Nvidia’s Revenue Forecast Falls Short of Lofty Expectations
The world’s most valuable firm, Nvidia, has failed to meet the high expectations of investors with its fourth-quarter revenue forecast. Despite predicting revenue of $37.5 billion, plus or minus 2%, the company’s shares fell roughly 2% in extended trading.
A Stunning Rate of Growth, But a Clear Slowdown
While Nvidia’s revenue growth remains impressive, it marks a significant slowdown from previous quarters. The company’s chips, which power complex generative AI systems, continue to be in high demand. However, the growth rate has slowed to approximately 69.5% from 94% in the third quarter.
CEO Jensen Huang on the Age of AI
“The age of AI is in full steam, propelling a global shift to NVIDIA computing,” said Nvidia CEO Jensen Huang. He highlighted the incredible demand for the company’s high-performing AI chips, Hopper and Blackwell, which are in full production.
High Expectations and Supply-Chain Challenges
Expectations were running high ahead of the results, with Nvidia shares up over 20% in the last two months. However, supply-chain snags have made it harder for the company to report big beats on revenue. The limited capacity for advanced manufacturing techniques at TSMC, Nvidia’s manufacturing partner, has been a significant bottleneck.
Third-Quarter Results and Data-Center Segment Growth
Nvidia recorded third-quarter adjusted earnings of 81 cents per share, beating estimates of 75 cents per share. The data-center segment, which accounts for a majority of Nvidia’s revenue, grew 112% to $30.77 billion in the quarter ended October 27.
Cloud Companies Drive Sales
Cloud companies’ continued spending on Nvidia’s chips has boosted sales, as they expand data centers capable of handling generative AI’s complex processing needs. The company has also fixed a design flaw with its Blackwell chips by changing the blueprints used by TSMC to manufacture them.
Analysts Weigh In
“Rumblings of potential supply chain issues are clearly causing some concerns,” said analyst Bob O’Donnell of TECHnalysis Research. Ryan Detrick, chief market strategist at Carson Group, noted that investors have become accustomed to huge beats from Nvidia, but meeting those expectations is getting harder.
Adjusted Gross Margin Shrinks
The company’s adjusted gross margin shrank to 75%, sparking concerns about its ability to maintain its revenue growth momentum. Despite this, Nvidia remains a leader in the AI chip market, driving innovation and growth in the industry.
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