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Nvidia ‘s (NVDA) fiscal year 2024 first-quarter earnings Wednesday far outpaced Wall Street’s expectations. But as strong as the results were, the chipmaker’s guidance for its current quarter was even more robust, driving shares to a new all-time high in afterhours trading. Revenue for the three months ended April 30 fell 13% year-over year, to $7.19 billion, but still came in well ahead of analysts’ forecasts of $6.52 billion, according to the consensus estimate from Refinitiv. Adjusted earnings-per-share (EPS) dropped 20% on an annual basis, to $1.09, though still surpassed predictions for 92 cents per share, Refinitiv data showed. Adjusted gross margin of 66.8% edged out the 66.5% estimate from analysts, according to FactSet. Shares of the semiconductor firm surged nearly 25% in post-market trading Wednesday, to around $381 apiece. The semiconductor firm’s market capitalization gained $220 billion in the extended-hours session, bringing it to around $975 billion. That compares with a current market capitalization of $174 billion for competitor and fellow Club name Advanced Micro Devices (AMD). Bottom line There is no overstating just how impressive this release was. With the stock up more than 100% year-to-date coming into the print, the bar was high. But the reported results easily exceeded even the most bullish expectations. The forward guidance, though — helped by soaring demand for Nvidia’s data center chips, which power generative artificial intelligence (AI) and large language models — was nothing short of jaw-dropping. Nvidia’s technology has become critical to the AI ecosystem, helping to power large language models like OpenAI’s viral ChatGPT. Moreover, the phenomenal sales guidance for the current quarter – one of the strongest versus expectations that we’ve ever seen – is going to have an even greater impact on the bottom line, given management’s gross margin guide was materially above Wall Street models ahead of the earnings release. “We’re going through that moment right now as we speak, while the world’s data center [capital expenditure] budget is limited. At the same time, we’re seeing incredible orders to retool the world’s data centers, so I think you’re seeing the beginning of…call it a 10-year transition to basically recycle or reclaim the world’s data centers and build it out as accelerated computing,” CEO Jensen Huang said on Nvidia’s post-earnings conference call. He added: “You’ll have a pretty dramatic shift in the spend of the data center from traditional computing to accelerated computing, with smart mix, smart switches, of course [graphics processing units, or GPUs] and the workload is going to be predominantly generative AI.” Ultimately, today’s release reinforces our conviction that Nvidia is in rarefied territory, deserving of being the second name we have ever designated as ‘own it, don’t trade’ – Apple (AAPL), of course, being the first. Our rating and price target, which we expect to move higher, are under review. Guidance Looking ahead to Nvidia’s fiscal 2024 second quarter, management forecasted better-than-expected sales, adjusted gross margin and capital expenditures on a non-GAAP, or generally accepted accounting principles, basis. Additionally, management expects operating expenses of $1.90 billion, other income of approximately $90 million, and a tax rate of 14% (plus or minus 1%). Though management does not provide a forecast for EPS, analysts at Truist Wednesday noted that the implied earnings guidance is in the range of $1.94 to $2.14 per share. At the $2.04-per-share midpoint, that’s nearly double the $1.06 per share the Street was expecting. Today’s results, along with the outlook, demonstrate that Nvidia, often knocked for its high valuation, is more often than not far cheaper than it seems on initial estimates. Coming into the print, the Street was modeling full-year adjusted EPS to be $4.59 per share. Adding up today’s $1.09 EPS result with the $2.04 mid-point estimate of the implied guidance for the current quarter, it becomes clear that Nvidia is on pace to reach EPS of $3.13 in the first half of its fiscal year alone. Combined with the company’s belief that generative AI has “extended Nvidia’s data center visibility out a few quarters” with “substantially higher supply for the second half of the year,” Wall Street’s valuations appear far to low. And we expect many revisions higher once analysts have updated their models. Quarterly commentary Data center sales in the reported quarter represented a new record for the company, driven by increased demand for generative AI and large language models. Gaming demand was impacted by the ongoing effort to normalize channel inventories, as well as lower demand resulting from the macroeconomic slowdown. On a sequential basis, however, sales were higher thanks to the new GeForce RTX 40 Series GPUs. Revenue at the professional visualization unit was also down on annual basis, a result of efforts to normalize channel inventory levels. However, it was up sequentially on improved demand for desktop and mobile workstation GPUs. Automotive sales, despite coming in below analysts’ expectations, demonstrated superb growth, boosted by sales of Nvidia’s self-driving platforms and AI cockpit solutions. Nvidia on Wednesday said its automotive design win pipeline over the next six years now stands at $14 billion, up from $11 billion a year ago, which should give “visibility into continued growth over the coming years.” Capital Allocation In the first quarter of its fiscal year 2024, Nvidia returned $99 million to shareholders via dividends. As of the end of that quarter, there was $7.23 billion remaining under the company’s current share-buyback authorization, which runs through December 2023. (Jim Cramer’s Charitable Trust is long NVDA, APPL, AMD. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. 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The logo of Nvidia Corporation is seen during the annual Computex computer exhibition in Taipei, Taiwan May 30, 2017.
Tyrone Siu | Reuters
Nvidia‘s (NVDA) fiscal year 2024 first-quarter earnings Wednesday far outpaced Wall Street’s expectations. But as strong as the results were, the chipmaker’s guidance for its current quarter was even more robust, driving shares to a new all-time high in afterhours trading.
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