Nvidia Earnings: No sign of AI slowing

• Estimated fair value: $105
• Morningstar rating: 3 stars
• Morningstar Economic Moat Rating: Lat
• Morningstar Uncertainty Rating: Very High

Our confidence in Nvidia remains as the company continues to thrive on the insatiable demand for graphics processors, or GPUs, and related products used in data centers to run artificial intelligence. However, Nvidia’s earnings pace hasn’t been as impressive as in past quarters, which could explain why the stock fell after hours.

Nvidia’s revenue rose 122% year-over-year

We maintain our estimated fair value of $105 per share. In the short term, we still assume Nvidia will increase its data center, or DC, revenue by several billion per quarter as additional GPU manufacturing capacity comes online. However, our fair value estimate is largely driven by our long-term assumptions for AI adoption and robust DC spending by Nvidia’s key AI customers. We maintain our Morningstar Uncertainty Rating very high because both assumptions will be opaque and subject to change in the coming years.

Revenue in the July quarter was $30 billion, up 15% sequentially, up 122% year-over-year, and ahead of guidance of $28 billion. DC revenue was $26.3 billion, up 154% year over year. Even with Nvidia’s new generation of Blackwell products arriving later this year, the firm hasn’t seen a slowdown in demand for its existing Hopper product family. Nvidia expects to earn “several billion” in Blackwell revenue in the fiscal fourth quarter ending in January 2025. Meanwhile, management anticipates Hopper shipments and revenue will continue to grow in the second half of fiscal 2025 as customers do not they will pause their Hopper purchases pending Blackwell.

Nvidia expects October quarter revenue to be $32.5 billion, which would be up 8% sequentially and 79% year over year. Nvidia’s key AI customers still plan to invest heavily in AI capital spending, and we still expect Nvidia to reap most of the rewards of such spending.

Looking to 2026 Nvidia

In the second half of fiscal 2025 and based on third quarter guidance, we model another $3 billion of DC revenue growth to $29.4 billion in the third quarter. We estimate $4.4 billion of incremental DC revenue in the fourth quarter (ended January 2025) to $33.8 billion. This fourth quarter forecast is above our previous estimates, as Nvidia will not only see Hopper growth, but also put Blackwell’s revenue above Hopper. As we look to fiscal 2026 – which is actually calendar 2025 – we still foresee incremental revenue growth quarter over quarter as more GPU supply comes online.

We still see Nvidia as the clear leader in GPUs and related software (CUDA) used for AI training, and we don’t think the company has serious competition in AI training today. However, we remain encouraged by management’s position that 40% of its GPUs are used for AI inference, which is a part of the AI ​​market that should be larger and more competitive than time-based training.

Looking at DC’s revenue mix, sales in China grew sequentially and accounted for a “significant” portion of DC’s revenue, despite tough US regulations that restrict the company from selling anything close to its most powerful processors to Chinese AI customers. However, Nvidia acknowledged that China’s share of DC revenue remains well below pre-restriction levels of around 20%.

Nvidia also believes that DC revenue from sovereign governments will top $10 billion this year, up from a previous estimate of “high single-digit billions” announced last quarter. We’re encouraged by the higher outlook and tend to think that such revenues could be stickier in the long run because they won’t depend on a government’s ability to generate AI revenue.