Nvidia (NVDA) Q3 earnings report 2024

Nvidia shares moved down 1% in extended trading on Tuesday after the chipmaker reported fiscal third-quarter results that surpassed Wall Street’s predictions. But the company called for a negative impact in the next quarter because of export restrictions affecting sales to organizations in China and other countries.

“We expect that our sales to these destinations will decline significantly in the fourth quarter of fiscal 2024, though we believe the decline will be more than offset by strong growth in other regions,” Nvidia’s finance chief, Colette Kress, said in a letter to shareholders.

On a conference call with analysts, Kress said Nvidia is working with some clients in the Middle East and China to obtain U.S. government licenses for sales of high-performance products. Nvidia is trying to develop new data center products that comply with government policies and don’t require licenses, but Kress said she didn’t think they would be meaningful in the fiscal fourth quarter.

Here’s how the company did, compared to the consensus among analysts surveyed by LSEG, formerly known as Refinitiv:

  • Earnings: $4.02 per share, adjusted, vs. $3.37 per share expected
  • Revenue: $18.12 billion, vs. $16.18 billion expected

Nvidia’s revenue grew 206% year over year during the quarter ending Oct. 29, according to a statement. Net income, at $9.24 billion, or $3.71 per share, was up from $680 million, or 27 cents per share, in the same quarter a year ago.

The company’s data center revenue totaled $14.51 billion, up 279% and more than the StreetAccount consensus of $12.97 billion. Half of the data center revenue came from cloud infrastructure providers such as Amazon, and the other from consumer internet entities and large companies, Nvidia said.

Healthy uptake came from clouds that specialize in renting out GPUs to clients, Kress said on the call.

The gaming segment contributed $2.86 billion, up 81% and higher than the $2.68 billion StreetAccount consensus.

With respect to guidance, Nvidia called for $20 billion in revenue for the fiscal fourth quarter. That implies nearly 231% revenue growth.

During the quarter, Nvidia announced the GH200 GPU, which has more memory than the current H100 and an additional Arm processor onboard. The H100 is expensive and in demand. Nvidia said Australia-based Iris Energy, an owner of bitcoin mining data centers, was buying 248 H100s for $10 million, which works out to about $40,000 each.

Computing instances based on the GH GPUs are coming soon to Oracle’s cloud, Kress said on the call.

As recently as two years ago, sales of GPUs for playing video games on PCs were the largest source of Nvidia’s revenue. Now the company gets most revenue from deployments inside server farms.

The introduction of the ChatGPT chatbot from Microsoft-backed startup OpenAI in 2022 caused many companies to look for ways to add similar generative artificial intelligence capabilities to their software. Demand for Nvidia’s GPUs strengthened as a result.

Nvidia faces obstacles, including competition from AMD and lower revenue because of export restrictions that can limit sales of its GPUs in China. But ahead of Tuesday report, some analysts were nevertheless optimistic.

“GPU demand continues to outpace supply as Gen AI adoption broadens across industry verticals,” Raymond James’ Srini Pajjuri and Jacob Silverman wrote in a note Monday to clients, with a “strong buy” recommendation on Nvidia stock. “We are not overly concerned about competition and expect NVDA to maintain >85% share in Gen AI accelerators even in 2024.”

Nvidia is still working on its plan to grow supply throughout next year, Kress said on the call.

Excluding the after-hours move, Nvidia stock has gone up 241% so far this year, vastly outperforming the S&P 500 index, which is up 18% over the same period.

WATCH: The major risk to Nvidia earnings is its relationship with China, says Degas Wright

First appeared on www.cnbc.com

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