Breaking Down Nvidia’s Q3 NVDA Stock Earnings: Surpassing Expectations but Navigating Export Restrictions

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Tuesday’s extended trading saw a 1% decline in Nvidia shares (NVDA Stock) following the chipmaker’s release of fiscal third-quarter data that exceeded Wall Street forecasts. However, the business warned that export restrictions will have a detrimental effect on sales to organizations in China and other nations in the upcoming quarter.

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Nvidia’s finance head, Colette Kress, wrote a letter to shareholders stating, “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.”

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During a conference call with investors, Kress stated that Nvidia is collaborating with some clients in China and the Middle East to secure permits from the US government to sell high-performance devices. Nvidia is working on new data center solutions that are license-free and compliant with government regulations, but Kress stated she didn’t expect any of them will be significant by the end of the fiscal year.

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In comparison to the consensus of analysts polled by LSEG, previously Refinitiv, the firm performed as follows:

Earnings: $4.02 adjusted per share against $3.37 predicted per share

Revenue: $18.12 billion versus the anticipated $16.18 billion

According to a release, Nvidia’s revenue for the quarter that ended on October 29 increased by 206% year over year. In comparison to the same quarter last year, when net income was $680 million, or 27 cents per share, it increased to $9.24 billion, or $3.71 per share.

Revenue from the company’s data centers came to $14.51 billion, above the $12.97 billion StreetAccount expectation and rising 279%. According to Nvidia, consumer internet firms and major corporations accounted for half of the data center’s income, with the remaining half coming from cloud infrastructure providers like Amazon.

According to Kress on the call, clouds that specialize in renting out GPUs to clients had a healthy demand.

The gaming industry contributed $2.86 billion, above the $2.68 billion Street Account estimate and increasing by 81%.

Nvidia provided expectations for the fiscal fourth quarter that called for $20 billion in sales. That suggests a revenue gain of over 231%.

Nvidia unveiled the GH200 GPU during the quarter; it sports an extra Arm processor and more memory than the H100. The H100 is a popular and pricey device. According to Nvidia, Iris Energy, an Australian company that owns data centers used for bitcoin mining, is purchasing 248 H100s for $10 million, or around $40,000.

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Open AI

According to Kress on the call, Oracle’s cloud would soon provide computing instances based on GH GPUs.

Sales of GPUs for PC video game play were Nvidia’s main source of income until around two years ago. These days, server farm installations generate the majority of the company’s income.

Following the release of OpenAI’s ChatGPT chatbot in 2022, a firm financed by Microsoft, several businesses searched for methods to include generative artificial intelligence features into their software. As a result, the market for Nvidia’s GPUs grew stronger.

Among the challenges Nvidia confronts are AMD’s rivalry and reduced earnings due to export limitations that may impede the company’s ability to sell GPUs in China. Nonetheless, several analysts were upbeat prior to the Tuesday announcement.

Demand for GPUs is still higher than availability as the use of Gen AI expands throughout several industrial verticals. Srini Pajjuri and Jacob Silverman of Raymond James sent a letter to investors on Monday recommending a “strong buy NVDA stock.We don’t think the competition will pose too much of a threat to NVDA stock  >85% market dominance in Gen AI accelerators by 2024.

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During the call, Kress stated that Nvidia (NVDA Stock ) is still working on its plan to increase supplies during the upcoming year.

With the exception of the after-hours trade, Nvidia’s NVDA stock has increased 241% so far this year, outpacing the S&P 500 index’s 18% gain over the same time frame.

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