Nvidia Earnings: Why the Stock Is Dropping on Strong Q2 Results ...
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Nvidia's second-quarter results and guidance for the current quarter surpassed Wall Street's expectations.
Companies are clamoring for the company's chips, with revenue from Nvidia's AI data center segment more than doubling in the period.
Shares are down, however. With the company’s stock up more than 150% this year—it is the S&P 500's top performer—investors may have wanted more.
EPS: Up 152% to 68 cents vs. 65 cents expected, according to FactSet.
Revenue: Up 122% to $30 billion vs. $28.7 billion expected.
Current-quarter outlook: Revenue of $32.5 billion at the midpoint vs. $31.7 billion expected.
Share buyback: The company raised the size of its program by $50 billion.
Stock reaction: Shares are down in after-hours trading. They closed 2.1% lower on Wednesday.
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Almost all of Nvidia’s numbers were heading up but the chip maker’s sky-high margins do appear to be moderating.
Nvidia said its July-quarter gross margin stood at 75.1%, up from 70.1% a year ago, but down from 78.4% in the first quarter. It expects a gross margin of 74.4% in the current quarter.
“A higher mix of new products in Data Center puts pressure on profitability,” wrote D.A. Davidson analyst Gil Luria in a research note on Thursday.
Luria has a Neutral rating and a $90 price target on Nvidia stock, making him one of the few relatively bearish analysts on the company.
“Over the next 3-5 quarters, we still believe a decline in demand for Nvidia compute is inevitable, as end customers are going to become more scrupulous when it comes to the ROI [return on investment] on their AI compute,” Luria wrote.
An Nvidia graphics processing unit (GPU). (Joel Saget/AFP via Getty Images)
Nvidia's dominant position in providing artificial-intelligence chips looks to still be unassailable, according to analysts.
The plan to ramp up next-generation Blackwell production in the fourth quarter might not leave much room for rivals such as Advanced Micro Devices or Intel to take significant market share.
“The lead Nvidia has built for themselves in the Data centers with [its software] CUDA provides them a cushion for the short-midterm, and [it] should hold 89-85% (worst case) market share of the total GPU [graphics processing unit] market,” wrote Third Bridge analyst Lucas Keh in an emailed comment.
