NVIDIA Corporation has announced impressive earnings results for the third quarter, surpassing expectations with revenue hitting $35 billion. This figure represents a significant year-over-year increase of 94% and a 17% rise from the previous quarter. Adjusted earnings per share (EPS) stood at $0.81, outperforming analyst projections of $33.2 billion in revenue and an EPS of $0.74.
The question arises as to why analysts consistently misjudged NVIDIA’s performance. A look back at the previous quarter provides insight. Three months prior, NVDA shares were trading at $125 when the company reported $30 billion in revenue—an astonishing 122% increase year-over-year and a 15% rise quarter-over-quarter. At that time, NVIDIA projected revenue of around $32.5 billion for the current quarter. Despite an initial drop in stock price to $101 following the announcement, shares ultimately rebounded to close above $145. Over the last three months, this rebound reflected a return of approximately 16%, closely aligning with the company’s quarter-over-quarter revenue growth.
Recently, NVIDIA exceeded its earlier guidance by posting revenue of $35.1 billion, marking an acceleration in the quarterly growth rate from 15% to 17%. The company has now projected $37.5 billion in revenue for the current quarter, putting it on a trajectory that could lead to revenues exceeding $40 billion in the forthcoming months. Analysts expect that this growth will likely result in another 16-17% rise in share price, potentially reaching $170 as demand for NVIDIA’s chips continues robust.
The co-founder and research director of Insider Monkey, which has encouraged a long position in NVIDIA since May 2023, reports strong performance for subscribers. While optimistic about NVDA stock over the next three months, there is a note of caution regarding its long-term investment potential, given its current market cap of nearly $3.6 trillion, which may exceed $4 trillion soon. This valuation implies hope for NVIDIA to achieve about $200 billion in annual earnings as it matures, drawing parallels to established firms like Alphabet Inc.
Investigating the feasibility of NVIDIA’s quarterly profits soaring from $19.3 billion to $50 billion in the coming years brings mixed responses. Although NVIDIA is a strong candidate for short-term AI investments, some analysts argue that other AI stocks might provide greater long-term returns. Investors seeking promising AI stocks, particularly those trading at lower earnings multiples, are encouraged to explore alternative opportunities.
In summary, NVIDIA’s strong quarterly earnings and future projections highlight its position as a leader in the tech industry, particularly in the AI sector. Given the continual growth in demand and optimistic forecasts, stakeholders are advised to remain attentive to both the short and long-term trends in the market, ensuring informed and strategic investment decisions.
Overall, this situation reflects a positive sentiment surrounding NVIDIA’s performance, with potential advantages for investors who consider both immediate and future growth prospects in the fast-evolving tech landscape.