Nvidia Earnings: Predictably Outstanding Results; Strong Forward Guidance

Key Morningstar Metrics for Nvidia

• Fair Value Estimate: $480.00
• Morningstar Rating: 3 stars
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: Very High

What We Thought of Nvidia’s Earnings

Nvidia NVDA reported predictably outstanding results for the October quarter that were ahead of guidance, and the company’s outlook for the fiscal fourth quarter was also ahead of our prior expectations. Nvidia is clearly the dominant provider of graphics processing units, or GPUs, deployed in data centers, and we don’t foresee the company losing its supremacy any time soon.

We maintain our $480 fair value estimate and view shares as fairly valued. We also maintain our Very High Uncertainty Rating, as the timing and magnitude of future artificial intelligence GPU growth remains unclear to us, especially given recent U.S. restrictions on chip sales into China. That said, Nvidia’s earnings report gives us a small confidence boost that the firm can reach our projection of $100 billion of data center revenue in fiscal 2028, compared with just $15 billion last fiscal year and our estimate of $46 billion this year.

Revenue in the October quarter was $18.1 billion, up 34% sequentially, up 206% year over year, and above guidance and our estimate of $16.0 billion. Data center revenue, driven by insatiable AI GPU demand, remains the only story that matters, in our view, with revenue of $14.5 billion up 41% sequentially and 279% year over year. AI GPU demand is coming from all customer types—cloud, consumer internet firms, and enterprises. Nvidia’s hefty pricing power on its GPUs remains intact, as adjusted gross margin rose to 75% and adjusted operating margin came in at 64%, above guidance of 72.5% and 53%, respectively.

Nvidia expects revenue of $20 billion in the January quarter, which would be up 10% sequentially and 230% year over year. Within revenue, we estimate that data center revenue will be $16.8 billion, up a whopping 366% year over year. A significant decline in revenue from China will be offset by robust growth elsewhere in the world. Adjusted gross margin is forecast to be 75.5%, and we model an exceptional 65% adjusted operating margin next quarter.