On Wednesday, Nvidia Corporation (NASDAQ: NVDA) went far beyond estimates with its quarterly performance report. This "drop the mic" moment, as described by Reuters, led to a 6.5% rise of its New York shares in extended trading, adding to its gains this year during which it became the fifth publicly traded U.S. company to join the "trillion-dollar club" whose members are Apple Inc (NASDAQ: AAPL), Microsoft Corporation (NASDAQ: MSFT), Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) and Amazon.com Inc (NASDAQ: AMZN).
Moreover, Nvidia's jaw dropping quarter also lifted other Big Tech stock, including Microsoft who is looking to get its hands on more of Nvidia's chips, with its stock rising 1.9% during extended trading. Even Meta Platforms (NASDAQ: META) stock went up 2.1%. A new computing era has begun and Nvidia is enjoying the results of its bold decision to invest heavily on producing chips that power AI systems long before its rivals Intel Corporation (NASDAQ: INTC), Advanced Micro Devices (NASDAQ: AMD) and Micron Technologies Inc (NASDAQ: MU) who focused on servicing markets with existing demand.
Smashing Second Quarter Results
For the quarter that ended on July 30th, Nvidia's adjusted revenue amounted to $13.51 billion, topping Refinitiv's consensus estimate of $11.22 billion. Sales have hit a record as they more than doubled, increasing 88%.
The data center business, whose output includes the A100 and H100 AI chips that are needed to build and run artificial intelligence applications like Microsoft-backed ChatGPT rose 171% YoY to $10.32 billion, going far beyond analyst estimates of $7.69 billion, according to Refinitiv's data.
The gaming segment rose 22% YoY to $2.49 billion, topping Refinitiv's consensus estimate of $2.4 billion.
On the other end, Nvidia is spending big to secure its long-term supply needs as it recorded a 53% jump to $11.15 billion of inventory commitments compared to the previous quarter.
Net income still skyrocketed from last year's comparable quarter ($656 million, or 26 cents a share) to $6.19 billion, or $2.48 a share. Adjusted earnings amounted to $2.70 per share, topping Refinitiv's consensus estimate of $2.09.
Third Quarter Outlook
While Refinitiv's consensus estimate for revenue was $12.61 billion, Nvidia guided for revenue of about 2% up or down of $16 billion as it expects sales to continue to soar approximately 170% YoY. Adjusted gross margin is expected at 72.5%, plus or minus 50 basis points, while Refinitiv's consensus stood at 70.4%.
Analysts are expecting Nvidia's fiscal 2025 data center revenue to expand to $40 billion due to its leadership in AI chips and software to put those chips to work as they power products like ChatGPT that Microsoft integrated in its 365 offerings. ChatGPT alone was trained using 10,000 of Nvidia's graphics processing units that made a supercomputer that Microsoft had built.
Q2 Blockbuster Results Reflect Nvidia's Dominant Position In The AI Chapter
The global demand for Nvidia's chips is likely to continue intensifying, therefore Nvidia's main job is to secure the supply chain to meet that demand. Although its rival Advanced Micro Devices is expected to take some market share away next year with its key AI chip, Nvidia's software still has a years' long lead under its belt. As Wedbush analysts Daniel Ives commented, Nvidia is "the purest and best barometer for AI demand" and its latest quarterly results that smashed Wall Street's more than ambitious estimates could have a ripple impact upon the tech industry that has now undoubtedly opened a new chapter in computing history.
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