NVIDIA’s Q3 Earnings Results

Key Takeaways

• Surging Revenue, Tempered Outlook: NVIDIA reported a 94% revenue surge, but supply chain limitations could hinder its growth trajectory in the coming quarters.
• Blackwell Chips in High Demand: The newly launched Blackwell chips are driving demand beyond expectations, with CEO Jensen Huang emphasizing that production is at “full steam.”
• Analysts Remain Bullish: Despite the supply hurdles, Wall Street sees NVIDIA’s leadership in AI accelerators as unmatched, with analysts raising price targets across the board.

Q3 FY25 Financial Highlights

• Quarterly Revenue: $35.1 billion, up 17% from Q2 FY25 and 94% from Q3 FY24.
• Data Center Revenue: $30.8 billion, up 17% from Q2 FY25 and 112% from Q3 FY24.
• Earnings per Share:
  • GAAP: $0.78, up 16% from Q2 FY25 and 111% from Q3 FY24.
  • Non-GAAP: $0.81 vs. 0.75 est, up 19% from Q2 FY25 and 103% from Q3 FY24.
• Sales: $35.10B vs $33.13B est ~Sees Q4 Sales $37.50B +/- 2% vs $37.09B est
• Shareholder Returns: Quarterly cash dividend of $0.01 per share declared, payable on December 27, 2024.

Outlook for Q4 FY25

• Expected Revenue: $37.5 billion, ± 2%.
• Gross Margins: GAAP: 73.0%, Non-GAAP: 73.5%, both ± 50 basis points.
• Operating Expenses: GAAP: ~$4.8 billion, Non-GAAP: ~$3.4 billion.
• Tax Rates: GAAP & Non-GAAP: 16.5%, ± 1%.

NVIDIA’s Financial Performance and AI Dominance

In its fiscal third quarter, NVIDIA’s revenue soared 94%, underscoring the explosive demand for its AI-focused data center chips. The company generated a record $30.8 billion from its data center segment alone, driven by strong performance from both its legacy Hopper chips and the initial shipment of 13,000 Blackwell chips.

Yet, the excitement was tempered by NVIDIA’s guidance for $37.5 billion in fourth-quarter revenue, a modest beat over Wall Street’s $37.1 billion forecast. This figure would represent the slowest growth pace in two years, reflecting ongoing supply chain issues. CFO Colette Kress acknowledged these challenges, stating that Blackwell demand would outpace supply well into 2026..

Wall Street’s Outlook and Blackwell’s Impact

Wall Street analysts have reinforced their optimistic outlook on Nvidia, raising price targets despite near-term challenges. Notable firms such as Wells Fargo, Goldman Sachs, Rosenblatt, Benchmark, Needham, Stifel, and Truist have issued upgraded price targets, reflecting strong confidence in the company’s future performance. With the latest revisions, the average price target now stands at $183, suggesting a potential upside of nearly 25%.

The Blackwell chips are expected to become NVIDIA’s revenue cornerstone, overtaking legacy Hopper chips by the end of the April quarter. Analysts forecast that accelerating shipments will drive annualized free cash flow beyond $100 billion by 2025. Such financial strength positions NVIDIA for aggressive stock buybacks and potential strategic acquisitions.

As Huang aptly put it, “The age of AI is in full steam.” With NVIDIA’s vision for AI factories powering the next industrial revolution, the company appears poised to maintain its lead in a multitrillion-dollar market. However, navigating geopolitical uncertainties and ongoing supply constraints will remain critical challenges moving forward.