TLDR
- NVIDIA reported Q4 EPS of $0.89 on revenue of $39.3 billion, beating analyst expectations
- Data center revenue reached $35.6 billion with Blackwell chips contributing $11 billion in their first quarter
- Company forecasts Q1 revenue of $43 billion, above Wall Street expectations
- Gaming revenue fell 11% year-over-year due to supply constraints
- Potential risks include 25% tariffs on imported chips and additional China export restrictions
NVIDIA Corporation (NVDA) reported strong fourth-quarter earnings that exceeded Wall Street forecasts, while providing guidance for the current quarter that topped analyst expectations despite concerns about AI spending and potential tariffs.
The chipmaker reported earnings per share of $0.89 on revenue of $39.3 billion for the quarter. These results beat analysts’ expectations of $0.84 EPS on $38.2 billion revenue.
NVIDIA’s data center segment, which includes its AI chips, generated $35.6 billion in revenue. This surpassed expectations of $34 billion.
The company’s new Blackwell AI chips contributed $11 billion in revenue during the quarter. CEO Jensen Huang called this “the fastest product ramp in our company’s history.”
NVIDIA guided for first-quarter revenue of approximately $43 billion, plus or minus 2%. This outlook exceeded the $42.3 billion Wall Street had anticipated.
Cloud service providers accounted for 50% of NVIDIA’s data center revenue in the quarter. This continues a trend seen in the previous quarter.
The stock rose about 2.5% in premarket trading following the earnings announcement. This represents a recovery from initial losses as investors digested the report.
Gaming revenue declined 11% year-over-year due to supply constraints affecting NVIDIA’s latest gaming chips. This segment brought in $2.5 billion, below the $3.02 billion analysts had expected.
Huang addressed concerns about Chinese startup DeepSeek, which reportedly developed AI models using less powerful NVIDIA chips. He stated that “demand for Blackwell is amazing” as reasoning AI requires more computing power.
NVIDIA faces several potential headwinds in the coming year. These include President Trump’s proposed 25% tariffs on imported chips.
The company also faces the threat of additional export restrictions on chips destined for China. This could impact revenue from that region.
Another challenge is the development of custom AI chips by major tech companies. Amazon, Google, Microsoft, and Meta are all working on their own processors.
However, Morgan Stanley analyst Joseph Moore cautions against overreacting to these custom chips. He notes that most NVIDIA alternatives “failed to get traction” despite initial enthusiasm.
NVIDIA’s gross profit margins may be tighter in the near term. CFO Colette Kress indicated margins will be around 71% in the current quarter, below analyst estimates.
Kress stated that margins should return to “mid-70s” percentage by the end of the year. The compressed margins are related to costs associated with ramping up Blackwell production.
NVIDIA remains the dominant provider of AI chips
Despite these challenges, NVIDIA remains the dominant provider of AI chips. Huang believes AI technology is still in the early stages of adoption across the broader economy.
The size of NVIDIA’s business has grown dramatically in recent years. Its latest quarterly sales exceeded its entire annual revenue from just two years ago.
NVIDIA’s data center division alone now generates more revenue than competitors Intel and AMD combined. This highlights the company’s dominance in the AI chip market.
Some analysts wonder if NVIDIA can maintain its streak of beating expectations by wide margins. Edward Jones analyst Logan Purk noted, “We think it will be challenging for management to continue to significantly beat expectations for future growth.”
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