Earnings highlights

• Revenue: $35.08 billion, beating expectations of $33.20 billion.
• Adjusted Earnings per Share (EPS): $0.81, beating the $0.75 consensus estimate.
• Data Centre Revenue: $30.8 billion, exceeding expectations of $29.1 billion.
• Q4 Revenue Outlook: Projected at $37.5 billion, with a margin of ±2%, hinting at slower growth momentum.

Nvidia Reports Record Revenue but Slower Growth in Q3

Nvidia released its much-anticipated Q3 earnings, reporting record revenue of $35.08 billion, a 94% year-over-year increase and a 17% rise from the previous quarter. The company reported adjusted earnings of $0.81 per share, compared with estimates of $0.75 per share.

Net income reached $19.31 billion, more than doubling from the same period last year. The company also spent $11 billion on stock buybacks during the quarter, signalling confidence in its long-term prospects.

Despite exceeding Wall Street expectations and delivering another strong quarter, the company forecasted its slowest revenue growth in seven quarters for the current Q4. This raised concerns among investors, leading to a pullback in Nvidia share price.

The slowdown was notable compared to previous quarters, where Nvidia’s revenues often doubled year-over-year. The company projected Q4 revenue of $37.5 billion, plus or minus 2%, slightly above analysts’ expectations of $37.09 billion. This represents a growth rate of 69.5% for Q4, down from 94% in Q3, signalling tempered expectations despite robust demand for AI chips.

The Blackwell Chip Launch

A major focus of Nvidia’s report was the launch of its Blackwell family of AI chips. CEO Jensen Huang described demand for the new chips as “staggering,” with sales expected to exceed initial projections of several billion dollars for Q4. The chips are designed to cater to the burgeoning generative AI market, which relies heavily on advanced processors for pre-training and post-training tasks.

However, the ramp-up of Blackwell production comes with challenges. Gross margins for the chips are projected to start in the low 70% range and improve to the mid-70% range over time. This temporary dip in margins caused some concern among investors. Nvidia’s gross margin for Q3 was 74.6%, down from the previous quarter, but still strong compared to industry standards.

The Blackwell chips have already gained traction among major customers, including Microsoft, Oracle, and CoreWeave, dispelling earlier reports of overheating issues. Nvidia emphasized that the demand for Blackwell chips will likely exceed supply well into fiscal 2026.

AI Boom Drives Record Data Centre Revenue

Nvidia’s data centre segment, which constitutes a majority of its revenue, achieved record sales of $30.8 billion in Q3, a 112% year-over-year increase. The growth was fuelled by the relentless demand for generative AI infrastructure, as Big Tech companies like Meta, Amazon, Google, and Microsoft ramped up spending on AI-driven technologies.

CEO Jensen Huang highlighted how the global shift to AI computing is accelerating, describing it as the “new industrial revolution.” He noted that the adoption of AI technologies is transforming industries and driving exponential growth in computing needs.

Supply Chain Constraints and Manufacturing Challenges

Despite the strong demand, supply chain limitations have emerged as a bottleneck for Nvidia’s growth. Advanced manufacturing constraints at Taiwan Semiconductor Manufacturing Company (TSMC), Nvidia’s fabrication partner, have slowed the production of Blackwell chips. Huang acknowledged the challenges but assured that Nvidia is improving production yields and expanding production lines to address the issue.

Additionally, Nvidia resolved a design flaw in its Blackwell chips, which had initially affected manufacturing efficiency. The company is optimistic about scaling up production to meet soaring demand, although supply is expected to remain tight for the foreseeable future.

AI and Robotics: Nvidia’s Vision for the Future

During the earnings call, Jensen Huang reiterated Nvidia’s commitment to advancing AI and robotics technologies. He described the ongoing AI revolution as a multi-trillion-dollar opportunity, with Nvidia positioned to lead across hyperscale cloud services, enterprise private clouds, and industrial robotics.

The CEO emphasized that new AI applications are driving exponential increases in computing demands, benefiting Nvidia’s business. He pointed to rising investments in industrial robotics and physical AI as evidence of the transformative potential of these technologies.

Outlook: Challenges and Opportunities Ahead

Looking ahead, Nvidia’s Q4 guidance reflects cautious optimism. While supply constraints and production challenges may limit short-term growth, the company expects to benefit from strong demand for its Blackwell and Hopper chips. The company expects margins will recover in the second half of 2025 as production efficiencies improve.

The broader AI market remains a key driver of Nvidia’s success, with Big Tech companies projected to spend over $1 trillion on AI infrastructure in the coming years.

Source: TradingView

Technical Analysis

Expectations ran high ahead of the Q3 results, with Nvidia shares up more than 55% since its August low and more than 192% YTD. While the secondary uptrend remains intact at this point, we note a bearish divergence between the price and the Relative Strength Index (RSI) indicator, suggesting that the price could take a breather in the short-term.

Despite the massive run in the share price, the weekly momentum indicators are firmly in the bull market range, suggesting that the long-term outlook remains positive. Therefore, we see a good probability of the price rallying to $180.00 over the long-term. In the short-term, the share price is likely to decline further and we see such potential share price weakness as a buying opportunity.

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