Nvidia delivers another crushing earnings beat, with data center chip sales rising 427% – Business
Nvidia Corp. delivered another earnings blowout today, crushing Wall Street’s already high expectations to send its share price soaring above the $1,000 mark for the first time.
The chipmaker has become synonymous with the artificial intelligence industry, with its stock seen as a yardstick to gauge the strength of that market. Today’s results suggest that demand for AI chips is not letting up. Nvidia Chief Executive Jensen Huang told investors that the company expects sales to increase with the launch of its upcoming new graphics processing unit, called Blackwell, later this year.
With Nvidia’s stock rising more than 6% in after-hours trading to hit a new likely record high when regular trading resumes Thursday, the company announced a 10-for-1 forward stock split that will go into effect on June 10, intending to make its shares “more accessible to employees and investors.”
The company reported fiscal 2025 first-quarter earnings before certain costs such as stock compensation of $6.12 per share, easily beating Wall Street’s target of $5.59 per share. Revenue rose by a stunning 262%, to $26.04 billion, well ahead of the $24.65 billion forecast.
All told, Nvidia delivered net income of $14.88 billion, up from just $2.04 billion one year earlier.
The company also delivered a strong outlook for the second quarter, saying it expects sales to hit $28 billion. Wall Street is looking for revenue of just $26.61 billion.
Nvidia’s stock has skyrocketed over the last year as technology companies such as Amazon.com Inc., Google LLC, Microsoft Corp., Meta Platforms Inc. and OpenAI have scrambled to snap up billions of dollars worth of its GPUs. The company’s pricey chips are widely seen as essential for developing and training large language models such as ChatGPT, and running AI applications.
The growing demand for GPUs has helped Nvidia’s data center business emerge as its most important segment, and revenue there grew by an astonishing 427% from the year prior. The data center unit includes sales of both AI chips as well as the networking components required to run AI servers.
On a conference call, Nvidia’s chief financial officer Colette Kress said the data center growth was driven by strong demand for the company’s H100 GPUs, which are the most powerful on the market currently and accounted for approximately 40% of the segment’s sales. “A big highlight this quarter was Meta’s announcement of Llama 3, their latest large language model, which used 24,000 H100 GPUs,” she told analysts.
Third Bridge analyst Lucas Keh said demand for Nvidia’s H100 GPUs is so strong that the chipmaker can barely keep up. “Its flagship H100 GPUs continue to be consumed as fast as they can be built, with ongoing capacity balances in line with our experts’ sentiment of continued peak GPU consumption in 2024-early 2025,” he explained.
Huang said there’s more to look forward to, with the imminent launch of Nvidia’s next-generation Blackwell GPUs set to drive even more growth later this year. “We will see a lot of Blackwell revenue this year,” he said, adding that he expects it to arrive in data centers by the fourth quarter.
In addition, the company said it was seeing strong demand for its networking components, which are becoming just as important as the GPUs. That’s because data center operators are looking to build clusters of tens of thousands of chips that must be interconnected with one another, to power more advanced AI workloads. Networking-related sales came to $3.2 billion during the quarter, up three-times from a year earlier, primarily resulting from sales of InfiniBand products.
Before the company became the most important supplier of AI chips, it was better known as a supplier of PC hardware for advanced gaming workloads. The gaming segment is no longer such a relevant part of the company’s business, but it did still grow by 18% in the quarter, with revenue topping $2.65 billion.
In addition, Nvidia sells chips for powerful graphics processing workstations and vehicles industry via its professional visualization and automotive business segments, which delivered $427 million and $329 million in sales, respectively.
Keh said the biggest question for investors now is how long Nvidia will continue to grow. While its guidance was somewhat muted compared to recent quarters, he predicted that the company will remain on an upwards trajectory for the time being.
“Large public-cloud hyperscalers continue to remain close to 50% of Nvidia’s data center revenue as the buildout continues for the near term, and lingering concerns investors had in the short term regarding an “air bubble” for GPU demand seem to have vanished with this positive guide,” he said.
That said, Keh believes that Nvidia’s dominant market share in AI will be tested in the coming months, as most AI inference use cases do not require the enormous amount of compute provided by its most powerful GPUs. “The price tag that comes with its chips makes alternatives like AMD attractive,” the analyst said. “Third Bridge experts believe that Nvidia will still be able to maintain a foothold in inference and assume almost 40% of their revenue last year was inference-based.”
The 10-for-1 forward stock split will come into effect after the market closes on June 7, the company said. Stock splits don’t alter the basic fundamentals of companies, but simply have the effect of making the underlying stock more affordable, which can have a positive psychological impact on retail investors.
Nvidia’s stock is currently priced at $1,005.95 per share, so a 10-for-1 split based on that price would mean individual shares are priced at $100.59. The company said the split is designed to make its stock accessible to a wider swath of retail investors. The price of Nvidia’s stock has gained more than 25-times in the last five years, and it means that buying a single share has become quite pricey for many retail investors.
Stock splits are a fairly common strategy, with companies including Alphabet Inc., Amazon.com and Tesla Inc. all orchestrating similar stock splits in 2022. When the change goes into effect on June 7, all Nvidia common stockholders will receive an additional nine shares, the company explained.
During the quarter, Nvidia bought back $7.7 billion worth of its shares and paid out $98 million in shareholder dividends. Going forward, the company intends to increase its cash dividend from 4 cents per share to 10 cents on a pre-split basis, so when the split comes into effect the new dividend will amount to a penny per share.