I’d say “not surprisingly,” but I guess that doesn’t quite work given that beats versus consensus are the very definition of a “surprise” in the context of corporate earnings.
Instead, I’ll just say that I wasn’t surprised when Nvidia topped estimates with Q3 results released after the bell on Tuesday.
Revenue of $18.12 billion was more than $2 billion ahead of the Street, and EPS of $4.02 beat by $0.65.
Sales in Q3 were easily ahead of the guide and, amusingly, were 45% ahead of Q3 estimates as they stood prior to the company’s guidance as issued alongside Q2 results.
Not that it matters (the gains are so stupendous as to make comparisons meaningless for the purposes of gleaning anything beyond the self-evident conclusion that things must be going well), but sales growth was 206% YoY and 34% sequentially.
Data center revenue of $14.51 billion was (obviously) a record and represented a 41% increase from Q2, and a near 280% YoY jump. Consensus there was $12.82 billion.
The company guided for $20 billion in revenue for Q4, plus or minus 2%. Consensus saw $17.9 billion.
Nvidia did caution (to the extent they’re capable of coming across as cautious) that sales to China and other destinations affected by new licensing requirements “will decline significantly” in Q4. Those products, the company said, have contributed between a fifth and a quarter of data center revenue recently.
But fear not: Nvidia believes growth in other regions “will more than offset” those declines. Recall that the US recently imposed additional restrictions on Nvidia’s chip sales to Chinese customers.
Virtually everything was a beat for Q3 — so, not just sales and EPS. Gross margin was 250bps better than expected, for example. Expenses were generally in line.
Jensen Huang delivered a characteristically bold assessment, touting a “broad industry platform transition from general-purpose to accelerated computing and generative A.I.”
“Large language model startups, consumer internet companies and global cloud service providers were the first movers, and the next waves are starting to build,” Huang carried on. All of Nvidia’s growth engines are “in full throttle” and “the era of generative A.I. is taking off.”
A couple of things. First, expectations for Nvidia’s Q3 results and Q4 guide were sky-high. The shares are priced beyond perfection. Consensus aside, it’s hard to say where “the bar” is at this point, and therefore it’s hard to know whether Nvidia cleared it.
Second, this week’s breathless media circus around the OpenAI soap opera has convinced me that the A.I. frenzy is overblown, at least in the near-term. There are two existential armed conflicts going on in the world and more often than not over the past four days, Gaza lost to Sam Altman in the fight for space above the fold.
That sort of hair-on-fire, 24-hour blanket coverage would be justified if anyone thought Skynet was on the verge of becoming self-aware, but for now it’s just entertaining your silliest chat requests and drawing me pictures of bears and bulls (like the one you see at the top of this article).
I’m going to leave it at that and let delirious investors decide whether Huang did enough in Q3 and said enough about Q4 to justify the share price.
