Nvidia’s earnings surge threefold as the AI chip industry experiences sustained growth.

ByYasmeeta Oon

Nov 24, 2023

Nvidia saw a 1% decline in its stock price during after-hours trading on Tuesday, despite reporting fiscal third-quarter results that exceeded Wall Street’s expectations. The company attributed the anticipated negative impact in the next quarter to export restrictions affecting sales to organizations in China and other countries.

In a letter to shareholders, Nvidia’s finance chief, Colette Kress, expressed the expectation of a significant decline in sales to these regions in the fourth quarter of fiscal 2024. However, she believed that this decline would be offset by robust growth in other global markets.

During a conference call with analysts, Kress mentioned that Nvidia was actively collaborating with clients in the Middle East and China to secure U.S. government licenses for the sale of high-performance products. The company was also working on developing new data center products that align with government policies and do not require licenses. However, Kress expressed doubts about the meaningful impact of these efforts in the fiscal fourth quarter.

Here’s a summary of Nvidia’s performance compared to analyst consensus, as per LSEG (formerly known as Refinitiv):

  • Earnings: $4.02 per share (adjusted), surpassing the expected $3.37 per share.
  • Revenue: $18.12 billion, exceeding the expected $16.18 billion.

Nvidia reported a remarkable year-over-year revenue growth of 206% for the quarter ending on October 29. Net income stood at $9.24 billion, or $3.71 per share, a substantial increase from the $680 million, or 27 cents per share, in the corresponding quarter of the previous year.

The company’s data center revenue reached $14.51 billion, a 279% increase, surpassing the StreetAccount consensus of $12.97 billion. Half of the data center revenue originated from cloud infrastructure providers like Amazon, with the rest coming from consumer internet entities and large corporations.

The gaming segment contributed $2.86 billion, an 81% increase, which exceeded the $2.68 billion StreetAccount consensus.

For guidance, Nvidia projected $20 billion in revenue for the fiscal fourth quarter, implying a nearly 231% revenue growth.

During the quarter, Nvidia introduced the GH200 GPU, featuring more memory than the current H100 and an additional onboard Arm processor. The H100, known for its costliness and high demand, found a buyer in Iris Energy, an Australia-based bitcoin mining data center owner, who purchased 248 H100s for $10 million, roughly $40,000 each.

Nvidia also revealed that computing instances based on the GH GPUs would soon be available on Oracle’s cloud.

While a couple of years ago, Nvidia’s largest revenue source was GPUs for PC gaming, the company now derives the majority of its revenue from deployments within server farms. This shift was driven in part by increased demand for GPUs due to the introduction of the ChatGPT chatbot by Microsoft-backed startup OpenAI in 2022.

Despite facing challenges such as competition from AMD and lower revenue due to export restrictions in China, some analysts remained optimistic. Raymond James’ Srini Pajjuri and Jacob Silverman, for instance, expressed confidence in Nvidia’s position, expecting the company to maintain over 85% market share in Gen AI accelerators even in 2024.

Nvidia continues to work on its plan to expand supply throughout the coming year. Excluding the after-hours fluctuations, Nvidia’s stock had surged by an impressive 241% year-to-date, significantly outperforming the S&P 500 index, which had risen by only 18% during the same period.

Yasmeeta Oon

Just a girl trying to break into the world of journalism, constantly on the hunt for the next big story to share.