Nvidia reported better-than-expected earnings and revenue on Wednesday, driven by the company’s booming data center business, which saw a remarkable 73% year-over-year growth. The stock rose about 6% in extended trading following the announcement.
Strong Financial Results and AI Demand
Here’s how Nvidia performed compared to analysts’ estimates:
- Earnings per share: 96 cents adjusted vs. 93 cents estimated
- Revenue: $44.06 billion vs. $43.31 billion estimated
Despite the impressive results, Nvidia expects about $45 billion in sales for the current quarter, slightly below analysts’ estimate of $45.9 billion. The company attributed this difference to a recent export restriction on its H20 chips bound for China, which resulted in lost sales. Nvidia mentioned that its guidance would have been about $8 billion higher if not for the restriction.
Impact of China-Related Restrictions
The export restriction on Nvidia’s H20 processor for China has caused significant financial challenges. Nvidia disclosed that it incurred $4.5 billion in charges related to excess inventory for the restricted chip. The company estimated that it would have recorded an additional $2.5 billion in sales if the chip had not been affected by the restrictions. This setback also impacted Nvidia’s gross margin, which stood at 61% for the quarter but would have been 71.3% without the China-related charge.
AI Infrastructure Driving Growth
Despite these challenges, Nvidia continues to see strong growth, particularly driven by demand for its artificial intelligence (AI) chips, which are crucial for developing applications such as OpenAI’s ChatGPT. Nvidia CEO Jensen Huang remarked, “Global demand for Nvidia’s AI infrastructure is incredibly strong.” The company’s net income rose by 26% to $18.8 billion, or 76 cents per share, compared to $14.9 billion, or 60 cents per share, a year earlier.
Data Center Division and Gaming Growth
Nvidia’s data center division, which includes AI chips and related products, grew 73% year-over-year to $39.1 billion, accounting for 88% of the company’s total revenue. Large cloud providers, including Microsoft, were significant contributors to this growth, with Microsoft deploying tens of thousands of Blackwell GPUs, partly due to its relationship with OpenAI.
The gaming division also performed well, with a 42% year-over-year growth to $3.8 billion. While Nvidia initially made gaming chips, these semiconductors have now become vital for AI applications. Nvidia also continues to produce the processor at the heart of the new Nintendo Switch 2 console.
Other Divisions and Shareholder Returns
In addition to its gaming and data center divisions, Nvidia’s automotive and robotics division saw sales growth of 72%, reaching $567 million, due to increased demand for its chips and software for self-driving cars. The professional visualization business, which includes 3D design chips and AI-driven desktops, grew by 19% to $509 million.
Nvidia also returned significant value to shareholders, spending $14.1 billion on share repurchases during the quarter and paying out $244 million in dividends.
