Nvidia's Q3 Triumph Overshadowed by Cautious Q4 Outlook Amidst AI Boom

In the recent U.S. trading session on November 20th, Nvidia released its financial results for the third quarter of its fiscal year 2025, along with guidance for the fourth quarter. Despite recording robust growth in Q3 due to surging demand fueled by the AI boom, Nvidia's Q4 guidance has sparked mixed reactions among investors, as it has been labeled conservative by some analysts.

Nvidia's Q3 revenue surged to $35.08 billion, marking a 94% year-on-year increase, with an adjusted gross margin of 75%. For the upcoming fourth quarter, Nvidia projects its revenue to be approximately $37.5 billion, with a possible variance of 2%. The anticipated gross margins for GAAP and non-GAAP measures stand at 73.0% and 73.5%, respectively, with a 50-basis-point variance. This guidance slightly exceeds the Bloomberg consensus expectation of $37.2 billion but falls short of the buy-side consensus, which hovers around $38 to $39 billion.

The market's focus remains firmly on Nvidia's Blackwell chip progress. The company has slated the commencement of Blackwell production for Q4 of fiscal year 2025, with operations expected to extend into fiscal year 2026. The cautious outlook appeared to have contributed to a post-earnings dip, as Nvidia's stock fell by more than 5% in after-hours trading, reversing some of its impressive gains this year.

CEO Jensen Huang reassured stakeholders by revealing that Blackwell chip deliveries this quarter will surpass Nvidia’s expectations. While this announcement somewhat alleviated market concerns, capturing a reduction in stock decline to about 1%, the broader sentiment underscores a cautious optimism surrounding Nvidia's trajectory.

In summary, while Nvidia's performance metrics showcased strong Q3 results, the conservative nature of its Q4 guidance relative to the highest market expectations has introduced a nuanced market response. This scenario underscores the competitive and rapidly evolving landscape of AI and computing technologies, as Nvidia continues to navigate these dynamics with strategic prudence.