Topic: Nvidia Q1 financial report exceeded expectations in an all-round way! Official announcement of share splitting plan
Source: Wall Street
After the US stock market closed on Wednesday, May 22, the chip giant Nvidia, which has been the most popular in the AI boom since last year, released its first fiscal quarter results of fiscal year 2025 as of April this year.
Nvidia's revenue in the first fiscal quarter was $26 billion, significantly higher than the analyst's expectation of $24.69 billion, of which the data center's revenue was $22.6 billion, also higher than the market's expectation of $21.13 billion, up 5% after hours.
The financial report also showed that Nvidia's gross profit margin in the current quarter was 78.9%, significantly higher than the 77% expected by analysts. The company expects revenue of $28 billion in the second quarter (plus or minus 2%), better than the market's expectation of $26.8 billion.
Nvidia also announced that it would split its shares at a ratio of 10 to 1 and increase its dividend by 150% to US $0.01 per share.
Nvidia closed 0.5% lower on Wednesday and hit a record closing high of $953.86 on Tuesday, rising nearly 92% this year, significantly outperforming the S&P 500 Index and the Nasdaq Index by more than 11%.
The company's market value jumped to $2.3 trillion, ranking third only after Microsoft and Apple in the U.S. stock market. The stock price has rebounded by nearly 750% from its low point in October 2022, and rose by 240% last year.
Wall Street's expectation of Nvidia's financial report is as high as ever. 40 analysts rated "buy", 2 rated "hold", and no one suggested "sell". The average target price of $1057.76 represents that there is still 11% room for growth.
Market expectation before financial report
Wall Street predicted that Nvidia's quarterly revenue increased by 240% year-on-year to US $24.6 billion, which would be the third consecutive quarter in which its revenue grew by more than 200% year-on-year. It is expected that the net profit will increase by 540% to 13.1 billion US dollars, and the revenue and profit will both hit a new high.
Over the same period last year, Nvidia's overall revenue was $7.192 billion, or only one-third of its quarterly revenue a year later, and its adjusted earnings per share was $1.09. Analysts expect the adjusted EPS of the latest financial report to be $5.65 or more than five times.
The official guidance of Nvidia is that the revenue in the first quarter of fiscal year 2025 will be about $24 billion, the non GAAP gross profit margin will slightly increase from 76.7% in the previous quarter to 77%, and the GAAP and non GAAP operating expenses will be about $3.5 billion and $2.5 billion respectively.
Wall Street also predicted that Nvidia's quarterly sales will exceed the threshold of 30 billion US dollars when the current fiscal year ends in January next year, and its revenue in the second fiscal quarter may further increase to 26.67 billion US dollars, and its revenue in the whole fiscal year may rise to more than 110 billion US dollars. Last fiscal year's revenue grew 126% year on year to a record high of US $60.9 billion.
In terms of business, the revenue of the data center has already surpassed the game GPU business and become a key area of NVIDIA's rapid growth. It is estimated that more than 21 billion of the total revenue of $24.6 billion in the first fiscal quarter came from the sales of advanced chips related to AI in the data center. The revenue of the data center in the same period last year was $4.284 billion, which is equivalent to a five fold increase.
Wall Street also mentioned that the revenue of the largest game business in the past is expected to grow by 16.9% year-on-year to 2.62 billion dollars, compared with 2.24 billion dollars in the same period last year. The revenue of professional visualization business is expected to grow 61.8% year on year to $480 million, compared with $295 million in the same period last year. The auto business revenue is expected to decline by 1.2% year-on-year to $290 million, compared with $296 million in the same period last year. The revenue of OEM and other businesses is expected to increase by 11.3% year-on-year to 85.7 million dollars.
In the last quarter (i.e. the fourth quarter of the fiscal year ending in January 2024), NVIDIA's quarterly revenue hit a new record high of $22.1 billion, up 22% month on month and 265% year on year. Among them, the revenue of the data center reached a record high of US $18.4 billion, up 27% month on month and 409% year on year. Adjusted EPS was $5.16, up 28% month on month and 486% year on year.
Why is it important
Nvidia is an undisputed leader in the field of AI chip production and the most obvious beneficiary of the AI trend. In addition, its share price has accounted for a quarter of the increase of the S&P 500 index this year. No wonder some analysts say that this is the most important financial report of this quarter or the whole year. It will not only provide the latest insights in the field of artificial intelligence, but also affect the performance of AI concept stocks and even the stock market.
Nvidia's financial report will also become a key test indicator for the sustainability of AI investment and demand in the technology industry. According to the estimation of Bernstein, a securities firm, super large enterprises such as Google, Amazon, Microsoft, Meta and Apple are expected to have a total capital expenditure of $200 billion this year, of which a large part is used to purchase special infrastructure such as AI chips, while Nvidia accounts for about 80% of the AI chip market.
Stifel, an investment bank, pointed out that investors may still focus on the medium-term sustainability of AI infrastructure investment acceleration. Bernstein said that at present, it is unknown how long this investment cycle will last and how much excess capacity will be generated in this period of time, in case that AI development is not as fast as expected.
What do you think of Wall Street?
Wall Street first pays attention to Nvidia's revenue guidance and AI Look ahead. On the one hand, for a huge enterprise like Nvidia, its profit growth rate is almost unprecedented, and it is rare that it can maintain a high profit margin.
In the second half of this year, Nvidia's next generation strongest chip Blackwell GB200 will be officially listed, which is bound to continue to increase profits. KeyBanc Capital Markets believes that the strongest chip may bring more than $200 billion in revenue to the data center in 2025.
CFRA analysts believe that NVIDIA still has a lot of room for growth, driven by the continuous transformation to artificial intelligence servers, the early stage of central processing unit expansion, and the upward space of potential target markets such as new software applications and more attention to energy efficiency.
However, many people pointed out that in view of the stock price reaction of AMD and Arm in this financial reporting season, if NVIDIA's performance is only "in line with expectations", it may cause the stock price to fall, or it needs a quarterly revenue of nearly $26 billion and similar high growth guidance to meet the high expectations of the market.
The second concern is whether the profit margin has reached the recent peak and capital expenditure. Some people worry that Nvidia's profit margin will narrow in the second half of the year as the capital expenditure behind the launch of new products accelerates. The operating expenditure in the last quarter increased by 25% year-on-year to $2.21 billion, and it is estimated that the expenditure scale in the first fiscal quarter may be close to $3 billion.
The third concern is whether the company's management will evaluate the sales substitution effect of Blackwell's super chip for the existing H100 Hopper chip, as well as the competitive risk of AI chips developed by super large technology companies such as Microsoft, Google and Amazon.
Gene Munster, co-founder of asset management agency Deepwater, Bank of America and other analysts are worried that the official launch of Blackwell in the second half of the year will curb Nvidia's recent chip sales
In terms of the concern that Nvidia's customers will develop their own chips, Piper Sandler analysts said that they should not be too worried. Even if Google and other companies build their own customized chips, Nvidia will still maintain at least 75% of the market share of AI accelerators. Raymond James also said that in view of the upcoming launch of Blackwell chip, even if Nvidia has any stock price correction, it will be temporary.
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Editor in charge: Yang Chunduan
