Nvidia Earnings: Stock Surges As AI Giant Reports 600% Profit Explosion and 10-For-1 Stock Split
23.05.2024: Nvidia has reported astounding financial results for the three-month period ending April 30. The company posted earnings per share of $6.12 and sales of $26 billion, significantly surpassing analyst expectations of $5.60 EPS and $24.59 billion in sales, according to FactSet.
Unprecedented Profit and Revenue Growth
Nvidia’s profits and revenues saw an explosive growth of 628% and 268%, respectively, compared to the same period last year. This marks the most profitable and highest-sales quarter in Nvidia’s history, exceeding the previous record of $12.3 billion net income and $22.1 billion revenue set in the quarter ending January.
AI Datacenter Division Fuels Growth
The primary driver of Nvidia’s phenomenal financial performance is its AI-intensive datacenter division, which generated $22.6 billion in revenue last quarter. This represents a 427% year-over-year increase and is a staggering 20 times higher than the $1.1 billion revenue from this segment in 2020.
Upcoming 10-For-1 Stock Split
Nvidia also announced a 10-for-1 stock split scheduled for June 7. This move will reduce the share price from approximately $950 to $95, making it more accessible for investors and employees to purchase whole shares, while the company’s total valuation remains unchanged.
Stock Performance and Market Impact
Following the earnings release, Nvidia’s stock jumped 4%, reaching an all-time high during regular trading hours. The stock was expected to experience high volatility, with options trading indicating an 8% movement in either direction post-earnings. Nvidia, which designs the majority of semiconductor chips for generative AI technology, has emerged as a major beneficiary of the AI boom over the past two years, with top customers including Amazon and Microsoft. Nvidia is now the third most valuable company in the world, with a market capitalization of around $2.3 trillion, a significant increase from its sub-$400 billion value at the end of 2022.
Future Growth Expectations
Despite the extraordinary growth Nvidia has experienced in recent quarters, analysts anticipate continued strong performance. Consensus estimates project Nvidia’s revenues to grow by about 90% in the fiscal year ending January 2025, with forecasted sales of $112 billion, more than four times higher than the $27 billion in the 2022-23 fiscal year.
Nvidia’s Role in Market Recovery
Nvidia has played a crucial role in lifting the American stock market from its 2022 downturn to record levels today. The company’s 490% total return over the past 18 months significantly outpaces the average S&P 500 stock’s 13% return, with the S&P 500 itself up over 36% during this period. Despite Nvidia’s soaring valuation, Wall Street remains optimistic, with no analysts tracked by FactSet rating the stock as a sell, and an average price target of $1,039 per share, indicating a 10% upside from Wednesday’s closing price.
Shift Away from Gaming
Interestingly, Nvidia’s rise to a $2 trillion company comes as its gaming business, once a core segment, has declined. Sales from Nvidia’s gaming unit are now about 25% lower than two years ago, making up just a tenth of overall revenues last quarter, compared to over 40% from 2020 to the first quarter of 2022. Nvidia has strategically shifted its focus from consumer graphics processing units (GPUs) to AI-focused GPUs for corporate clients.