Nvidia outperformed estimates once again in its latest quarterly results, released on Wednesday evening (28 August), yet after-market trading saw the share price tumble near 7%.
In the second quarter, the company created $30bn in revenue, above the forecasted $28.7bn. While Nvidia’s revenue still outperformed estimates, it did so by the nearest margin in six quarterly reports. Compared to a year ago, revenue for the quarter is up 122%, and compared to the first quarter of this year, up 15%.
The release of Nvidia’s quarterly report comes near a month after a market tumble in early August, where tech companies particularly took a hit. Nvidia’s share price dropped below $100 in this period, but throughout the month of August, recovered close to its June and July peaks.
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Garry White, chief investment commentator at Charles Stanley, said: “Nvidia’s earnings report was one of the most widely anticipated set of quarterly figures in this earnings season – and for good reason too. The artificial intelligence (AI) chipmaker had led market gains this year in an investment frenzy – and these results have provided some reassurance that businesses are continuing to invest in the new technology.
“Expectations of an earnings beat in the second quarter and raised guidance for the current quarter were duly delivered. As a result, these earnings should support the recent recovery in the technology sector, particularly AI-related companies from the early August sell off – but are likely not spectacular enough to provide a major market boost. Nevertheless, they are likely to provide some relief to investors worried about the future market direction.”
Yet early trading following Nvidia’s results, which saw the share price drop 6.89%, shows some investors are not yet satisfied.
Matt Britzman, senior equity analyst at Hargreaves Lansdown, said the dip could be due to the precedent Nvidia has set around its results.
“It’s less about just beating estimates now, markets expect them to be shattered and it’s the scale of the beat today that looks to have disappointed a touch,” Britzman said.
He said the two areas investors should have eyes on are the guidance for the next quarter and information on the delay of the Blackwell platform.
“Guidance was higher than expected, and Blackwell commentary should alleviate some of the concerns that delays will have a meaningful impact on next quarter’s revenue.
“It’s not just the chips that make Nvidia’s product so appealing, the CUDA software platform that enables users to optimise the hardware is just as important. Competition will come from the hyper-scalers themselves, who are working hard to build in-house chips, to more specialised companies looking to solve more specific problems. But it’s likely these remain edge cases for a good while yet, enabling Nvidia to continue to enjoy its dominant position over the next few years.”
Britzman added: “Nvidia is the flagbearer for the AI revolution, but investors tend to overstate the importance of one set of quarterly results in the grand scheme of AI. Leaders like Musk, Zuckerberg and Nadella are thinking on a multi-year, even multi-decade, time frame and investors would be wise to adopt a similar mentality.
“The question of return on investment that many AI bears fall back on simply isn’t the main consideration for Nvidia’s biggest customers at this stage. Like many before, this cycle won’t be a straight line, but while the ‘build it and they will come’ approach continues, it plays right into Nvidia’s hands.”
