Earnings report analysis for NVIDIA Corporation (NVDA) | 11/20/24

Earnings report analysis for NVIDIA Corporation (NVDA) | 11/20/24

Get a quick breakdown of NVIDIA’s earnings report and call on 11/20/2024, as well as a look back at the previous quarter’s report.

Introduction

Welcome to the Thematic Earnings Report Analysis, where we break down the latest company earnings reports and analyst calls to provide a valuation analysis relative to the company's competitors and industry.

This analysis is made in the context of the previous NVIDIA earnings call, giving you a detailed look at key insights, trends, and changes to help you make more informed decisions. For more detail, all company fundamentals and financials are a click away (where you can also type questions and get truly insightful answers that draw from a broad library of up-to-date sources).

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TL; DR

NVIDIA's Q3 FY25 earnings report showcases exceptional performance, with record revenue of $35.1 billion (+94% YoY), driven by surging demand in AI and data center markets. Data Center revenue reached $30.8 billion (+112% YoY), fueled by the successful ramp of the Blackwell platform and strong H200 demand. Gaming and automotive segments also reported significant growth. While supply chain constraints limit short-term output, NVIDIA is scaling production to meet unprecedented demand.

Key drivers include AI's expanding adoption across industries, sovereign AI partnerships, and enterprise AI growth. Despite geopolitical risks and intense competition, NVIDIA's leadership in accelerated computing and generative AI positions it for sustained growth. Q4 revenue is projected at $37.5 billion, with gross margins stabilizing post-Blackwell ramp.

Most recent earnings report: For NVIDIA’s Q3 2025 — November 20, 2024

Thematic evaluation: Overvalued

See the full evaluation → 

Compared to: Advanced Micro Devices, Inc. (AMD) | Taiwan Semiconductor Manufacturing Co., Ltd. (TSM) | Technology Select Sector SPDR Fund (XLK)

NVIDIA's current valuation appears slightly overvalued due to extremely high valuation multiples that may be pricing in an overly optimistic scenario. While the company's financial performance, market dominance in AI chips, and strong growth prospects support a premium valuation, the current levels seem to underestimate potential risks such as increased competition, regulatory challenges, and possible AI market slowdown.

Key takeaways

  1. Exceptional Data Center Growth: NVIDIA's Data Center business continues to be a significant driver of revenue growth, fueled by strong demand for its high-performance GPUs and the expansion of AI workloads.

  2. Blackwell's Strategic Importance: The successful ramp of the Blackwell platform is crucial for NVIDIA's continued growth and maintaining its leadership position in the rapidly evolving AI market. However, margin pressure is expected in the near term.

  3. Supply Chain Challenges: While demand significantly exceeds supply, NVIDIA is actively working to address supply chain constraints to meet the growing demand for its products.

  4. AI Market Expansion: The expansion into enterprise and industrial AI presents significant growth opportunities for NVIDIA, leveraging its existing strengths and expanding into new market segments.

  5. Geopolitical Risks: The evolving geopolitical landscape, particularly the US-China relationship, presents both opportunities and risks for NVIDIA's business.

  6. Inference Market Potential: The inference market is expected to experience significant growth, driven by the increasing adoption of AI across various industries and applications.

  7. Long-Term Growth Outlook: NVIDIA's long-term growth prospects remain strong, driven by the ongoing platform shift from traditional computing to AI and the continued expansion of the AI market.

Management commentary:

Management expressed strong confidence in the continued growth of the AI market and NVIDIA's position within it. They highlighted the ongoing scaling of large language models, the emergence of new scaling techniques (post-training and inference time scaling), and the significant opportunities in enterprise and industrial AI. The company emphasized its full-stack approach and its ability to deliver customizable AI infrastructure to meet diverse customer needs. While acknowledging supply chain challenges, management expressed confidence in its ability to ramp production and meet the strong demand for its products.

  • Record Q3 Results: Revenue of $35.1B, exceeding guidance, with strong growth across all market platforms driven by accelerated computing and AI adoption.

  • Data Center Dominance: Record Data Center revenue of $30.8B, fueled by exceptional H200 demand and significant CSP growth (revenue more than doubled YoY). H200 is highlighted as the fastest product ramp in company history.

  • Blackwell Ramp: Blackwell is in full production, with shipments exceeding initial estimates. Demand is described as "staggering," and the company is working to scale supply. Blackwell is positioned as a full-stack, customizable AI infrastructure solution.

  • Software Growth: Software, service, and support revenue is annualizing at $1.5B, with expectations to exceed $2B by year-end.

  • AI Market Expansion: Focus on Enterprise AI and Industrial AI, highlighting NVIDIA AI Enterprise and Omniverse as key platforms. Growth in AI-native startups and the potential for billions of AI agents are emphasized.

  • Global Expansion: Significant progress in sovereign AI initiatives in India and Japan, with partnerships with leading CSPs and enterprises.

  • Gaming Performance: Strong Q3 gaming results driven by back-to-school sales and healthy channel inventory. New GeForce RTX AI PCs are being shipped.

  • Automotive Growth: Record automotive revenue driven by Orin and strong end-market demand.

  • Financial Guidance: Q4 revenue guidance of $37.5B (+/- 2%), reflecting continued Hopper demand and Blackwell ramp. Gross margin guidance anticipates moderation to the low 70s initially, with a return to the mid-70s expected upon full Blackwell ramp.

Financial Performance

NVIDIA reported record Q3 FY25 revenue of $35.1 billion, exceeding its guidance of $32.5 billion. This represents a 17% sequential increase and a substantial 94% year-over-year growth. Data Center revenue reached a record $30.8 billion, up 17% sequentially and 112% year-over-year. Gaming revenue was $3.3 billion, up 14% sequentially and 15% year-over-year. Professional Visualization (ProViz) revenue reached $486 million, a 7% sequential and 17% year-over-year increase. Automotive revenue hit a record $449 million, up 30% sequentially and 72% year-over-year. GAAP gross margin was 74.6%, while non-GAAP gross margin was 75%, slightly down sequentially due to a mix shift towards more complex, higher-cost Data Center systems. Operating expenses increased sequentially due to higher compute, infrastructure, and engineering development costs. The company returned $11.2 billion to shareholders through share repurchases and dividends.

Industry and Market Conditions

NVIDIA views the AI market as experiencing a fundamental shift from traditional coding to machine learning, creating a massive opportunity for modernization of existing data centers. The company sees the emergence of generative AI as a new industry, creating AI factories that generate digital intelligence. Management anticipates this growth to continue for several years. The company acknowledges the competitive landscape, particularly in China, and its commitment to complying with export controls.


Guidance and Outlook

NVIDIA provided Q4 FY25 revenue guidance of $37.5 billion, plus or minus 2%. This guidance incorporates continued demand for Hopper and the initial ramp of Blackwell, with expectations to exceed previous Blackwell revenue estimates. Gaming revenue is expected to decline sequentially due to supply constraints. GAAP and non-GAAP gross margins are expected to be 73% and 73.5%, respectively, plus or minus 50 basis points. Operating expenses are expected to remain elevated due to ongoing investments. The company acknowledges that demand greatly exceeds supply for Blackwell.

Topics from the analyst Q&A:

  • Large Language Model Scaling
  • Blackwell Execution and Roadmap
  • Gross Margin Trajectory
  • Inference Market Growth
  • Networking Business Performance
  • Sovereign AI Demand
  • Gaming Supply Constraints
  • Sequential Growth Trajectory
  • US-China Relations and Tariffs
  • AI Compute Allocation

Prior report:  For NVIDIA’s Q2 2025 — August 28, 2024

Full summary

Key takeaways

  • NVIDIA delivered another record quarter, with strong growth across its data center and gaming segments, driven by robust demand for its Hopper architecture and anticipation for the upcoming Blackwell platform.

  • The data center business was the primary growth engine, with revenue up 154% year-over-year, fueled by strong cloud, consumer internet, and enterprise adoption of NVIDIA's GPU computing and networking solutions.

  • The company is seeing significant momentum in generative AI, with frontier model makers, cloud service providers, and enterprises rapidly adopting NVIDIA's infrastructure to power a wide range of applications, from chatbots and recommender systems to drug discovery and enterprise productivity tools.

  • NVIDIA is positioning Blackwell as a transformative AI infrastructure platform, with a comprehensive suite of integrated components, including CPUs, GPUs, networking, and software, designed to enable customers to build large-scale, high-performance AI factories.

  • The company expects Blackwell to begin ramping in Q4, with several billion dollars in revenue, and anticipates strong demand for the platform to continue into fiscal 2026, as customers race to modernize their computing infrastructure and capitalize on the generative AI revolution.

  • NVIDIA's software and services business is also gaining traction, with the NVIDIA AI Enterprise platform expected to reach a $2 billion annual run rate by the end of the year, highlighting the company's ability to monetize its ecosystem and provide value-added solutions to customers.

  • Overall, NVIDIA's strong financial performance, strategic initiatives, and management's confidence in the company's ability to lead the transition to accelerated computing and generative AI suggest a promising outlook for the company's future growth and market dominance.

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