Nvidia Smashes Estimates With Record Revenue And Blowout Guidance; Stock Jumps
Heading into NVDA's earnings, we said that all else equal, the bare minimum for the stock - which has underperformed peers rather dramatically in recent months - to outperform, was to (solidly) beat expectations of another 2+2 quarter, i.e., beat the guide by $2BN and beat Street expectations for the April quarter guide by $2BN.
What they got was a blowout 2.2+5: Q4 revenues beating by $2.2BN and guidance beating the midpoint by about $5BN
Here are the details from the just completed Q4:
- Adjusted EPS $1.62, beating estimate $1.53
- Revenue $68.13 billion, +73% y/y, blowing away estimates of $65.91 billion by $2.2BN
- Data center revenue $62.31 billion, +75% y/y, smashing estimate $60.36 billion
- Compute revenue $51.33 billion, +58% y/y, missing estimate $51.61 billion
- Networking revenue $10.98 billion vs. $3.02 billion y/y, beating estimate $9.02 billion
- Gaming revenue $3.73 billion, +49% y/y, missing estimate $4.01 billion
- Professional Visualization revenue $1.3 billion vs. $511 million y/y, beating estimate $770.7 million
- Automotive revenue $604 million, +6% y/y, missing estimate $643.2 million
- OEM & other revenue $161 million, +28% y/y, missing estimate $179.4 million
According to the company, Data Center revenue was driven by accelerated computing and AI:
Overall revenue has been a relentless juggernaut.
- Adjusted gross margin 75.2%, above the 75.0% bogey and beating estimates of 74.7%
- Adjusted operating expenses $5.10 billion, +51% y/y, below estimate $4.96 billion
- Adjusted operating income $46.11 billion, +81% y/y, above estimate $44.56 billion
- R&D expenses $5.51 billion, +48% y/y, above estimate $5.38 billion
- And free cash flow was a remarkable $34.90 billion, more than double the $15.52 billion YoY
While historical were great, the guidance was stellar:
- Sees revenue $76.44 billion to $79.56 billion, the midpoint of $78BN more than $5BN above the estimate $72.78 billion, and comfortably above the buyside bogey of $74-75BN
- Sees adjusted gross margin 74.5% to 75.5%, in line with the 75% buyside bogey and above the sellside consensus estimate 74.7%
- Sees adjusted operating expenses about $7.5 billion, estimate $5.33 billion
- For the full year fiscal 2027, GAAP and non-GAAP tax rates are expected to be between 17.0% and 19.0%, excluding any discrete items and material changes to NVIDIA's tax environment.
Notably, NVDA's guidance does not assume any China data center compute revenue.
Here are some of the comments from Jensen Huang:
- Computing Demand Is Growing Exponentially
- Customers Are Racing to Invest in AI Compute
- Enterprise Adoption of Agents Is Skyrocketing"
- Grace Blackwell With Nvlink Is the King of Inference
As Bloomberg summarizes, this was a solid quarter by any measure and shares are responding accordingly. "Fourth-quarter revenue beat by more than $2 billion while the forward guide midpoint lands at $78 billion, way above the $72.78 billion Wall Street was anticipating. So in other words, Nvidia delivered on even some of the highest expectations out there, which should go a long way to reviving confidence in the tech sector."
Needless to say, how investors now react to Nvidia’s results will be important for the entire market, given the stock’s nearly 8% weight in the S&P 500. Nvidia shares gained 1.4% in Wednesday’s session to close at the highest level since Nov. 10. Shares have been stuck in a narrow range over the last few months as investor enthusiasm around artificial intelligence has waned. Options were pricing in a 4.4% move ahead of the report, which means we are about to see a lot of options expire worthless. That's because while the stock jumped about 3%, it has since faded gains a bit. Still, it is trading at the highest level since November.
The question is will that be enough to get the Nasdaq out of its recent funk?
Here is the company's Q4 investor presentation.