NVIDIA Corporation recently released its third-quarter earnings, showcasing impressive results that surpassed market expectations. The company reported a revenue of $35 billion, showing an incredible 94% increase compared to the same quarter last year and a 17% rise from the previous quarter. This performance translated into adjusted earnings per share (EPS) of $0.81, which was above analysts’ predictions of $33.2 billion in revenue and an EPS of $0.74.
The figures prompt a review of why analysts consistently underestimate NVIDIA. In the previous quarter, NVDA’s shares were valued at $125, and their reported revenue was $30 billion—a staggering 122% year-over-year increase and a 15% quarter-over-quarter rise. Despite originally guiding investors to expect around $32.5 billion for this current quarter, NVDA shocked the market with its higher-than-expected revenue, causing a quick drop and then a recovery in share prices, ending above $145 recently.
Even more encouraging, NVDA has now projected revenue for the current quarter to be around $37.5 billion, indicating they may well exceed $40 billion. The consistent increase in revenue implies sustained strong demand for NVDA’s chips, driving optimism about future growth.
As Insider Monkey’s co-founder and research director, I have advocated for a long position in NVDA since May 2023, and my subscribers have benefited from these recommendations. I maintain a personal stake in NVDA and hold a positive outlook for the next three months, as further upward momentum in share prices appears likely.
However, it’s essential to consider the stock’s long-term sustainability. With a current market cap nearing $3.6 trillion, analysts speculate it could surpass $4 trillion soon. This raises questions about the feasibility of NVDA achieving a yearly earning structure similar to that of mature companies like Alphabet Inc., which trades with a forward P/E ratio of 20. The trajectory from today’s quarterly profit of $19.3 billion to projected growth of $50 billion within a few years presents a challenging yet intriguing perspective.
While NVDA has strong short-term potential, I believe that certain other AI stocks might offer better long-term returns. For those interested in exploring AI investments with potentially higher returns at a more favorable valuation, I recommend looking into our report on the most affordable AI stocks available.
Overall, NVIDIA’s solid third-quarter performance not only illustrates the robustness of its market position but also reflects a broader trend of growth in the tech sector, particularly in AI. Investors may find opportunities in both NVIDIA and other emerging tech stocks, focusing on innovation and potential long-term gains.