Nvidia Corporation (NASDAQ:NVDA) has announced impressive second-quarter results that have exceeded expectations, showcasing the strong demand for its chips driven by the increasing adoption of generative artificial intelligence.
As trading commenced on Thursday, shares surged more than 7.5% in pre-market activity.
Nvidia disclosed adjusted earnings per share (EPS) of $2.70 on revenue totaling $13.51 billion. This outperformed the predictions of analysts polled by Investing.com, who had forecasted EPS of $2.07 on revenue of $11.13 billion.
The data center business, a high-margin segment, soared by 171% to a record $10.32 billion in Q2 compared to the previous year. This growth can be attributed to businesses transitioning from general-purpose computing to accelerated computing and generative AI, which is significantly driving demand.
As the demand for AI technologies escalates, Nvidia’s array of AI-related products, including chips and a cloud service for training generative AI models, has emerged as a dominant choice for startups and enterprises venturing into AI. The chip manufacturer has expressed expectations for supply to increase every quarter through the coming year.
Revenue from the gaming business also witnessed a 22% increase, reaching $2.49 billion for the quarter.
For the fiscal third quarter, Nvidia has forecasted revenue of around $16 billion, with a potential variance of 2%. This outlook surpasses estimates from Investing.com, which predicted $12 billion in revenue. Gross margins are projected to range from 71.5% to 72.5%, plus or minus 50 basis points.
The significantly better-than-expected guidance has sparked optimism among analysts. Wedbush noted in a Wednesday report that this guidance “will be fuel in the engine to ignite a tech rally we see continuing into the rest of the year despite the recent pullback and Fed jitters,” following Nvidia’s earnings release.
Furthermore, these robust results point to an impending surge in enterprise expenditure on AI, which will have a positive impact on AI-focused companies such as Microsoft (NASDAQ:MSFT), Google (NASDAQ:GOOGL), Apple (NASDAQ:AAPL), Oracle (NYSE:ORCL), Palantir (NYSE:PLTR), MongoDB (NASDAQ:MDB), Snowflake (NYSE:SNOW), Salesforce (NYSE:CRM), Advanced Micro Devices (NASDAQ:AMD), C3.ai (NYSE:AI), and others.
In addition to its earnings report, Nvidia has unveiled a new stock buyback program totaling $25 billion, with repurchases expected to continue throughout the year. The company has disclosed that it spent $3.28 billion on buybacks in Q2.
Stifel analysts have upgraded Nvidia’s stock to Buy from Hold, setting a price target of $600 per share. The analysts highlighted the company’s potential to benefit from the shift of $1 trillion of existing data center infrastructure from general-purpose compute to accelerated compute architectures.
Morgan Stanley analysts commended Nvidia’s performance, describing it as “another exceptional quarter.” They noted that the company’s data center business grew by more than three times within a span of six months.
Meanwhile, Rosenblatt analysts have increased the price target to $1,100 per share, indicating their positive outlook on Nvidia’s future prospects.