BREAKING: Nvidia earnings above expectations but shares drop 2% after-hours trading 📉

Nvidia (NVDA.US) today released its financial results for fiscal Q4 2025 (Q3 2024). Earnings per share came in at $0.78 versus expectations of $0.75 on revenue of $35 billion, well above the expected $33.1 billion. Revenue expectations were exceeded by sales in both data center and gaming business segments. Despite this, the stock lost nearly 2.5% in after-hours trading, and plunged even more than 5% in the first reaction. What's important is that expected by Nvidia, quarterly revenue growth at $37.5 billion for the current quarter (7%) would be the weakest pace since 2023. It's worth keeping in mind that the market's reaction could still be at different levels by the time the US stock market opens tomorrow; the US100 contract is currently losing 0.5%.

• Data center revenue: $30.8B, 6% higher than est. $29.14B; 112% YoY and 17% QoQ growth
• Gaming rev.: $3.3B, est. $3.06B (15% YoY gr and 14% QoQ growth)
• Professional visualization: 486M USD (7% QoQ and 17% YoY)
• Automotive: 449M USD (30% QoQ and 72% YoY)
• Fiscal Q4 2025 adjusted gross margin: 73% to 74%, est. 73.5%

• Gross margin came in 75% (-1pp QoQ), virtually in line with expectations, and EBIT slightly exceeded Wall Street's forecast. Net income came in at $19.31 billion (111% YoY), and revenue guidance for fiscal Q4 2025 (calendar Q4 2024) was set at $37.5 billion (plus or minus 2%), beating a lot of Wall Street analysts' forecasts. Operating margin came in 62% (flat QoQ)
• Nvidia has signaled that the first deliveries of Blackwell and Hopper AI chips will occur in the last quarter of this year and will be made in subsequent quarters. Both designs have 'some supply constraints,' but demand for Blackwell will still likely outstrip supply for 'several quarters' next year (fiscal 2026); chip shipments are expected to accelerate next year;
• The earnings report is very strong and signals that the artificial intelligence boom is probably far from over, despite the high valuations of technology companies. Nvidia reassured the market about the first deliveries of Blackwell chips, although it indicated that there are indeed some limitations in their production. Nonetheless, the market's reaction indicates profit-taking pressure on Nvidia shares.

Source: Nvidia Fiscal Q3 2025 Earnings Report

New business partnerships and high-tech potential

• Nvidia has announced a partnership with Foxconn to build the fastest AI supercomputer in Taiwan using NVIDIA Blackwell. Accenture, Deloitte and Google Cloud, are using NVIDIA AI software to develop proprietary AI applications. Nvidia has also expanded business partnerships with Lenovo, Volvo, Toyota, T-Mobile, Ericsson, Nokia, SoftBank and India's Reliance Industries.
• The construction of AI supercomputers in Japan (SoftBank), Denmark, and India, Indonesia and Taiwan signals Nvidia's expansion in key regions. Commercialization of AI technology in 5G networks, could create a relatively new revenue stream for the company. The use of Omniverse and AI in automotive (e.g., new Volvo models) and in manufacturing automation strengthens the company's position in the industry.
• On the gaming side, RTX and DLSS technologies, are clearly attracting gamers and developers. Increased performance on benchmarks of large tongue-in-cheek models (up to 2.2x) can attract customers who demand the highest performance, expanding the company's 'moat' in AI business.
• Strong revenue growth from automotive markets (+72% y/y) and new AI tools for robotics (Project GR00T) suggest that both segments could be increasingly important revenue sources in the future. Also, the development of so-called “digital twins” technology seems to support the company's growth potential, in the coming quarters.

Nvidia chart (D1 interval)

Currently, reaction on Nvidia stock suggests tomorrow's opening at $141 per share, although the price could still change quite a lot. The company maintained the quarterly dividend at 0.01 USD per share, in line with expectations. 

Source: xStation5

NVDA financial dashboards

The price investors are paying for Nvidia shares is becoming increasingly challenging, with a price/earnings ratio of 57 (and forward price to earnings at 38) and a price/sales ratio above 30. On the other hand, however, the company is reporting exponential ROIC growth, and Wall Street is seeing a premium in this stock for good reason; Nvidia has a dominant position in the high-performance GPU market, targeting AI; it is also reporting growth in its other business sectors - outside of data centers. 

Source: XTB Reserach, Bloomberg Finance LP

Source: XTB Reserach, Bloomberg Finance LP