Nvidia’s business is growing faster than expected. Investors were still disappointed.

Sometimes your best isn’t good enough. That’s the lesson Nvidia (NVDA) learned Wednesday, after the company’s share price fell 3% despite posting better-than-expected second-quarter earnings and third-quarter guidance.

Nor does it appear that the company’s growth has been unimpressive. Revenue rose 122% year over year to $30 billion from $13.5 billion. Nvidia’s all-important data center revenue reached $26.3 billion, up 154% year over year.

But this was not the kind of blowout that investors have quickly become accustomed to in recent quarters.

Beyond investor sentiment, Wall Street analysts also seem to have picked up on Nvidia’s growth after several quarters of big surprises on the upside.

Nvidia’s revenue reported Wednesday beat Wall Street expectations by 4.1 percent, the narrowest margin since the fourth quarter of fiscal 2023.

As Nvidia’s business has grown over the past two years, the company’s revenue has beaten Wall Street forecasts by double-digit percentage points for three consecutive quarters, including a 22% gap in the second fiscal quarter of 2024.

And as Wall Street appears to have taken a better view of Nvidia’s growth at this point in the AI ​​investment cycle, questions have also arisen about the status of Nvidia’s next-generation Blackwell chip.

Ahead of the company’s earnings announcement, The Information reported that the chip, which follows Nvidia’s Hopper line, has faced delays that could affect some of the company’s biggest customers, including Microsoft and Google.

In her quarterly comments, Nvidia CFO Colette Kress explained that the company has made changes at Blackwell to improve its production yield. Meanwhile, CEO Jensen Huang said the chip is currently being sampled to customers, a major step toward volume delivery of the processor.

Huang said the company expects to deliver several billion dollars of Blackwell’s revenue in the fourth quarter. But the CEO could not say exactly how much Blackwell will generate, despite questions from analysts.

However, Huang offered a number of other strong points for Nvidia, including noting that demand for Blackwell’s platforms far outstrips supply. The CEO also said that Nvidia’s Hopper platform will continue to grow in the second half of the year and explained that the company expects its data center business to grow “pretty significantly next year.”

Huang also said that AI inference drives the company’s data center revenue. Inference refers to computers running AI programs and providing users with answers to their questions.

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That should allay fears of threats to Nvidia’s long-term growth as companies shift from training AI models to using inference. Huang seems to believe that Nvidia will continue to advance as customers use its chips to both train and run its AI models.

Nvidia is still the world leader in AI chips, and it will be some time before rivals AMD ( AMD ) and Intel ( INTC ) catch up to their hardware and software lead. And while Nvidia may face a short-term decline in its stock price, Wall Street is still on board.

In an investor note published following Nvidia’s earnings, BofA’s Vivek Arya raised his price target for the chip designer to $165 from $150 per share, writing: “Despite the quarterly noise, we continue to believe in the opportunity unique growth (Nvidia), execution and dominant. A share of over 80% because generative AI deployments are still in the first 1-1.5 (years) of what is at least a 3 to 4 year initial investment cycle.”

Raymond James’ Srini Pajjuri also raised the company’s price target on Nvidia shares from $120 to $140, writing in an investor note that “Blackwell’s delays look better than feared and management forecasts strong growth in FQ4”.

Pajjuri also said that demand for Nvidia’s current-generation Hopper chip continues to be healthy and pointed to an anticipated increase in sales in Q4, despite the increase in Blackwell production at the same time.

Morgan Stanley’s Joseph Moore, who raised his price target on Nvidia from $144 to $150, said Nvidia’s skyrocketing expectations for the company’s stock moves after the earnings report.

“Expectations become more challenging as the superlative becomes commonplace, but this was still a very strong quarter given the transitional nature of the current environment.”

Whether that’s enough to satisfy investors next quarter remains to be seen.

Email Daniel Howley at [email protected]. Follow him on Twitter at @DanielHowley.

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