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NVIDIA shares fell about 7 percent after its latest quarterly earnings report as investors digest a stellar financial picture, albeit tarnished by the specter of the peak growth phase that is now clearly visible, leading to over-partying and the reduction of the stock’s nosebleed premium on margins.
This is a key page for anyone interested in Nvidia! Highly recommended reading!
Nvidia Q3 Guidance Update:
1. Revenue over US$32.5 billion
2. Gross margin still very strong at 74.4%
3. Operating profit just under US$19.9 billion!!!!
4. Very strong operating margin at 61.2%
5. Operating expenses US$ 4.3 billion
6.… photo.twitter.com/79sBLFMZEx— AJ (@alojoh) August 28, 2024
On the surface, NVIDIA has delivered another impeccable quarterly performance beating analyst consensus estimates for both top- and bottom-line metrics and delivering another impressive guidance for the ongoing quarter of $32.5 billion in revenue, which exceeded consensus estimates by about $600 million.
NVIDIA’s net profit margin fell slightly to 55% in Q2 from a record 57% in Q1. This is the first decline in its profit margin since Q2 2022. $NVDAhttps://t.co/l5IYmkf6Ih photo.twitter.com/X81qgSzRVc
—Charlie Bilello (@charliebilello) August 28, 2024
However, under the hood, there are some giant caveats. First, NVIDIA’s net profit margin fell for the first time since Q2 2022.
Additionally, consider the fact that NVIDIA is now guiding for a gross profit margin of 74.4% for the current quarter, which is below not only the June quarter’s actual margin of 76.7%, but also below that quarter’s guidance of 74.8%.
$NVDA: China data center revenue grew sequentially and was a “significant contributor” to overall revenue.
Data center revenues in China have fallen below levels seen before export controls were imposed…the market there will remain competitive.
— Wall St Engine (@wallstengine) August 28, 2024
As another potential chink in NVIDIA’s armor, note that its data center-related revenue from China has fallen below levels seen before the U.S. imposed export controls.
On the Blackwell front, NVIDIA confirmed rumors of a minor design flaw, but observed that the deficiencies were corrected through some changes to the photomask – a specific template used to create custom patterns on semiconductor wafers.
With these changes, the company expects to begin shipping Blackwell products in the December quarter, with Hopper shipments expected to ramp up in the second half of 2024.
Blackwell’s slight delay, however, comes at a high cost: NVIDIA noted during its earnings call that it “will see weaker margins in the fourth quarter.”
Wild$NVDA photo.twitter.com/caAbHj0ETd
— The Wall Street Maverick (@TheMaverickWS) August 28, 2024
So there you have it: NVIDIA’s era of unbridled, uninterrupted, and unblemished growth is over. Sure, the company still remains a potent cash-generating force. But the stock market is an efficient discounting machine, and it’s now factoring a growth hiatus—even if temporary and related only to a few metrics—into NVIDIA’s stock price, shaving off some of its giddy premium.