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Despite sky-high expectations, Nvidia ((NVDA - Free Report) ), the world’s leading chip maker and the second-largest U.S. company, exceeded Wall Street Expectations. Revenue exploded to $30.05 billion versus $13.51 billion year-over-year, trouncing estimates of $28.86 billion. Data center revenue soared to $26.3 billion versus $10.32 billion in the 2023 quarter. Meanwhile, the Zacks Rank #3 (Hold) stock reported adjusted EPS of $0.68, beating Zacks Consensus Estimates for a seventh straight quarter.
Image Source: Zacks Investment Research
Per usual, Nvidia laid out a rosy outlook for the future, again upping guidance. However, the quarter was mixed due to a delay in the company’s latest chip (named Blackwell) and a margin slowdown. Read below for more details.
Blackwell Update
Gene Munster (@munster_gene), Managing Partner at Deepwater Asset Management, made an astute observation following Nvidia’s earnings release:
“NVDA first take: the guidance is much better than investors’ first take (stock down). The company guided revenue up ~3% in October, which includes the negative impact of what appears to be a 2–3-month Blackwell delay. In other words, if there was no delay, the guidance would have been measurably higher. Keep in mind the October quarter will also face strong “Osborne Effect” headwinds as some customers delay purchasing in anticipation of Blackwell.”
“The Osborne Effect” describes the drop or slow down in sales that can happen when a company announces a new product too early, causing customers to hold off on buying the current offering and opting to wait for the new one to be released. The term was coined in the 1980s when Osborne Computer Corporation unveiled a new model to replace their current one, which led to a significant decline in sales for the existing version and ultimately played a role in the company’s bankruptcy.
While Nvidia is far from seeing a similar fate, Blackwell, Nvidia’s newest and most sophisticated chip, was set to ship in 2024 until there was an issue with the company’s supplier, Taiwan Semiconductor ((TSM - Free Report) ).As I discussed in my Nvidia EPS preview, the status of Blackwell would be a critical factor to watch this quarter. The good news for investors is that management largely quelled concerns, saying, “We shipped customer samples of our Blackwell architecture in the second quarter. We executed a change to the Blackwell GPU mask to improve production yield. Blackwell production ramp is scheduled to begin in the fourth quarter and continue into fiscal 2026. In the fourth quarter, we expect to ship several billion dollars in Blackwell revenue. Hopper demand is strong, and shipments are expected to increase in the second half of fiscal 2025.”
Nvidia Announces $50 Billion Buyback Program
Nvidia is looking to put some of its massive cash hoard to work with a $50 billion buyback.
Image Source: Zacks Investment Research
Share buybacks, like the one seen in Apple ((AAPL - Free Report) ), can be bullish because they limit the shares outstanding, drive EPS, and reinforce management’s confidence in the company’s future.
Nvidia’s Net Profit Margin Shrinks
Nvidia’s net profit margins decreased to 55% from a record 57% in Q1, marking it’s first profit margin decline in two years. The NVDA CFO explained, “Q2 gross margins were negatively impacted by inventory provisions for low-yielding Blackwell material and may continue to be impacted in the future.”
Image Source: Charlie Bilello, Creative Planning
I believe this is the one major concern moving forward for NVDA. Demand clearly remains insatiable. However, a sustained slowdown in margins could take some wind out of the stock’s sails. Increased competition from Advanced Micro Devices ((AMD - Free Report) ) is another potential threat to NVDA’s dominance. Nonetheless, one quarter does not make a trend.
Conclusion
Nvidia again smashed Wall Street expectations and provided a rosy outlook. Meanwhile, the delay in the company’s highly-anticipated Blackwell chip seems to be a minor hiccup. That said, NVDA longs must monitor profit margins in the coming quarters.
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Nvidia Q2 EPS Review: Blackwell Update, Buyback, Margins
Nvidia Beats Wall Street Estimates
Despite sky-high expectations, Nvidia ((NVDA - Free Report) ), the world’s leading chip maker and the second-largest U.S. company, exceeded Wall Street Expectations. Revenue exploded to $30.05 billion versus $13.51 billion year-over-year, trouncing estimates of $28.86 billion. Data center revenue soared to $26.3 billion versus $10.32 billion in the 2023 quarter. Meanwhile, the Zacks Rank #3 (Hold) stock reported adjusted EPS of $0.68, beating Zacks Consensus Estimates for a seventh straight quarter.
Image Source: Zacks Investment Research
Per usual, Nvidia laid out a rosy outlook for the future, again upping guidance. However, the quarter was mixed due to a delay in the company’s latest chip (named Blackwell) and a margin slowdown. Read below for more details.
Blackwell Update
Gene Munster (@munster_gene), Managing Partner at Deepwater Asset Management, made an astute observation following Nvidia’s earnings release:
“NVDA first take: the guidance is much better than investors’ first take (stock down). The company guided revenue up ~3% in October, which includes the negative impact of what appears to be a 2–3-month Blackwell delay. In other words, if there was no delay, the guidance would have been measurably higher. Keep in mind the October quarter will also face strong “Osborne Effect” headwinds as some customers delay purchasing in anticipation of Blackwell.”
“The Osborne Effect” describes the drop or slow down in sales that can happen when a company announces a new product too early, causing customers to hold off on buying the current offering and opting to wait for the new one to be released. The term was coined in the 1980s when Osborne Computer Corporation unveiled a new model to replace their current one, which led to a significant decline in sales for the existing version and ultimately played a role in the company’s bankruptcy.
While Nvidia is far from seeing a similar fate, Blackwell, Nvidia’s newest and most sophisticated chip, was set to ship in 2024 until there was an issue with the company’s supplier, Taiwan Semiconductor ((TSM - Free Report) ). As I discussed in my Nvidia EPS preview, the status of Blackwell would be a critical factor to watch this quarter. The good news for investors is that management largely quelled concerns, saying, “We shipped customer samples of our Blackwell architecture in the second quarter. We executed a change to the Blackwell GPU mask to improve production yield. Blackwell production ramp is scheduled to begin in the fourth quarter and continue into fiscal 2026. In the fourth quarter, we expect to ship several billion dollars in Blackwell revenue. Hopper demand is strong, and shipments are expected to increase in the second half of fiscal 2025.”
Nvidia Announces $50 Billion Buyback Program
Nvidia is looking to put some of its massive cash hoard to work with a $50 billion buyback.
Image Source: Zacks Investment Research
Share buybacks, like the one seen in Apple ((AAPL - Free Report) ), can be bullish because they limit the shares outstanding, drive EPS, and reinforce management’s confidence in the company’s future.
Nvidia’s Net Profit Margin Shrinks
Nvidia’s net profit margins decreased to 55% from a record 57% in Q1, marking it’s first profit margin decline in two years. The NVDA CFO explained, “Q2 gross margins were negatively impacted by inventory provisions for low-yielding Blackwell material and may continue to be impacted in the future.”
Image Source: Charlie Bilello, Creative Planning
I believe this is the one major concern moving forward for NVDA. Demand clearly remains insatiable. However, a sustained slowdown in margins could take some wind out of the stock’s sails. Increased competition from Advanced Micro Devices ((AMD - Free Report) ) is another potential threat to NVDA’s dominance. Nonetheless, one quarter does not make a trend.
Conclusion
Nvidia again smashed Wall Street expectations and provided a rosy outlook. Meanwhile, the delay in the company’s highly-anticipated Blackwell chip seems to be a minor hiccup. That said, NVDA longs must monitor profit margins in the coming quarters.