7 takeaways from Nvidia’s big revenue report

Chip giant Nvidia (NVDA) the dominant player in artificial intelligence development, beat analysts’ estimates on revenue and earnings in its second-quarter earnings and guided higher for the third quarter and the full year.

But the stock sold off after hours on Wednesday and hurt tech stocks in general.

Shares closed down 2.1 percent at $125.61 in regular trading, the biggest percentage loss for stocks on the Magnificent Seven list. Nvidia fell an additional 6.9 percent to $116.95 in after-hours trading.

At last check in regular trading on Thursday, the stock was down 1.6% at $123.55.

Here are the top 7 takeaways from the report and the company’s conference call.

Related: Apple analysts reset targets after C-suite shakeup

The earnings were good, very good. But not good enough

Nvidia earned 68 cents per share in the quarter, ahead of the consensus estimate of 64 cents and up 152% from the year-ago period. Revenue rose 122% to $30 billion. Both were records. But the whispered revenue estimates, the unpublished ones that float ahead of earnings reports, were closer to $32 billion.

Data center revenue, the heart of Nvidia’s business, was $26.3 billion, up 154 ​​percent from a year earlier.

But the results, as great as they were, proved a disappointment to many investors.

Third-quarter revenue forecasts were less robust: $32.5 billion, plus or minus 2 percent. The downside: Wall Street was probably looking for something over $34 billion. And the gain would be “only” 79.4% of the $18.1 billion in the third quarter of fiscal 2024.

The Blackwell GPU is delayed

Deliveries of Blackwell GPU, short for graphics processing units, Nvidia’s new blockbuster product, will be delayed until the fourth quarter of the current fiscal year. Some redesign work has been done on the incredibly complex product. Samples are now shared between customers. CEO Jensen Huang said the demand was “incredible”.

The company expects to generate several billion dollars in revenue from Blackwell products in the fourth quarter, said Colette Kress, Nvidia’s chief financial officer.

There wasn’t much discussion about exactly what the problems were. But analysts shrugged off the concern, noting how complex Blackwell’s product is.

The problem is not a big one, analysts said. It takes time to fill orders for Blackwell tokens. Meanwhile, Nvidia’s Hopper family of GPUs is enjoying robust sales and will grow in the second half of the fiscal year.

Nvidia CEO: AI is a new industrial revolution

CEO Huang continues to champion the idea that artificial intelligence is key to lowering the cost of information processing.

In recent years, computing has basically added programming to standard computers to get the most out of them, he said on the earnings call.

“CPU scaling has been known to slow for some time and has slowed to a crawl,” he said, adding that compute demand “continues to grow quite significantly.” Maybe it doubles annually.

AI has increased the need for accelerated computing systems that can take data from multiple sources to create faster solutions, he said.

More tech stocks:

• Analysts reset AMD stock outlook after AI acquisition
• Analyst resets Nvidia stock price target ahead of earnings
• The trader who predicted the outlook for Palantir, SoFi, Rocket Lab rally updates

Operating expenses are expected to increase

Full-year operating expenses are expected to increase in the mid-to-high 40% range.

Operating expenses have increased in the range of less than 40% in recent years.

Much of the expense is the cost of getting Blackwell and other products ready for market.

TheStreet/Shutterstock

The shareholders got something

If you define a $50 billion share buyback as something small. That buyback comes as the company said it returned $15.4 billion to shareholders in buybacks and dividends.

The dividend is one penny per share. The next dividend is paid on October 3rd to holders of record on September 12th.

Nvidia remains the AI ​​giant by far. . .

Nvidia’s dominance of artificial intelligence is reflected in its $3 trillion market cap, the largest of any pure chip company.

Among the other players:

• Taiwan Semiconductor (TSM) . Its factories make the chips that most everyone else, including Nvidia, designs. Market cap: $877 billion.
• Broadcom (AVGO) . A multinational semiconductor manufacturer. Market cap: $736 billion.
• Advance Micro Devices (AMD) . Long a rival of Intel (INTC) invested heavily in AI. Market cap: $236.9 billion.

. . . but Nvidia could lose its membership in the $3 trillion club

With Wednesday’s close of $125.61, Nvidia’s market capitalization stood at $3.09 trillion, the second most valuable of US stocks after Apple. (AAPL) .

But if the after-hours price of $116.95 holds on Thursday, the market cap will drop to $2.88 trillion.

As of June 18, the market capitalization was $3.34 trillion, just ahead of Microsoft (MSFT) 3.34 trillion dollars. It fell below $3 trillion before the Aug. 5 market selloff. It was over $3 trillion again by August 15th.

Related: Veteran fund manager sees world of pain coming for stocks