NVIDIA forecast fourth-quarter revenue slightly above estimates on Wednesday (Nov 20), but still failed to meet lofty expectations of some investors who have made it the world’s most valuable firm.
Shares of the Santa Clara, California-based company fell roughly 1 per cent in extended trading. They had closed down 0.8 per cent during the regular trading session.
Nvidia is in the middle of launching its powerful Blackwell family of artificial intelligence (AI) chips, which will weigh on the company’s gross margins initially but improve over time.
The new line of processors has been embraced by Nvidia’s customers and the company will exceed its initial projections of several billion US dollars in sales of the processors in the fourth quarter, finance chief Colette Kress told analysts on a conference call on Wednesday.
“We will deliver this quarter more Blackwells than we had previously estimated,” CEO Jensen Huang said.
Initially, the new line of chips will carry gross margins in the low 70 per cent range, but will increase to the mid 70 per cent range when production ramps up, Kress said.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
The company forecast revenue of US$37.5 billion, plus or minus 2 per cent for the fourth quarter, compared with analysts’ average estimate of US$37.09 billion according to data compiled by LSEG.
Still a stunning rate of growth thanks to huge demand for the company’s chips that make up the brains of complex generative AI systems, it marks a clear slowdown from previous quarters when Nvidia mostly posted sales that at least doubled.
“The age of AI is in full steam, propelling a global shift to Nvidia computing,” Huang said. “Demand for Hopper and anticipation for Blackwell – in full production – are incredible as foundation model makers scale pretraining, post-training and inference,” he said, referring to two high-performing AI chips.
Nvidia’s fourth-quarter forecast indicated the company’s revenue growth will slow to roughly 69.5 per cent from 94 per cent in the third-quarter.
Expectations ran high ahead of the results, with Nvidia shares up more than 20 per cent over the last two months and hitting an intraday record high on Monday. The stock has nearly quadrupled so far this year and is up more than nine-fold over the last two years.
“Investors have become accustomed to huge beats from this company, but doing that is getting harder and harder,” said Ryan Detrick, chief market strategist at Carson Group. “This was still a very solid report, but the truth is when the bar is this high it makes things just that much tougher.”
While demand is soaring for the company’s chips, supply-chain snags have made it harder for Nvidia to report the big beats on revenue that have helped make it a Wall Street darling.
One of the bottlenecks for its chip supply has been the limited capacity for advanced manufacturing techniques at the company’s manufacturing partner Taiwan Semiconductor Manufacturing Company (TSMC).
The company recorded third-quarter adjusted earnings of 81 cents per share, compared with estimates of 75 cents per share.
Sales in the data-centre segment, which accounts for a majority of Nvidia’s revenue, grew 112 per cent to US$30.77 billion in the quarter ended Oct 27. The segment had recorded growth of 154 per cent in the prior quarter.
Nvidia’s sales are boosted by cloud companies’ continued spending on its chips, as they expand data centres capable of handling generative AI’s complex processing needs. The company said it had fixed a design flaw with its Blackwell chips by changing the blueprints used by TSMC to manufacture it.
“Rumblings of potential supply chain issues are clearly causing some concerns,” said analyst Bob O’Donnell of TECHnalysis Research.
The company said adjusted gross margin shrank to 75 per cent. REUTERS
