NVIDIA Corporation (NVDA) has recently released its third-quarter earnings report, which has significantly outperformed expectations. The company’s revenue soared to $35 billion, reflecting a remarkable 94% increase year-over-year and a 17% rise compared to the previous quarter. Additionally, NVIDIA achieved an adjusted earnings per share (EPS) of $0.81, surpassing analyst predictions of $33.2 billion in revenue and an EPS of $0.74.
A closer examination reveals the reasons behind analysts consistently misjudging NVIDIA’s performance. Just three months prior, NVIDIA shares were valued at $125, and the company announced a revenue figure of $30 billion, marking a 122% year-over-year rise. At that time, NVIDIA projected its current quarter revenue to be around $32.5 billion, which led to a sharp drop in stock price to $101. However, following the latest earnings report, the stock surged, closing above $145—a 16% increase over the past three months, aligning closely with the quarter-over-quarter revenue growth rate.
In their most recent announcement, NVIDIA revealed a revenue of $35.1 billion instead of the previously guided $32.5 billion, continuing its upward trajectory with revenue growth accelerating from 15% to 17%. Moreover, the company has forecasted revenue of $37.5 billion for the upcoming quarter, suggesting that quarterly revenue could potentially surpass $40 billion. This growth trend indicates that NVIDIA’s share price might witness a similar increase of 16-17% over the next three months, potentially reaching $170.
Insider Monkey’s co-founder, who has been recommending a long position in NVIDIA since May 2023, has noted the stock’s robust performance for subscribers and holds a personal interest in the shares. While optimistic about NVIDIA’s short-term prospects, he expresses caution about its long-term potential given the company’s current market capitalization of approximately $3.6 trillion. If predictions hold true, it could reach $4 trillion within three months. This leads to the question of whether it is feasible for NVIDIA’s quarterly profits to escalate from $19.3 billion today to $50 billion in the coming years, maintaining growth akin to established giants like Alphabet Inc. (GOOGL), which currently trades at a forward P/E multiple of 20.
While acknowledging NVIDIA’s potential as a short-term play in the AI sector, there is a belief that other AI stocks may offer even greater long-term returns. For investors interested in alternative AI opportunities, insights on cheaper AI stock options are provided for those seeking comparable promise to NVIDIA without the inflated price-to-earnings ratio.
Overall, NVIDIA’s performance showcases the resilience and demand for its products in a rapidly evolving tech landscape. Despite the cautious long-term outlook, the company’s short-term success illustrates strong market confidence and the potential for substantial growth in the coming quarters. Investors might find this a promising time to explore opportunities within the AI industry.