Nvidia: the renowned chip designer and artificial intelligence leader, has once again surpassed Wall Street’s expectations with its latest earnings report. This remarkable performance has driven its stock to a record high.
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Key Facts
- Earnings and Sales: Nvidia reported earnings of $6.12 per share and sales of $26 billion for the quarter ending April 30. These figures significantly exceeded analyst predictions of $5.60 per share and $24.59 billion in sales.
- Profit and Revenue Growth: The company’s profits soared by 628% and revenues increased by 268% compared to the same period last year.
- Record-Breaking Quarter: This was Nvidia’s most profitable and highest-sales quarter ever, surpassing the previous record set in the quarter ending January with a net income of $12.3 billion and $22.1 billion in revenue.
- AI Datacenter Division: The AI-focused datacenter division was a major contributor, generating $22.6 billion in revenue, a 427% year-over-year increase.
- Stock Split Announcement: Nvidia announced a 10-for-1 stock split effective June 7, reducing the share price from about $950 to $95, making it more accessible for investors and employees.
- Stock Performance: Following the earnings release, Nvidia’s stock jumped 4%, reaching an all-time high.
Background
Nvidia’s stock was expected to be highly volatile, with options trading suggesting an 8% movement in either direction post-earnings. The company, which designs most of the chips powering AI technology, has been a significant beneficiary of the AI boom, counting Amazon and Microsoft among its top clients. Nvidia is now the third most valuable company globally, with a market capitalization of about $2.3 trillion, a dramatic rise from under $400 billion at the end of 2022. Analysts predict continued strong growth, with expected revenues of $112 billion for the fiscal year ending January 2025, a sharp increase from the $27 billion in the 2022-2023 fiscal year.
Market Impact
Nvidia’s impressive performance has been a driving force behind the American stock market’s resurgence from its 2022 slump to current record levels. Over the past 18 months, Nvidia has delivered a total return of 490%, far outpacing the S&P 500’s 36% increase during the same period. Despite its soaring valuation, Wall Street remains bullish on Nvidia, with no analysts tracked by FactSet rating the stock as a sell and an average price target of $1,039 per share.
Surprising Fact
Nvidia’s rise to a $2 trillion valuation occurred even as its video game segment, once a core part of its business, experienced a decline. Gaming sales are now 25% lower than two years ago and represent only 10% of overall revenues, down from over 40% between 2020 and early 2022. The company has shifted its focus from consumer graphics processing units (GPUs) favored by gamers to AI-focused GPUs for corporate clients.
Nvidia’s latest earnings report and strategic shift underscore its dominance in the AI sector and its ability to adapt to changing market dynamics, ensuring continued growth and investor confidence.