Shares in Nvidia have dipped in after-hours trading despite its announcement of strong third-quarter earnings. The California-based chipmaker posted revenue of $35.1bn for the quarter ending 27 October 2024, a surge of 94% year-on-year (YoY). Despite surpassing analyst expectations, markets remained unimpressed with the GPU design firm, with the company’s stock dropping as much as 5% in after-hours trading.
Much of this dissatisfaction appears to stem from Nvidia’s prediction that revenues will grow at their slowest rate in two years. The forecast comes amid growing speculation that the surge in demand for generative AI services, much of which rely on LLMs trained on GPUs designed by Nvidia, may now be slackening.
Investor optimism had surged in the lead-up to Nvidia’s earnings announcement, with the company’s stock climbing over 20% in the past two months alone. Earlier this week, shares hit a record intraday high, reflecting growing anticipation of another blockbuster quarter. Nvidia’s stock has seen extraordinary gains in recent months, bringing its market capitalisation to approximately $3.6 trillion.
Nvidia’s Q4 forecast and Q3 results
For the upcoming quarter, Nvidia expects revenue of $37.5bn, with a margin of error of plus or minus 2%. This represents a slowdown in revenue growth to approximately 69.5%, compared to the 94% growth recorded in the third quarter. Gross margins in Q4 FY25 are forecasted at 73.5% on a non-GAAP basis while operating expenses are projected to be approximately $3.4bn on a non-GAAP basis. The company anticipates $400m in other income, excluding gains and losses from non-affiliated investments.
Nvidia’s net income for the third quarter of fiscal year 2025 surged to $19.31nn, more than doubling year-on-year, driven by strong demand for its AI chips, which contributed the bulk of its revenue. This marks a 109% increase compared to the same period last year. The company’s diluted earnings per share also saw significant growth, rising 111% to $0.78, up from $0.37 in Q3 FY24.
The company’s Q3 revenues were propelled by the explosive growth of its AI data centre business, which delivered $30.8bn in revenue for the quarter, a 112% increase YoY. The company is also rolling out its next-generation Blackwell AI chips, which are expected to boost future performance but have temporarily pressured gross margins.
“Demand for Hopper and anticipation for Blackwell — in full production — are incredible as foundation model makers scale pretraining, post-training and inference”, said Nvidia’s founder and CEO, Jensen Huang. “AI is transforming every industry, company and country. Enterprises are adopting agentic AI to revolutionise workflows. Industrial robotics investments are surging with breakthroughs in physical AI. And countries have awakened to the importance of developing their national AI and infrastructure.”
Recently, reports surfaced that Nvidia’s Blackwell AI chips are allegedly overheating in test runs with associated server racks. The heat management problems with the 72-chip racks have caused concerns among data centre providers, raising doubts about whether the rollout of Nvidia’s new chips will meet internal deadlines. However, the firm stated that it has now resolved these issues, confirming that production of the AI chips is running at full capacity and that key customers have already received their shipments.
Read more: Nvidia’s Blackwell AI chip rollout hits snag with overheating server racks
