Nvidia beats but does not blow out; Will it be enough for investors?
NVIDIA (NVDA) reported impressive fiscal second-quarter results for FY25, with both top and bottom-line numbers significantly surpassing consensus expectations. Revenue came in at a record $30.04 billion, a remarkable increase of 122% year-over-year (Y/Y) and up 15% sequentially. This outperformed the expected $28.86 billion. On the earnings side, net income surged to $16.6 billion, or $0.67 per share, up from $6.19 billion, or $0.25 per share, in the same period last year. Adjusted earnings per share (EPS) were $0.68, beating the FactSet consensus of $0.65. Despite these strong results, NVIDIA's shares experienced a slight dip in after-hours trading, falling by 1.6%, likely due to cautious investor sentiment around future product cycles and broader market dynamics.
In terms of segment performance, NVIDIA's Data Center segment was the standout performer, with revenue soaring 154% Y/Y and 16% quarter-over-quarter (Q/Q) to $26.3 billion. This was driven primarily by the strong demand for NVIDIA's Hopper GPU computing platform, which is heavily utilized in AI applications, including large language models and generative AI. Within this segment, Compute revenue rose 162% Y/Y and 17% Q/Q, reflecting the broad adoption of Hopper GPUs. Networking revenue also posted solid growth, up 114% Y/Y and 16% Q/Q, underpinned by increased sales of InfiniBand and Ethernet products tailored for AI workloads.
Other segments also contributed to NVIDIA's robust performance. Gaming revenue grew by 16% Y/Y and 9% Q/Q, reaching $2.88 billion. This was largely driven by higher sales of GeForce RTX 40 Series GPUs, bolstered by strong demand during the back-to-school season. The Professional Visualization segment saw revenue increase by 20% Y/Y and 6% Q/Q, thanks to the continued ramp-up of RTX GPU workstations based on the Ada architecture. The Automotive segment, though smaller, also posted healthy growth with revenue rising 37% Y/Y and 5% Q/Q, driven by AI Cockpit solutions and self-driving platforms.
Management provided crucial updates on NVIDIA's upcoming product cycles, particularly the Blackwell and Hopper chips. The Hopper platform, which has been a major driver of the current quarter's success, is expected to see even greater demand in the second half of fiscal 2025. NVIDIA also announced that it shipped customer samples of its new Blackwell architecture during the quarter. However, the company noted that a mask change was required to improve production yields, with the full production ramp expected to begin in Q4 FY25 and continue into FY26. The anticipation for Blackwell among customers is reportedly high, with NVIDIA expecting several billion dollars in Blackwell-related revenue starting in Q4.
Looking ahead, NVIDIA provided robust guidance for the third quarter, with revenue expected to be $32.5 billion, plus or minus 2%, which again exceeds the analyst consensus of $31.9 billion. The company anticipates gross margins to remain strong, with GAAP gross margin expected at 74.4% and non-GAAP gross margin at 75.0%, both plus or minus 50 basis points. This guidance suggests continued strong demand for NVIDIA’s data center products, particularly the Hopper and upcoming Blackwell GPUs, and positions the company well for sustained growth into FY26.
On the capital return front, NVIDIA announced a substantial increase in its share repurchase program, with the Board of Directors approving an additional $50 billion for share buybacks. This comes on top of the $7.2 billion already utilized for repurchases during the quarter. Additionally, NVIDIA maintained its dividend at $0.01 per share. These actions underscore the company's confidence in its long-term growth prospects and its commitment to returning capital to shareholders.
Free cash flow was another highlight of the quarter, coming in at $13.48 billion, more than double the $6.05 billion reported in the same quarter last year. The strong free cash flow reflects not only the robust revenue growth but also NVIDIA’s operational efficiency and strategic investments in its data center capabilities. This substantial cash flow gives NVIDIA the financial flexibility to continue investing in growth initiatives, such as the development of the Blackwell architecture, while also returning capital to shareholders.
In conclusion, NVIDIA's Q2 FY25 results demonstrate the company's dominant position in the AI and data center markets, with strong performance across all segments. The impressive growth in both revenue and profitability, coupled with robust guidance and significant capital return plans, reaffirms NVIDIA’s leadership in the semiconductor industry. While there are some concerns around the production ramp of the Blackwell chips, the company's overall outlook remains highly positive, setting the stage for continued growth in the quarters ahead.