.7% on earnings. There has been some spillover into other AI names, with AMD +1.6%, Marvell +2.4%, Broadcom +2%, and the numbers have lifted NAS100 futures +0.5% since reporting.


The real kicker though has come from the outlook and guidance from CFO Colette Kress and CEO Jensen Huang, and once again we see that when Jensen Huang speaks on the business you simply don’t bet against him, where the narrative has been predictably positive on all facets of the business – be it demand for its H200 GPU, while importantly Huang stated that the Blackwell platform – the future of GPU architecture - is seeing big demand, a factor recently pushed by AWS, who will be enthused by Huang’s comments that Blackwell is in “full production” with products due to be shipped this quarter, for a full ramp up in Q3 and into data centres by Q4 – A Timeline that will also sit well with investors.

Either way, the high-level story remains one where demand significantly outpaces supply. Where the company is pushing into the next phase of growth, and where there is massive opportunity in the pipeline and Nvidia is pushing the AI scene and evolving it from the front – if some felt there was a catalyst missing for Nvidia that debate may be put on ice for now, and investors will be fully revitalized. The question now is whether we see a similar run as we did in February with traders chasing price.

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