Nvidia outpaces revenue estimates with strong data center growth amid mixed analyst reactions

Nvidia issued a revenue forecast that fell short of the most optimistic projections, hinting at potential limits to its rapid growth. Despite this tempered outlook, the company's performance has been remarkable over the past two years. Nvidia is on track to double its sales for the second consecutive year, achieving profits that surpass its former total revenue.

According to the latest financial results released on November 20, Nvidia reported fiscal third-quarter revenue of US$ 35.08 billion, marking a 94% year-over-year increase and surpassing Bloomberg's estimate of US$33.25 billion. The gross margin remained steady at 75%, consistent with the previous year. Operating income nearly doubled, reaching US$23.28 billion compared to US$11.56 billion in the same period last year.

The data center segment was a standout performer, generating revenue of US$30.8 billion, more than doubling from US$14.51 billion in the previous year and exceeding the estimated US$29.14 billion.

The growth momentum extended to other divisions as well. The gaming sector achieved a revenue of US$3.3 billion, reflecting a 15% increase year-over-year, surpassing the forecast of US$3.06 billion. Professional visualization revenue rose by 17% to US$486 million, slightly above the anticipated US$477.7 million. Meanwhile, the automotive division experienced a significant surge, with revenue climbing by 72% to US$449 million, exceeding expectations of US$364.5 million.

Rising demands across geographies

The US is still the largest market for Nvidia over the last quarter, while the company saw surging demands from Singapore and Other markets as companies and governments worldwide procured Nvidia chips to build their AI infrastructure.

Notably, as Nvidia CFO Colette Kress said in a prepared mark that CSPs accounted for about half of Nvidia's data center revenue, indicating AWS, Google Cloud, and Azure are acquiring Hopper or Blackwell in their data centers around the world

Despite the US export curbs that restrict the most advanced Nvidia chips from shipping to China, the country is the third-largest market for Nvidia, which registered a 34.39% revenue growth from the region.

Fourth-quarter outlook

In the fourth quarter forecast, Nvidia anticipates a gross margin between 73% and 74%, with the current Bloomberg consensus estimate set at 73.5%. Revenue for the quarter is projected to be US$37.5 billion, plus or minus 2%, compared to a Bloomberg estimate of US$37.1 billion. Operating expenses are expected to be approximately US$3.4 billion, surpassing the estimated US$3.21 billion.

The company has expressed strong enthusiasm about the demand for its products, particularly noting that the anticipation for Blackwell is incredible.

"The age of AI is in full steam, propelling a global shift to Nvidia computing," said Jensen Huang, founder and CEO of Nvidia. "Demand for Hopper and anticipation for Blackwell — in full production — are incredible as foundation model makers scale pretraining, post-training, and inference.

What did analysts say

Nvidia's recent forecast has prompted mixed reactions among analysts, but there is a consensus that concerns over the company's outlook may be temporary. According to Bloomberg Intelligence, while Nvidia's projection to surpass the fourth quarter sales consensus by approximately 1% did not meet the most optimistic estimates, its expectations for a significant ramp-up in Blackwell by fiscal 2026 and stabilizing margin views suggest a focus shift toward the company's robust long-term fundamentals.

From the perspective of vital knowledge, Nvidia's results demonstrate a "decent upside," despite a "slightly negative" initial reaction due to guidance that was merely "inline" and a shortfall in networking sales in the third fiscal quarter. Analysts note that the high bar set for Nvidia and the crowded nature of the stock does not detract from the firm's sustained bullish outlook. This sentiment is fueled by Nvidia's substantial growth and limited competition, which underpin the positive view of its prospects.

Meanwhile, CFRA points to supply constraints affecting Nvidia's Hopper and Blackwell solutions, projecting that these limitations will persist through at least the calendar year 2025. These solutions are anticipated to drive the next wave of data centers for major hyperscalers. Despite the current hurdles, the company's strategic positioning and innovation boon offer a promising horizon for investors and stakeholders alike.

Source: Nvidia, November 2024

Source: Nvidia, November 2024

Source: Nvidia, November 2024

Source: Nvidia, November 2024