NVIDIA Corporation has recently reported a remarkable performance in its third-quarter earnings, surpassing expectations significantly. The company’s revenue soared to $35 billion, marking an impressive 94% increase compared to the same period last year and a 17% rise from the previous quarter. This strong financial outcome led to an adjusted earnings per share (EPS) of $0.81, outperforming analysts’ estimates of $33.2 billion in revenue and $0.74 in EPS.
The unexpected results have raised questions about why analysts miscalculated NVIDIA’s performance yet again. To understand this, it is essential to reflect on the previous quarter. Just three months ago, NVIDIA shares were priced at $125, and the company announced a revenue of $30 billion, a staggering 122% year-over-year increase and a 15% growth quarter-over-quarter. At that time, the company had guided investors to expect around $32.5 billion in revenue for the current quarter. However, despite an initial sharp decline to $101, the stock price rebounded and closed above $145 today. This represents a 16% increase, aligning closely with its quarter-over-quarter revenue growth rate.
In a surprising turn of events, NVIDIA reported revenue of $35.1 billion, exceeding its earlier guidance of $32.5 billion. Additionally, its revenue growth rate accelerated from 15% to 17% quarter-over-quarter, and the company projects a revenue of $37.5 billion for the upcoming quarter. If history is any indication, this may lead to quarterly revenue exceeding $40 billion, with a potential rise in share price by another 16-17% over the next three months, possibly reaching $170. Analysts have not observed any signs of diminishing demand for NVIDIA’s chips, suggesting a strong market presence.
As the co-founder and research director of Insider Monkey, I can confidently say that we have consistently recommended a long position in NVIDIA since May 2023, which has proven beneficial for our subscribers. Personally, I hold a small stake in NVIDIA as well. I anticipate that NVIDIA’s stock will continue to outperform the market in the near term, but I caution that this performance does not necessarily translate to a solid long-term investment. Currently valued at nearly $3.6 trillion, NVIDIA’s emergence as a dominant force could likely push its market cap to over $4 trillion in three months, leading to expectations of around $200 billion in annual earnings as it matures similar to Alphabet Inc (GOOGL), which is currently valued at a forward P/E ratio of 20. However, reaching quarterly profits of $50 billion and maintaining growth akin to Alphabet raises questions about feasibility.
While NVIDIA demonstrates potential for short-term investment particularly in the AI sector, I believe other AI stocks could yield even greater long-term returns. For those interested in promising investments akin to NVIDIA yet priced at less than five times their earnings, I recommend exploring our report on affordable AI stocks.
Overall, NVIDIA’s consistent growth and the bullish sentiment surrounding it paint a positive picture for both investors and the tech industry as a whole. This situation reflects a broader trend in the technological landscape, where innovation and demand continue to fuel robust market activity.