NVIDIA Corporation (NVDA) has recently unveiled its third-quarter earnings report, showcasing a remarkable performance that outshone analysts’ expectations. The company reported a staggering revenue of $35 billion, reflecting a 94% increase year-over-year and a 17% rise from the previous quarter. This strong growth was accompanied by adjusted earnings per share (EPS) of $0.81, exceeding analysts’ predictions of $33.2 billion in revenue and an EPS of $0.74.
The question arises: why were analysts once again off the mark regarding NVDA? To grasp this, we need to look back at the previous quarter. Three months prior, shares of NVDA were priced at $125, with the company announcing a revenue of $30 billion—up 122% year-over-year and 15% sequentially. At that time, NVDA projected revenue for the current quarter to be around $32.5 billion. Following this announcement, the stock initially dipped to $101 but rebounded to close above $145. In essence, NVDA’s share price appreciated by approximately 16% over three months, mirroring its quarter-over-quarter revenue growth.
Just hours ago, NVIDIA disclosed revenues of $35.1 billion, significantly higher than the $32.5 billion forecasted just three months earlier. The company’s quarterly revenue growth rate accelerated from 15% to 17%, and it now anticipates revenue of $37.5 billion for the current quarter. This trend suggests that NVDA could potentially surpass $40 billion in quarterly revenue, possibly resulting in another 16-17% increase in share price over the next three months, pushing it towards $170. Analysts have not identified any slowdown in demand for NVIDIA’s chips, which remains robust.
As a co-founder and research director at Insider Monkey, I have been advocating for a long position in NVIDIA since May 2023, and the stock’s performance has proven beneficial for our subscribers. I personally hold a small stake in NVDA shares and believe that the stock is poised to continue outperforming the market in the near term. However, I recognize that this does not necessarily signify it is an ideal long-term investment. NVIDIA’s current market capitalization is approaching $3.6 trillion, and should my predictions hold true, it could surpass $4 trillion in the coming months. This valuation implies that investors are anticipating earnings of around $200 billion annually as NVDA matures, akin to Alphabet Inc (GOOGL), which currently trades at a forward P/E ratio of 20. The question remains whether it is realistic to expect NVIDIA’s quarterly profits to surge from $19.3 billion today to $50 billion over the next few years and maintain a growth rate similar to that of GOOGL.
While I see potential for NVIDIA as a short-term investment in the booming AI sector, I also believe that there are other AI stocks that may offer even greater long-term returns. For those seeking an AI investment with similar promise to NVIDIA but trading at lower earnings multiples, I recommend exploring our report on the most affordable AI stock options.
In summary, NVIDIA’s impressive earnings report highlights its ability to not only meet but exceed expectations, indicating a solid demand for its products. While the company holds substantial promise, investors should consider a balanced approach by exploring a range of AI investments for potential long-term success.