Nvidia Does It Again — Q3 Earnings Beat Estimates Despite Blackwell Chip Delays

• Nvidia exceeded expectations for revenue and earnings, driven by the robust performance of its AI and Data Center.
• The Data Center segment remains a major revenue driver, with significant growth in chip and networking hardware sales.
• Nvidia expressed confidence in the development and production of its next-generation Blackwell AI chips.

Beating Market Expectations

Nvidia reported third-quarter earnings that exceeded expectations  for sales and profits and a stronger-than-expected forecast for the current quarter. However, shares fell 2% in after-hours trading.

For the third quarter, Nvidia posted adjusted earnings per share of $0.81, surpassing the expected $0.75. Revenue reached $35.08 billion, exceeding the anticipated $33.16 billion.

Net income for the quarter surged to $19.3 billion, or $0.78 per share, compared to $9.24 billion, or $0.67 per share, in the previous year’s quarter. The company’s gross margin also increased to 73.5%, slightly above analysts’ expectations, with Nvidia attributing the rise to higher sales of data center chips.

Nvidia‘s revenue growth remains strong, rising 94% year-over-year in the quarter ending Oct. 27. However, this represents a slowdown compared to the previous three quarters, when revenue increased by 122%, 262%, and 265%, respectively.

Looking ahead, Nvidia forecasts about $37.5 billion in sales for the current quarter, slightly above the $37.08 billion analysts predict. This projection implies an annual growth of roughly 70%, a significant slowdown from the 265% growth the company experienced during the same period last year.

Boost From AI And Data Center

Third-quarter results showed that Nvidia remains the market leader in AI hardware, expanding its reach with the H100 and H200 GPUs already circulating while the Blackwell project is still developing. These next-generation GPUs outperform traditional CPUs in responsiveness and efficiency.

Nvidia’s Data Center business, which accounts for the bulk of its revenue, generated $30.8 billion in the quarter, surpassing analysts’ expectations of $29 billion and marking a 112% increase compared to the $14.5 billion the segment earned in the third quarter of last year.

The company’s gaming revenue reached $3.3 billion, up from $2.8 billion in the same quarter last year. This exceeded the $3 billion analysts had forecasted.

However, not all of Nvidia‘s Data Center revenue came from chips. The company reported that approximately $3.1 billion of the total was attributed to networking hardware sales.

Despite supply chain challenges, Nvidia’s AI-driven growth has propelled its market capitalization to $3.48 trillion, surpassing Apple (AAPL), which currently stands at approximately $3.40 trillion.

NVDA stock has surged an impressive 187% year-to-date, far outpacing the performance of the “Magnificent 7” group. In comparison, Apple has gained 17% while Microsoft (MSFT) is up by just 10%.

Ongoing sovereign AI initiatives and data center expansions will bolster Nvidia’s growth, with its market share projected to reach 66% by 2026. However, Federal Reserve Chair Jerome Powell‘s approach to interest rates poses a potential risk to overall market valuations, which could impact the technology sector.

Blackwell Update

Although recent reports showed potential cooling issues with Nvidia’s new flagship Blackwell AI servers, the company reassured investors that Blackwell  is in “full production” and progressing “full steam ahead,” with plans to continue increasing chip deliveries each quarter moving forward.

Nvidia’s CFO, Colette Kress, stated that 13,000 Blackwell samples have already been shipped to customers this quarter. Meanwhile, CEO Jensen Huang emphasized Blackwell’s success, claiming that it has already generated billions in value.

“As you can see from all the systems being set up, Blackwell is in great shape,” Huang told investors.