Stellar Q3 Earnings, Raised Q4 Outlook Despite China Concerns

On November 21, NVDA delivered yet another blowout quarterly result. Impressively, both revenue and earnings smashed analysts’ expectations as well as the company’s own revenue guidance. Revenues tripled to $18.1 billion, while GAAP net income jumped by over 13x to $9.2 billion. Q3 adjusted EPS of $4.02 handily beat estimates of $3.37 and was up almost 7x year-over-year.

The highlight of the quarter was NVDA’s relentless market leadership in AI chips, as Data Center revenues registered a growth of 279% year-over-year to $14.5 billion. Meanwhile, the firm's adjusted gross margins remained strong at 75%, growing 380 bps year-over-year.

Despite reporting a massive beat, NVDA stock has not gained since then. One of the main reasons for share price weakness is the significant anticipated decline in revenues from China due to export restrictions imposed by the U.S. It is to be noted that China represents 20% to 25% of Data Centre revenues on an average basis over the last few quarters. The company is confident that the loss of revenues from China will be more than offset by growth in other regions.

Nonetheless, there was some reason to cheer, as management raised its Q4 outlook. Q4 revenues are expected to come in at $20 billion (+/-2%) versus prior expectations of $18 billion. This means that revenue may triple one more time on a year-over-year basis, reconfirming unwavering demand for all things AI. More positively, its adjusted gross margin is expected to hover around 75.5%. $NVIDIA (NVDA.US)$ $Advanced Micro Devices (AMD.US)$