Nvidia Quarterly Results

HOW is it possible for the biggest company in the world to announce RECORD profits… and yet its stock FALLS!
Yes, as crazy as it sounds, right now many investors are asking themselves: “What the hell just happened?”

I’m talking of course about Nvidia, which just announced its results for the second quarter of its fiscal year and… guys, they are nothing short of IMPRESSIVE. Yet, after the announcement, the stock went down.

A QUARTER WITH TOP GRADES

For the quarter that ended on July 27, Nvidia reported revenue of $46.74 billion.
And net income of $1.08 per share, beating Wall Street’s expectations.

Analysts had expected $46.13 billion in revenue and $1.01 per share. So, not only did Nvidia beat expectations—it crushed them. These are results most S&P 500 companies would envy.

And now hold on tight: Data Center revenue reached $41.1 billion, up 56% compared to the same quarter last year, although slightly below the forecast of $41.29 billion.

In gaming, revenue was $4.3 billion, up 49% year over year and 48% compared to the previous quarter. In automotive, Nvidia brought in $586 million, a 69% increase. And in professional visualization, the number was $601 million, up 32%.

Adjusted Gross Margin hit 72.7%, although without the $180 million inventory return from H20 chips, it would have been 72.3%.
And if all that wasn’t enough, Nvidia also announced a new $60 billion share buyback program.

A move that screams confidence in its future. When a company buys itself back at that scale, it’s sending a very clear message to the market: “We believe we’re worth a lot more.”

So then… “Why did the stock fall?” you’re wondering.

THE CHINA BLOCK

The main “thorn” right now is the H20 chip, a model designed specifically for the Chinese market to comply with the Biden-era restrictions. But now, with the Trump administration back, things have become more complicated.

The Trump administration blocked H20 sales to China earlier this year. Although there was a deal for exports on the condition that the U.S. government would take 15% of H20 revenues, no official regulation has yet been issued. Nvidia’s CFO, Colette Kress, made it clear that if nothing official comes out, they could proceed with sales without paying anything.

In short, Nvidia had zero H20 sales in China during Q2, it has not included them in its Q3 guidance, but it estimates that if the issue is resolved, it could add between $2 and $5 billion in extra revenue next quarter.

This uncertainty is what’s holding the stock back. Not the results.

ANALYSTS WENT CRAZY

Despite the stock’s drop, analysts didn’t hide their excitement. In fact, most of them raised their price targets.

Morgan Stanley noted that Nvidia is forecasting an extra $7 billion in revenue in just one quarter, not even counting China. That’s historic. Jefferies said that everything is sold out, with customers even buying three-year-old Hopper chips, simply because there aren’t enough to meet demand. And Wedbush added that we’re looking at $3–4 trillion in AI infrastructure investments by 2030, with Nvidia at the center of it all.

Everything points to real demand being much bigger than what the numbers currently show. And that’s good for the stock’s long-term trajectory.

INVESTMENT TAKEAWAY

The market punished the stock temporarily. Why? Either because some investors panicked over geopolitical tensions, or because expectations for Q3 were just too high, with hopes of seeing China sales included.

But let’s take a calm look: Nvidia is projecting an additional $7 billion in revenue for the next quarter. Its customers are literally lining up. Governments and hyperscalers are pouring billions into AI.

So if someone believes Nvidia will continue to dominate AI, then this dip in the stock after such results might actually offer a great buying opportunity.

Posted Using INLEO