Nvidia's earnings crush Wall Street estimates again, and the company tempers its outlook for China

Nvidia (NVDA) reported third-quarter earnings after the bell on Tuesday that beat Wall Street expectations again as an artificial intelligence boom continues to fuel demand for the company’s chips.

The chipmaker reported adjusted earnings per share of $4.02 on revenue of $18.12 billion, both of which beat analysts’ expectations. Analysts had expected adjusted earnings per share to total $3.36 on revenue of $16.1 billion, according to data from Bloomberg.

The company’s revenue guidance for the current quarter also beat estimates, at $20 billion, plus or minus 2%; Analysts had expected fourth-quarter guidance of $17.8 billion.

However, the stock market reaction to these results was weak, with the company noting that new restrictions on chip exports to China would impact the results.

“Our sales to China and other affected destinations, derived from products that are now subject to licensing requirements, have consistently contributed approximately 20-25% of data center revenue over the past few quarters,” said Nvidia CFO Colette Kress. statement.

“We expect our sales to these destinations to decline significantly in the fourth quarter of fiscal 2024, although we believe this decline will be offset by strong growth in other regions.”

The chip maker reported data center revenue, which includes its AI chips, of $14.51 billion; The Street was expecting revenue of $12.82 billion for the sector.

Nvidia’s gaming revenue was $2.86 billion for the quarter, also higher than analysts’ expectations of $2.7 billion. Shares of the chipmaker fell about 1% after hours on Tuesday.

The report came after the stock closed at a record high of $504.09 per share on Monday, as artificial intelligence once again became the story of the moment for investors. Amid the ongoing drama Surrounding the departure of Sam Altman from ChatGPT maker OpenAI and his move to join Microsoft (MSFT). Nvidia stock fell nearly 0.9% on Tuesday ahead of the results along with the broader market.

Earlier this year, Nvidia stock was a notable mover following earnings releases.

In August, the stock hit an all-time high after Nvidia reported second-quarter results that smashed Wall Street expectations for both revenue and earnings per share, as well as guidance that beat lofty estimates. Last May, one analyst referred to the company’s forecasts as “guidance for the ages.”

Printing can have major impacts on the overall market as well. Nvidia has been a driver of momentum in the stock market this year as a key member of the “Magnificent Seven” stocks — along with Apple (AAPL), Alphabet (GOOGL, GOOG), Microsoft (MSFT), Amazon (AMZN), and Meta. (META), and Tesla (TSLA).

Combined, these stocks have gained more than 70% this year through mid-November versus a 6% rise for the remaining 493 stocks in the S&P 500.

Julien Emanuel, Evercore ISI’s senior managing director, noted Sunday that “it’s still an NVDA world,” and warned investors to prepare for “post-NVDA volatility” no matter which way the stock swings.