NVIDIA: Growing revenue, robust margins

Nvidia (NVDA -2.10%)leader in artificial intelligence (AI) and computer graphics, released its earnings report for the second quarter of fiscal year 2025 on August 28, 2024.

The company posted record revenue of $30.0 billion, beating management’s guidance of $28.0 billion by a significant margin. This represents a 122% increase over Q2 FY24 and a 15% increase over the previous quarter.

GAAP gross margin was 75.1%, slightly above the 74.8% expected. The overall assessment of the quarter is very positive, demonstrating substantial growth in its business segments.

Source: SEC documents. Expectations based on management guidance as provided in the 2024-05-22 earnings report.

Understanding Nvidia

Nvidia is renowned for its advanced graphics processing unit (GPU) technology that drives its AI, data center and gaming solutions. The company’s AI platforms, including the H200 Tensor Core and the much-anticipated Blackwell architecture, are critical for intensive AI and high-performance computing (HPC) workloads. Nvidia’s AI solutions are widely adopted by cloud services, enterprises and researchers, strengthening its market leadership. Recently, Nvidia has focused on expanding its AI capabilities and entering new markets, with AI and data center solutions central to its growth.

Critical to Nvidia’s business success are its comprehensive data center platforms and gaming GPU technology. The company’s focus on AI, professional graphics applications and automotive solutions drives substantial revenue growth and creates a competitive advantage in various industries. Nvidia aims to maintain its market leadership through continuous innovation and strategic partnerships.

Quarterly highlights

Nvidia’s data center revenue hit a record $26.3 billion, up 154% year over year, driven by strong demand for AI solutions. In particular, H200 Tensor Core GPUs have seen significant adoption in various cloud ecosystems, with CoreWeave integrating these GPUs into its services. The company’s gaming revenue also increased to $2.9 billion, marking a 16% year-over-year increase, fueled by new product launches and the expansion of its GeForce NOW gaming service.

Nvidia’s automotive segment showed robust performance, generating $346 million in revenue, up 37 percent year-over-year. This growth is attributed to new partnerships and the adoption of its AI platforms in autonomous and electric vehicles. Operating expenses came in at $3.932 billion on a GAAP basis, slightly below expectations of $4.0 billion, while non-GAAP operating expenses were $2.792 billion, slightly above guidance of $2.8 billion .

The company reported other revenue of $572 million, beating expectations of $300 million, reflecting better profits from non-core operations. Nvidia’s GAAP and non-GAAP tax rates were in line with expectations at 17%. The company’s ability to effectively manage its expenses while generating significant revenue growth stands out this quarter.

In addition, Nvidia has strengthened its developer ecosystem with over 150 companies incorporating NIM microservices to enhance generative AI development. This highlights the company’s commitment to fostering innovation within its technical community.

Looking ahead

Nvidia’s guidance for Q3 2025 calls for revenue of $32.5 billion, plus or minus 2%, indicating continued strong demand for its AI and data center solutions. Given strong market trends and Nvidia’s strategic position, the outlook remains positive. However, the company will need to effectively manage rising operating expenses and supply constraints to sustain this growth trajectory.

Investors should watch for updates on Nvidia’s AI and data center segments, as well as any changes in its competitive landscape, particularly from emerging rivals such as Advanced microdevices (AMD -2.75%). Additionally, continued adoption of Nvidia’s AI solutions across industries will be crucial to the company’s future performance and continued market dominance.