Nvidia's Option Enthusiasm Will Be Worthless as AI King Shows Mixed Results Despite Strong AI Demand
2min read Nvidia released its third-quarter earnings report as scheduled. Despite doubling both revenue and EPS, the less-than-stellar guidance has become the focus, leaving investors with mixed signals after nearly a 200% rally this year.
The AI giant's shares initially dropped nearly 5% post-market, then the decline narrowed to around 2%. However, for those options traders betting on at least an 8.5% movement, their options will be worthless as the market opens tomorrow, leading to speculative disappointments.
Here are the results.
Revenue: $35.08 billion, up 94% year-over-year and 17% quarter-over-quarter, above expectations of $33.25 billion, but ending five consecutive quarters of triple-digit y/y growth.
Diluted EPS: $0.81, up 103% y/y, versus the expected $0.74.
Gross Margin: 75%, flat year-over-year but down 0.7 percentage points quarter-over-quarter. This may be impacted by the ramp-up costs of Blackwell architecture GPU production and the initial costs of H200 mass production.
Meanwhile, Nvidia expects fourth-quarter revenue to reach $37.5 billion, with y/y growth further narrowing to 70%, slightly above the expected $37.1 billion; gross margin is expected to fall to73.5%, indicating that production ramp-up will further impact profitability.
Demand for Hopper and anticipation for Blackwell — in full production — are incredible as foundation model makers scale pretraining, post-training, and inference, said Nvidia CEO Jensen Huang in a statement.
Nvidia's core data center business posted revenue of $30.8 billion this time, up 112% year-over-year. The ongoing frenzy for computing power among tech giants keeps AI demand booming, making the market focus on the company's new H200 chips and the highly anticipated but controversial mass production of Blackwell architecture chips.
Currently, many of Nvidia's major customers, such as Microsoft, Oracle, and OpenAI, have started receiving Blackwell architecture GPUs. CFO Colette Kress stated in the conference call that they have shipped 13,000 Blackwell chip samples to customers, Every customer is racing to be the first to market. Blackwell is now in the hands of all of our major partners, and they are working to bring up their data centers.
She also denied recent rumors of Blackwell overheating issues delaying deliveries, prioritizing mass production and meeting demand as the primary goal. Kress expects Blackwell to be fully shipped in the fourth quarter, with revenue likely to exceed previous estimates of several billion dollars, and the gross margin of ramped-up chips to reach around mid 70%. Meanwhile, sales of Hopper architecture AI chips H200 saw significant growth, surpassing $10 billion in the third quarter.
The company will steadily increase two AI chip shipments next year. However, both Hopper and Blackwell systems have certain supply constraints, and the demand for Blackwell is expected to exceed supply for several quarters in fiscal 2026, Kress said.
Compared to Nvidia's explosive AI business, other segments seem slightly less impressive. Gaming and AI PC business revenue posted $3.3 billion in the third quarter, up 15% year-over-year, exceeding the expected $3.06 billion. The company stated that sales growth benefited from the recovery of the PC and laptop market, as well as increased chip revenue from gaming consoles (such as Switch).
Professional visualization revenue posted $486 million, up 17% year-over-year, including the company's metaverse product Omniverse. Notably, automotive and robotics business revenue was $449 million, up 72% year-over-year, indicating that the world is accelerating towards AI robotics, becoming another major growth point for the future.
Jensen Huang was also asked during the conference call whether the company would be affected by possible tariffs imposed by the Trump administration. He said, Whatever the new administration decides, we will, of course, support the administration and the highest mandate, adding that the company will comply with any regulation that comes along fully.
Overall, Nvidia's earnings report remains explosive. Even if high base effects slow revenue growth, the highly anticipated Blackwell and H200 chips will continue to gain momentum in the fourth quarter, with supply constraints highlighting the irreplaceability of the products. Even with moderate guidance, it paves the way for Nvidia to exceed expectations further in the future. However, given the stock's current high valuation, investors should remain cautious. After all, good things are always good, but they come at a price. Nvidia's future remains incredibly bright, continuing to lead the AI era.