Nvidia (NASDAQ:NVDA) stock gave Wall Street an unusual wake-up call on Thursday. After delivering its latest earnings report, the shares moved lower, a departure from the post-earnings rallies investors have grown accustomed to. The drop reflected concerns over slowing data center growth, while management also cautioned that uncertainty in China could weigh on near-term results. Together, these factors raised questions about whether the AI boom might be losing some of its momentum.
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But let’s put some perspective into the downbeat reaction, as in no way did Nvidia deliver a dud of a report. In fact, it was another estimate-beating affair. Nvidia delivered revenue of $46.74 billion, up 55.6% year-over-year and $610 million ahead of expectations. Its core revenue generator, the Data Center biz, reached $41.1 billion, climbing 5% sequentially and 56% vs. the prior year. At the bottom line, adj. EPS came in at $1.05, topping estimates by $0.04.
Looking ahead to FQ3, Nvidia guided for revenue of $54 billion, plus or minus 2%, vs. consensus at $52.76 billion. The forecast excludes any contribution from H20 shipments to China, although the company said on the call that it has secured several licenses but has not yet shipped any H20 chips under them. These sales could contribute an additional $2–5 billion in revenue in the October quarter.
Nvidia has now posted y/y revenue growth above 50% for nine consecutive quarters, a streak that began in mid-2023 when the generative AI surge first began driving results. Even so, the quarter represented the company’s slowest pace of growth over the period.
With this in mind, Cowen analyst Joshua Buchalter says the results were “underwhelming by recent exceptional standards.” That said, Buchalter also points out that H20 moving parts “made numbers appear less inspiring than reality.”
All told, the analyst believes the quarter yielded “no major concerns,” with Nvidia (and its clients) pointing to strong demand, a Blackwell Ultra transition that is going well, and gross margins trending toward 75%.
“Broadly, we remain confident that NVIDIA is the leader in accelerated computing,” Buchalter went on to say. “We believe the CPU/GPU/DPU combination of Grace/Blackwell (eventually leading to Vera/Rubin) systems positions the company to sustain strong Datacenter growth in the coming years. We continue to see earnings power exceeding $8 by C2030, and this (very) conservatively incorporates a digestion year in C2027… a digestion year that has now been pushed out twice (we originally modeled it for C2024!).”
To this end, Buchalter assigns NVDA shares with a Buy rating and a $235 price target. The implication for investors? Upside of 30% from current levels. (To watch Buchalter’s track record, click here)
The Street as a whole is a bit more restrained, with an average price target of $199.26 that suggests an ~11% gain over the next year. Still, with 34 Buys, 3 Holds, and just a single Sell, Nvidia retains a Strong Buy consensus. (See NVDA stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.