Nvidia tops estimates and says sales will jump 170% this quarter, driven by demand for AI chips

Nvidia shares climbed 6% in extended trading on Wednesday after the chipmaker beat estimates for its fiscal second quarter and issued optimistic guidance for the current period.

Here’s how the company did in the quarter ending July 30:

• Earnings: $2.70 per share, adjusted, versus $2.09 per share expected by Refinitiv.
• Revenue: $13.51 billion versus $11.22 billion expected by Refinitiv.

Nvidia said it expects fiscal third-quarter revenue of about $16 billion, higher than $12.61 billion forecast by Refinitiv. Nvidia’s guidance suggests sales in the current quarter will grow 170% from the year-earlier period.

Net income jumped to $6.19 billion, or $2.48 a share, from $656 million, or 26 cents, a year earlier.

Nvidia’s strong sales and forecast underscore how central the company’s graphics processing units (GPUs) have become to the generative AI boom. Nvidia’s A100 and H100 AI chips are needed to build and run AI applications like OpenAI’s ChatGPT and other services that take simple text queries and respond with conversational answers or images.

Revenue in the second quarter doubled from $6.7 billion a year earlier and increased 88% from the prior period.

“The world has something along the lines of about a trillion dollars worth of data centers installed, in the cloud, enterprise and otherwise,” Nvidia CEO Jensen Huang said on a call with analysts. “That trillion dollars of data centers is in the process of transitioning into accelerated computing and generative AI.”

On the earnings call, finance chief Colette Kress said the company would not be immediately affected by proposed Biden administration export restrictions on chips.

“Given the strength of demand for our products worldwide, we do not anticipate that additional export restrictions on our data center GPUs, if adopted, would have an immediate material impact to our financial results,” Kress said.

Even before Wednesday’s report, Nvidia’s stock price had more than tripled for the year, making it the top performer in the S&P 500. It jumped to around $500 after hours, a level that would mark a record if it closes there on Thursday. Its prior closing high was $474.94 on July 18.

Nvidia’s performance was driven by its data center business, which includes AI chips, as cloud service providers and large consumer internet companies like Alphabet, Amazon and Meta snapped up next-generation processors. The company reported $10.32 billion in revenue for the group, up 171% year over year and above the $8.03 billion estimate, according to StreetAccount.

Nvidia added that it saw its adjusted gross margin increase 25.3 percentage points to 71.2%, because of growth in profit-rich data center sales.

The gaming division, which used to be Nvidia’s core business, saw revenue increase 22% from a year earlier to $2.49 billion, topping the $2.38 billion average estimate.

Nvidia also makes chips for high-end graphics applications. That business shrank 24% year over year to $379 million. The company reported $253 million in automotive revenue, up 15% from a year earlier.

Nvidia said its board of directors authorized $25 billion in share buybacks after the company purchased $3.28 billion in shares during the quarter.

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