Nvidia Stock Wavers as Earnings Beat, But Investors Aren’t Impressed, 27 Feb

Nvidia stock had a bit of a rollercoaster ride early Thursday after the company reported fourth-quarter earnings that exceeded Wall Street’s expectations. However, the excitement quickly cooled when Nvidia’s guidance for its first-quarter gross margin came in lower than what analysts had hoped for.

For the first quarter, Nvidia Stock is expecting gross margins around 71%, a dip from the 73% margin it reported in the fourth quarter.

The company posted a revenue of $39.3 billion and earnings per share of $0.89, both of which surpassed Wall Street estimates, according to Bloomberg consensus. Nvidia also forecast first-quarter revenue of approximately $43 billion, give or take 2%, which is slightly higher than the $42.3 billion analysts had predicted.

Despite the solid earnings and a revenue beat, investors didn’t seem all that excited. As William Stein from Truist Securities put it in a note to investors on Wednesday, “Despite the beat & raise, investors are yawning.”

In a follow-up interview with Yahoo Finance, Cody Acree, a benchmark analyst, expressed concerns about Nvidia’s first-quarter gross margin guidance, noting it could indicate pricing pressure and increased competition. “I think that’s just the future Nvidia has to live with,” Acree said. “But demand for their products is still strong, and that’s the real takeaway for Nvidia going forward.”

One of the bright spots in Nvidia Stock quarter was its Blackwell AI GPUs. These chips brought in a whopping $11 billion in revenue, marking the fastest product ramp in the company’s history, according to CFO Colette Kress. Nvidia had originally forecasted several billion dollars in Blackwell sales for the fourth quarter.

This positive news follows a rough patch earlier, where design flaws reportedly delayed the Blackwell production by a quarter. There were also concerns about overheating and glitches with Nvidia’s massive GB200 server racks that caused some customers to reduce their orders. But those worries seem to have been put to rest, as Nvidia confirmed Blackwell is now “fully ramped.” CEO Jensen Huang emphasized that “demand for Blackwell is extraordinary.”

Stifel analyst Ruben Roy pointed out that the pace of Blackwell’s ramp-up was impressive, considering the technical setbacks earlier in the production cycle. Roy maintained his Buy rating on Nvidia’s stock and kept his $180 price target.

Truist’s Stein also highlighted that the Blackwell success helped “de-risk” future production ramps for Nvidia’s upcoming AI chips, overcoming potential challenges early on.

Other analysts, like Raymond James’ Srini Pajjuri and Citi’s Atif Malik, were also positive about Nvidia’s performance, especially with the Blackwell chips. Malik even mentioned that Blackwell’s sales exceeded his expectations, while Pajjuri noted that demand for these chips should continue to outpace supply.

On top of that, Pajjuri pointed out that Nvidia’s sales in China have declined as a percentage of total sales, which could help ease concerns about potential export restrictions. Nvidia’s stock took a hit earlier in January when reports surfaced that the U.S. government might tighten its grip on chip exports to China.

Nvidia Stock Quarterly

While Nvidia’s quarterly results were generally strong, the stock’s early volatility suggests investors are still wary about the challenges ahead. However, if demand for Nvidia’s products continues to stay robust, the company could remain on solid footing in the months to come.

Disclaimer: The information presented in this blog is for informational purposes only and does not constitute financial or investment advice. All opinions expressed are based on current data and analysis at the time of writing and are subject to change without notice. Readers are encouraged to conduct their own research and consult with a qualified financial advisor before making any investment decisions. The author and the publication are not responsible for any financial losses or gains resulting from the use of this information.

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