Nvidia expects an adjusted gross margin of 75%, plus or minus 50 basis points, for the third quarter…
Despite reporting a new record in profits and revenues, Nvidia did not excite investors… The reason? The company forecasted for Q3 2024 a gross margin that could fall short of market estimates.
Specifically, shares of the Santa Clara, California-based company fell 3% in after-hours trading – although they have risen more than 150% so far this year.
Nvidia expects an adjusted gross margin of 75%, plus or minus 50 basis points, for the third quarter. According to LSEG data, analysts, on average, had forecasted a gross margin of 75.5%. For the second quarter, the gross margin reached 75.7% compared to an average estimate of 75.8%.
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Investors had high expectations from the chip maker, following a more than seven-fold increase in Nvidia’s shares over the past two years, making the company one of the biggest beneficiaries of a stock rally linked to artificial intelligence.
Its ability to surpass estimates faces increasing challenges, as every success pushes Wall Street to set the bar higher.
According to LSEG data, the company projected revenues of $32.5 billion, plus or minus 2%, for the third quarter, compared to the average analyst estimate of $31.77 billion.
Additionally, second-quarter revenues were $30.04 billion, against estimates of $28.70 billion. Sales in Nvidia’s data center segment increased by 154%, to $26.3 billion, compared to estimates of $25.15 billion.
Net earnings stood at $16.6 billion, up 168% compared to the same period last year. In the first half of the fiscal year, Nvidia returned $15.4 billion to shareholders in the form of dividends.
“Demand for the ‘Hopper’ remains strong and expectations for ‘Blackwell’ are incredible,” said Jensen Huang, founder and CEO of Nvidia. “Nvidia achieved record revenues as global Data Centers are in full swing to modernize computing with accelerated computing and artificial intelligence,” he noted. “Generative AI will revolutionize every industry,” he emphasized.
“Based on the stock reaction, a $2 billion rise is not enough for investors,” said Kevin Garrigan, analyst at WestPark Capital.
The company stated it expects several billion dollars in revenue from its latest Blackwell chips in the fourth quarter, addressing concerns about delays hindering growth.