Chip-making giant Nvidia (NASDAQ:NVDA) announced its third-quarter earnings on Wednesday 20 November in one of the stock market’s most eagerly-anticipated events of the quarter.
The artificial intelligence (AI) company is one of the top stocks with investors – it was the third most-bought stock on retail platform Interactive Investor last month.
Before the results were released, Josh Gilbert, market analyst at investment platform eToro, asked “can the biggest company in the world beat expectations and raise Q4 guidance again?” In his view, the answer was “yes”.
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By most metrics, Nvidia delivered on this optimism.
Earnings per share more than doubled to $0.81, comfortably beating analyst estimates of $0.75. Revenue similarly increased 94% year-on-year to $35.08 billion, beating analyst estimates of $33.16 billion.
Over the last two years, Nvidia has gone from a market capitalisation of just over $400 billion to being the world’s most valuable company, driven by its unrivalled status as the supplier of graphical processing units (GPUs) that have underpinned the rise of AI. It is the bellwether member of the ‘Magnificent Seven’ stocks that are seen as driving the AI and technology boom.
Nvidia’s revenue and earnings growth during this period have been eye-watering, and have set market expectations for continued growth extremely high.
In the last 12 months alone, Nvidia’s share price has gained 196%.
What happened to Nvidia’s share price post-earnings?
After the earnings release, despite beating analyst estimates, Nvidia’s share price fell 2.5% in after hours trading.
The reasons for this decline are unclear but one possibility is the reserved guidance that Nvidia’s management issued. This was expected to be a hot topic prior to the earnings release: Gilbert said before the announcement that “the market now expects Nvidia to not only beat estimates but also raise its guidance significantly, building plenty of optimism for 2025.”
In the event, though, management dampened expectations for the fourth quarter of its 2025 financial year, anticipating supply challenges for its next-generation Blackwell GPU. Revenue guidance for the quarter of $37.5 billion, plus or minus 2%, implies slightly under 7% growth and quarter-over-quarter and 70% year-on-year, well below the triple digit numbers that investors have become accustomed to.
Blackwell said supply challenges will, hopefully, be temporary. Colette Kress, Nvidia’s chief financial officer, told analysts in a post-earnings call that delivery will “be back on track with more suppliers as we turn the corner into the new calendar year”, but that the “challenge” would be “how fast we get that supply… into the market this quarter”.
When is Nvidia's next earnings release?
Nvidia released its Q3 results after US markets closed on 20 November. This happens at 4.30pm Eastern time due to US stock market opening times, or 930pm in the UK.
Nvidia has not yet announced when it will next release earnings, but it will be approximately three months after the latest release.
Nvidia Blackwell: will it drive revenue?
Nvidia’s CEO Jensen Huang has described demand for Nvidia’s next-generation AI GPU chip, ‘Blackwell’, as “insane”. In October, Barron’s reported that Huang had told Morgan Stanley analysts that Blackwell chips are already booked out for the next 12 months, meaning an order placed today won’t be delivered for another year.
While this is expected to be a major revenue driver, it also poses complications for Nvidia. Blackwell’s rollout hasn’t been smooth so far. The Information reported this week that Blackwell GPUs have been prone to overheating when connected to each other on the server racks Nvidia has repeatedly redesigned for the chip. A further redesign could slow GPU shipments and delay the opening of new data centres for Nvidia’s big tech customers.
This explains why investors appear to have sold off the stock following the earnings release, given the expected challenges in supply of Blackwell chips next quarter.
Forecasts for Blackwell’s fourth quarter revenue range from the $5-6 billion that Morgan Stanley analysts expect to the $12-13 billion forecast by Spear Invest.
Is Nvidia a buy?
Investors should consider the level of risk involved in a stock trading at the levels Nvidia has reached.
Having consistently beaten analyst expectations and posted double digit revenue growth over the past 18 months, Nvidia has taught the market to expect incredible results every time.
“Expectations almost seem unattainable”, as Gilbert put it. This explains why the stock fell despite posting growth numbers that most companies can only dream of.
Longer term, it is difficult to predict how the ongoing trade war with China will play out. US sanctions against AI-ready chip exports to the country have already hampered Nvidia’s growth, and the incoming Trump administration is expected to adopt an even more hostile stance.
However, despite the elevated expectations baked into Nvidia’s current valuation, industry analysts expect Nvidia’s stock to keep gaining over the next 12 months. According to Kiplinger, industry analysts revised their price targets for Nvidia upwards by an average of 5% in a week in the run-up to the earnings release.
The median target among analysts polled by LSEG of $170 implies approximately 16.5% gains from Nvidia’s 19 November close price. This is sedate compared with its previous explosive gains, but still worth exposure if it happens.
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