Nvidia delivered another blowout quarter and looks poised for more big gains

After the market closed today, Nvidia (NVDA -2.10%) released results for the second quarter of the current fiscal year — which ended July 28. The artificial intelligence (AI) company once again had strong sales and earnings.

Nvidia’s revenue rose 122% year-over-year, and its non-GAAP (adjusted) earnings per share rose 152% to $0.68. Meanwhile, the average analyst estimate, according to the survey LSEG asked the company to report sales of $28.7 billion and earnings of $0.64 per share.

The artificial intelligence (AI) leader beat Wall Street’s mid-point sales target by 4.5% and mid-point earnings target by 6.25%. The company also crushed its own guidance, which called for revenue of $28 billion and an adjusted gross margin of 75.5 percent.

Nvidia delivers several huge wins in data center AI

Nvidia’s data center segment was again the standout performance driver in Q2. Segment sales grew 154% year-over-year to $26.3 billion and accounted for 87.7% of total revenue. Sales were also up 16% on a sequential quarterly basis. With tech giants included Microsoft, Amazon, Meta platformsand Alphabet Investing heavily to stay at the forefront of artificial intelligence, demand for Nvidia’s graphics processing units (GPUs) has skyrocketed.

Nvidia GPUs have become the core hardware powering the artificial intelligence (AI) revolution, and the company has a strong track record when it comes to providing processors to power today’s most advanced AI applications. Due to the dominance of its CUDA software platform for using GPUs for AI and other accelerated computing applications, the company has created an ecosystem with a clear performance advantage and high switching costs. If the company can continue to pair significant hardware advantages with industry-standard software tools, its competitive moat will be very hard to breach.

While competitors incl Advanced microdevices and Intelare trying to gain share in the data center GPU market, there’s little sign that either will dampen Nvidia’s push in the space. Some estimates put the company’s share of the AI ​​GPU and accelerator market at 95% or more.

Image source: Getty Images.

Nvidia’s other segments also contributed to the breakout quarter

While the data center segment was the main driver of note and performance, Nvidia’s other segments also posted encouraging results. Gaming segment sales increased 16% year-over-year to $2.9 billion and accounted for approximately 10% of quarterly sales in the period. Meanwhile, sales for the professional visualization segment rose 20% year-over-year to $454 million, and revenue from the automotive and robotics segment rose 37% to $346 million.

The sales contributions from these other segments may seem relatively small compared to what’s happening in the data center, but they’re still significant. High expectations from Wall Street analysts and other investors meant Nvidia needed to be firing on all cylinders with its Q2 report, and the company delivered.

What’s next for the hot AI leader?

In addition to the successful Q2 results, Nvidia issued performance targets for fiscal Q3. The company expects sales to reach about $32.5 billion — suggesting annual growth of about 80 percent. Management is also recommending an adjusted gross margin of 75% and adjusted operating expenses of approximately $3 billion.

As with Q2 results, Nvidia’s guidance looks very encouraging. The AI ​​leader’s sales guidance comfortably beats the average analyst estimate for revenue of $31.7 billion in the period, and its gross margin target suggests the business is experiencing little erosion of pricing power when it comes to of GPUs and accelerators for data centers. For comparison, the business posted an adjusted gross margin of 78.9% in the first quarter of this year and a margin of 75.7% in Q2.

Nvidia is now shipping samples of its next-generation Blackwell chips, and the company expects the new hardware to be its most successful product yet. While there is still uncertainty about when its first Blackwell processors will be released, the new platform is poised to be a major driver of sales and margins. Nvidia passed the test with its latest quarterly report, and the company has never looked stronger.