Nvidia, the leading chipmaker, reported robust earnings for the first quarter of fiscal year 2025, driven by surging demand for artificial intelligence (AI) chips. The AI powerhouse announced a 10-for-1 stock split as its share price surged over 5%, surpassing the $1,000 mark for the first time in after-hours trading on Wednesday.
Nvidia has been the primary beneficiary of the AI boom since 2023, with its share price soaring 100% this year. The company provided guidance for the current quarter that also exceeded market expectations. CEO Jensen Huang indicated that Nvidia is poised for the next wave of growth.
Data Center revenue quadrupled
Nvidia's most profitable segment, Data Center, generated revenue of $22.6 billion (€20.9 billion), marking a 23% sequential increase and a staggering 427% rise from the same quarter last year. Analysts had predicted revenue of $21 billion (€19.4 billion). For the current quarter ending in July, Nvidia expects its revenue to reach $28 billion (€26 billion), plus or minus $25 million (€23 million), surpassing analyst expectations of $26.6 billion.
The company's overall revenue grew by 262% to $26.04 billion, with earnings per share reaching $6.12, both surpassing market estimates of $24.65 billion and $5.95, respectively. Its non-GAAP gross margin increased to 78.9% from 76.7% in the final quarter of fiscal year 2024. Net income soared to $15.238 billion, marking an impressive 492% surge from a year ago.
Meanwhile, Gaming revenue was recorded at $2.6 billion, reflecting an 8% decrease from the previous quarter but an 18% increase from a year ago.
Tech giants help Data Center revenue
Notably, CFO Colette Kress revealed that approximately 45% of Nvidia's Data Center revenue stemmed from major cloud providers like Alphabet, Microsoft, Meta Platforms, and Amazon. Demand for Nvidia's H100 was particularly robust, driven in part by Meta's utilisation of the large language model (LLM) software, Lama 3.
CEO Jensen Huang expressed confidence that Nvidia's new supercomputing AI GPU, Blackwell, would spearhead the company's growth in the coming year, stating: "We are poised for our next wave of growth. The Blackwell platform is in full production and serves as the cornerstone for trillion-parameter-scale generative AI." Launched in March, Blackwell boasts the capability to "reduce LLM inference operating costs and energy consumption by up to 25 times", positioning it as the next-generation AI chip crucial for supporting widespread LLM training across diverse domains.
Huang hinted at Nvidia's strategic shift towards diversifying its product offerings across various sectors, including consumer internet companies, automotive manufacturers, and healthcare providers, rather than solely focusing on cloud businesses. Bloomberg reports that Huang views the partnership with Dell Technologies Inc. as instrumental in expanding Nvidia's reach to a broader customer base through the development of its own AI infrastructure.
A 10-for-1 stock split
Amid a soaring share price, Nvidia has announced a 10-for-1 stock split, set to commence trading on June 10. This move will result in shares being valued at approximately $100 each post-split. The primary objective of a stock split is to lower the price of individual shares, thereby enhancing accessibility for investors. It's worth noting that while this action reduces the share price, it doesn't alter the company's market capitalisation or valuations. Notably, prominent tech firms such as Amazon, Alphabet, and Tesla also executed similar stock splits in 2022.
Nvidia stock may have further to rise
In addition, the chip-making giant has raised its cash dividend to 10 cents per share, marking a significant 150% increase from the previous four cents per share. Nvidia has augmented shareholder returns through a combination of share repurchases totalling $7.7 billion and dividend payouts amounting to $98 million. This contrasts with the $2.7 billion in share repurchases and $99 million in cash dividends distributed in the previous quarter.
Nvidia maintains a Price-to-Earnings ratio of 80, with year-on-year revenue growth consistently surpassing 200% over the past three quarters. The company's forward-looking guidance, forecasting revenue of $28 billion for the July quarter, indicates a projected increase of approximately 207%. This suggests that Nvidia's stock is reasonably valued. Moreover, an earnings beat in the current quarter could potentially enhance its market valuation, particularly with the impending stock split.
