Nvidia beats Wall Street, outlook on track to beat US$100b in current quarter

Nvidia’s latest quarterly results once again blew past Wall Street’s expectations as revenue for the computer chip company’s high-end artificial intelligence (AI) chips soared, the latest sign that AI infrastructure spending remains strong.

The company reported on Wednesday net income of US$59.69 billion, or US$2.46 per share, for the May-July period. That compares to net income of US$26.42 billion, or US$1.08 per share, in the same quarter last year.

Excluding certain items, earnings were US$2.22 per share, well above the US$2.09 per share consensus forecast by Wall Street analysts, according to FactSet.

Revenue more than doubled from a year earlier to US$96.22 billion, surpassing analysts’ average forecast of US$92.27 billion.

“AI has reached its inflection point. It’s doing useful work. Its tokens are productive and profitable. Now, compute is revenue,” said Chief Executive Officer Jensen Huang in a statement.

The Santa Clara, California company’s results have regularly cleared the bar set by analysts in the past three years, often by a wide margin, since Nvidia’s high-end chips emerged as AI’s best building blocks.

Along with higher profit and revenue, however, Nvidia’s operating expenses surged 55 per cent to US$8.41 billion.

For the current quarter, Nvidia forecast revenue of about US$108 billion. Analysts are forecasting US$104.86 billion.

If Nvidia hits its revenue target for the August-October period, it will translate into a roughly 89 per cent increase from last year – an indication that Nvidia’s phenomenal growth rate is still accelerating. The company said it’s not assuming any data centre compute revenue from China in its outlook.

Nvidia expects to grow its revenue in its fiscal year ending January 2028 by about 70 per cent, citing surging demand for its AI-powering chips. In fact, the company’s growth outlook would be closer to double, based on its customers’ own forecasts, if it weren’t for challenges in sourcing enough supplies to meet the chip production demand, noted Chief Financial Officer Colette Kress in a call with Wall Street analysts.

Huang also emphasised the supply limitations the company is grappling with.

“Our entire supply chain is challenged,” he told analysts. “At this point we have supply for 70 per cent. ... Our demand is much higher than that.”

Nvidia’s data centre segment, which includes its AI data centres and factories business, as well as chip demand from hyperscalers – operators of huge cloud-computing data centres such as Amazon, Meta and Google – reported revenue of US$89 billion, up more than twofold from a year earlier.

Capital spending by the top five hyperscalers is expected to reach nearly US$800 billion this year and US$1.3 trillion in 2027, Kress noted.

On Wednesday, Nvidia and Amazon Web Services announced a plan to deploy 2 million additional Nvidia graphic processing units, and will incorporate Nvidia chips to power its fleet of warehouse robots.

Kress also said the company expects that its computer processing unit revenue will more than double in fiscal 2028, “positioning us as one of the world’s leading server CPU suppliers”.

Nvidia’s shares rose 4.1 per cent in after-hours trading following the earnings call. The stock ended the regular trading session 1.6 per cent lower and is up 12.4 per cent so far this year.

The company’s edge computing segment, which includes chips bringing AI-powered features to computers, game consoles and robotics, among others, posted revenue of US$7.2 billion, up 27 per cent from the same period last year.

Despite the stellar results and still-rosy outlook, many investors worry about a jarring comedown after a three-year boom that has seen Nvidia’s market value soar from US$400 billion at the end of 2022 to roughly US$5.2 trillion now.

While AI has powered stock market gains and US economic growth in recent years, there’s been growing scepticism about whether AI will justify the trillions of dollars that are being spent to develop the technology.

The AI industry is also increasingly facing pushback amid objections to the expansion in data centres, and fears that the speed with which AI is being adopted could lead to widespread job losses for many Americans.

AP