Nvidia Reports 122% Revenue Growth Amid AI Chip Demand Surge

Nvidia recently reported earnings that surpassed Wall Street expectations, along with stronger-than-expected guidance for the current quarter. Despite this, the stock saw an 8% drop in extended trading. The company reported earnings per share of 68 cents, beating the 64 cents expected, with revenue reaching $30.04 billion, compared to the anticipated $28.7 billion. For the upcoming quarter, Nvidia forecasts revenue of approximately $32.5 billion, exceeding the $31.7 billion expected by analysts.

Unprecedented Revenue Growth

Nvidia's revenue surged by 122% year-over-year, marking the fourth consecutive quarter of significant growth. The company’s net income more than doubled to $16.6 billion, up from $6.18 billion a year ago. Nvidia has been a major beneficiary of the artificial intelligence boom, with its stock up more than 150% this year following a 240% increase in 2023. The company’s market cap recently surpassed $3 trillion, briefly making Nvidia the most valuable public company in the world, second only to Apple.

Data Center Business Leads the Charge

Nvidia’s data center business, which includes its AI processors, was the main driver of revenue growth, with sales climbing 154% year-over-year to $26.3 billion. This accounted for 88% of Nvidia’s total sales and exceeded expectations. While AI chips contributed significantly to this revenue, the company also reported $3.7 billion from its networking products. Nvidia’s chips, such as the H100 and H200, are integral to the majority of generative AI applications, including OpenAI’s ChatGPT.

Blackwell and Hopper AI Chips on the Horizon

Nvidia’s next-generation AI chip, Blackwell, is highly anticipated by customers, with samples already shipped during the quarter. The company expects to generate several billion dollars in revenue from Blackwell in the fourth quarter. However, Nvidia's current-generation chip, Hopper, will continue to see strong demand, with shipments expected to increase over the next two quarters. Supply for Hopper is becoming more available, while Blackwell remains in limited supply.

Evolving Business Segments

Although Nvidia’s gaming business was once its primary focus, the data center segment now dominates. Gaming revenue increased by 16% from a year ago to $2.9 billion, driven by increased shipments of PC gaming cards and console SOCs. Additionally, Nvidia’s professional visualization business rose by 20%, reporting $454 million in revenue, while automotive and robotics revenue reached $346 million. Nvidia also said it approved $50 billion in additional share buybacks.

Investor Reactions and Future Outlook

Despite Nvidia’s impressive financial performance, its shares slipped between 7-8% in after-hours trading. Analysts noted that while Nvidia's earnings beat expectations, the margin of the beat was smaller than in previous quarters. Nvidia continues to lead the AI sector, with tech giants heavily investing in its chips and data centers. CEO Jensen Huang emphasized the strong return on investment from Nvidia’s infrastructure, highlighting the ongoing demand for generative AI products. The company plans to ramp up production of its Blackwell AI chips in the fourth quarter, with expectations of continued growth into fiscal 2026.