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Nvidia earnings beat Wall Street expectations 📊 Guidance for Q4 increased 📈

22:04 21 November 2023

Nvidia's (NVDA.US) highly anticipated report today turned out to be much better than the market expected. Nevertheless, the company's shares are currently losing less than 1%, as the company expects significantly lower chip sales to China in the fourth quarter of the year. This information is somewhat surprising to the market. Analysts had expected the impact of U.S. sanctions on AI chip sales to China to be limited, and Chinese media had relayed that Nvidia would supply Chinese firms with three AI GPU Chips in H100 technology. Despite this 'weakness' on the overall report, the results themselves were much better than expected. Moreover, the company expects lower sales in China to be offset by an increase in orders in other regions.

Nvidia Q3 earnings highlights

  • Revenues: $18.12 billion vs. $16.1 billion forecast and $16.32 billion Nvidia estimate and $5.93 billion in Q3 2022 (34% q/q, 12.5% above expectations)
  • Earnings per share: $4.02 vs. $3.37 forecasts and $0.58 in Q3 2022 (47% q/q, 18% above expectations)
  • Data center revenue: $14.51 billion vs $12.82 billion forecasts and $3.83 billion in Q3 2022 (41% q/q)
  • Gaming revenue: $2.86 billion vs $2.7 billion forecasts and $1.57 billion in Q3 2022 (15% q/q)
  • Automotive revenue: $0.3 billion (3% q/q)
  • Professional visualization revenue: $0.4 billion (10% q/q)
  • OEM & other: $0.1 billion (11% q/q)
  • Gross margin: 74% vs 72.5% forecast and 70.05% in Q2 2023
  • Net profit: $9.2 billion (51% net margin, 5% growth quarterly)
  • Q4 revenue estimates: $20 billion (with an estimated possible deviation of 2% in either direction) vs $17.8 billion Wall Street forecast
  • Flat y/y Q3 R&D expenses ($2.3 billion, 0.2% y/y growth), sales and administrative costs ($0.7 billion, 0.1% y/y growth)

Data centers revenue = surge in AI demand

The higher-than-forecast gross margin suggests that the company continues to post great results from sales and does not feel the 'breath' of competition from AMD, which plans to introduce its own AI chip offerings in 2024. Sharply higher-than-expected results in the data segment signal that corporate demand for the computing power of AI models is very high. It consistently beats Wall Street forecasts, and observing Nvidia's growth rate in this segment, it still seems far from saturated.

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'Miraculous' report is not enough ?

It seems that the news of declining sales to China may have been fuel for the market to fulfill the 'buy the rumors, sell the facts' scenario. The company reported that export restrictions have hit its competitive position in the market. Products in China, which are subject to licensing agreements, account for 20 to 25% of revenue, from data centers (about $3.5 billion) so this part of the contribution to the current quarter's results will be uncertain. The stock reached new one-year highs, in yesterday's session, and despite the great report and almost abstract revenue forecasts, the market may see the situation as suitable for profit taking. Ultimately, the market's reaction to the results will have to wait until the opening of tomorrow's session on Wall Street, before which it will have a conference call with analysts led by CEO Jensen Huang (10:00 PM GMT).

Source: xStation5

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