Stock market high-flyer Nvidia (NVDA) revealed in an earnings call that it pushed past analyst’s heady expectations with its financial performance for the fiscal year’s second quarter. The Santa Clara, California-based technology company reported quarterly revenues of just over $30 billion, comfortably beating the forecast of $28.7 billion and improving over the same quarter last year by 122%. Net income came to nearly $16.6 billion, an improvement of 168% over the year earlier figures. Earnings per share were $0.67, also up 168% compared to a year ago and again ahead of the expected $0.65. Additionally, a $50 billion stock buyback program was announced. Here’s what you need to know.
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Nvidia’s Fiscal Year 2025 Q2 Earnings
The Aug. 28, earnings call by Nvidia was one of the most hotly anticipated events of the year on Wall Street. Investors were anxious to see whether the company’s eye-catching financial performance of late would continue in the second quarter of its fiscal 2025. Executives including CEO Jensen Huang did not disappoint, presenting fiscal summary that showed Nvidia was doing better than most experts expected and even eclipsed the robust results from the first quarter.
The $30 billion in revenues was about $1.3 billion more than analysts had forecast. And the earnings per share figure of $0.67 was about $0.02 per share ahead of expectations. Both figures, along with net income of $16.6 billion, were up strongly compared with the first quarter of Nvidia’s fiscal 2025, as well as the second quarter ending in July 2024.
Huang and CFO Colette Kress walked listeners through the figures, which showed that gaming and graphics, the businesses where Nvidia started in 1993, had been far outstripped by sales to data centers. Data centers represented $26.3 billion in revenues, up 154% from a year earlier, while gaming contributed $2.8 billion in sales, a 16% increase over the prior year quarter.
Nvidia Stock Performance and Buybacks
Driven by artificial intelligence systems that rely on its chips and other products, Nvidia’s market capitalization has increased by almost 1,000% percent since November 2022, shortly before the ChatGPT kicked off the AI frenzy. Recently the company became just the fourth publicly traded firm to reach a market capitalization of more than $3 trillion, joining tech elites Apple, Google and Microsoft.
Given the rapid advance in the stock price, which saw it trading at 100 times earnings, there was some question whether any disappointment or even less-than-superb performance by Nvidia might cause a significant correction. While the stock was trading down after-hours after the earnings call, which took place after the markets closed, the stock traded up about 2%, around $120, the morning after the call.
During the conference call, executives announce a $50 billion stock buyback program had been approved by the board of directors. Buybacks usually generate upward price pressure on a company’s stock, as the company accumulates its own shares with excess profits.
Meanwhile, the company had completed a 10-for-1 stock split in June. A quarterly cash dividend of $0.01 per share will be paid Oct. 3, to shareholders of record on Sept. 12.
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Nvidia’s Business
Nvidia’s mushrooming sales and profits have been driven by a worldwide trend of massive investments in artificial intelligence by businesses from startups to tech giants. It is the primary supplier of the high-performance processors that power all sorts of AI products and services, including the large language models behind ChatGPT and others, as well as ad-targeting systems, tailoring suggestions to shoppers and social media users, and many more.
The company’s existing products, led by its Hopper graphical processing unit (GPU) line, are said to command as much as 95 percent of the global market for chips inside AI systems. During the earnings call, Huang said Hopper sales are still growing even as it prepares to roll out its next set of products based on a chip design dubbed Blackwell, which are supposed to add billions of dollars in sales in the fourth quarter.
Analysts on the call asked several questions addressing whether global corporate investment in AI hardware, specifically Nvidia chips, could be expected to continue at the current elevated level. Stock market observers have recently expressed skepticism that AI investments would generate profits soon or perhaps ever, and suggest pullbacks in the purchases of hardware and software to outfit new AI-focused data centers are coming soon.
Huang responded by saying that, while AI was helping to drive the boom in Nvidia’s sales, a larger trend was a shift away from computing systems based on more conventional central processing unit (CPU) chips, which have begun running up against limits to performance, and toward faster systems driven by GPUs like Nvidia’s. These accelerated computing systems are much faster and use less energy and will eventually replace most or all of existing global computing infrastructure, Huang said.
He and CFO Kress presented guidance for the third quarter suggesting the company would have $32.5 billion in sales, while profit margins held steady. Neither stressed caution. “Next year is going to be a great year,” Huang told listeners. “We expect to grow our data center business quite significantly. Blackwell is going to be a game changer for the industry.”
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Bottom Line
Nvidia recorded another strong quarter with revenue and profits that outstripped analyst expectations and suggested the company’s recent rocket-like growth trajectory has yet to reach its apex. With both sales and net income up by triple-digit percentages compared to the second quarter of last year, the maker of high-performance processors continued a string of impressive quarterly performances that saw its stock climb by 150% in the first half of 2024. Company executives offered guidance indicating that the growth is likely to continue in the next quarter, and responded to questions about whether the results were sustainable by suggesting the company’s growth still had a long way to run.
Tips
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