Nvidia Delivers 'Underwhelming' Report After 2 Years of Surges

Again, the chipmaker at the nexus of an AI spending boom, Nvidia Corp, delivered good, but not great quarterly results. This elicited a muted reaction from the investors used to big gains. They had blostered expectations for the results and hence received mediocre results. 

Sales, Nvidia stated, will net approximately $43 billion within the fiscal first quarter, which is set to run through April. Analysts, on the other hand, had estimated an average of $42.3 billion, ranging between $48 - 50 billion. These figures seem severely exaggerated. 

In addition, there is also the risk of American tariffs impinging on results. Nvidia shared Blackwell, a new chip design, but warned that gross profit margins loose will be tighter than unacceptable standards. On Wednesday, after fluctuating losses and gains, Nvidia shares were down less than a percent in late trading. 

Nvidia shares have dipped during the year over worries that data center operators will cut their spending. The increased competition from the low cost Chinese startup, DeepSeek, has dimmed the prospects for further spending on powerful AI chips from Nvidia. This sharply reduces demand for the companies flagship product.

The AI industry is notoriously shaky and complicated. Set aside for the moment that strategy that is seems robust in theory does require copious resources, ensuring tremendous output on all aspects of the industry. 

While Nvidia heads stiff competition from cheap alternatives, chatbots, and a myriad of new concepts, capably encapsulating the clients needs, it counteracts their issues with exuberant spending. The risk free paradigm is sure to dwindle further. Therefore, the more presidents and executives speak about the reality of things, the fewer block releases becomes.

“The input provided was mildly surprising,” Purk noted in his report. However, initial sales of the Blackwell chips will mitigate some of the concerns investors have with the recently announced production problems. 

The firm garnered $11 billion of revenue from Blackwell in the last quarter, which Nvidia claims to be the “fastest product ramp” in their history. Chief Executive Officer Jensen Huang noted, “Demand for Blackwell is amazing.”  

Charts 

Despite surpassing sales expectations from analysts for the fourth fiscal quarter, actual sales were greater to expectations by a small margin, the lowest since March of 2023. Moreover, earnings only provided a modest profit of, which was the lowest since late 2022. 

After Nvidia’s stock marked tremendous growth in the years 2023 and 2024 and made it the world’s leading chip producer, stocks suffered a decline of 2.2% this year. 

Nvidia has been the greatest benefactor of the massive growth in spending on AI over the last two years, resulting in the company doubling their revenue. As a leader in supplying processors for AI software, Nvidia reaps the benefits of investment made to data center hardware by large technology firms.

Over the years, Nvidia and its CEO have appeared at the forefront of the AI revolution, being the focal point for its advancement. Huang, for the past two years, has travelled the world advocating for this technology and believes it is in its early stages of adoption within the economy. 

Sales for the last quarter, that ended on 26th January, increase to 39.3 billion, lower than the projection of 42 billion but higher than the estimation. To emphasize how much the company has advanced, their quarterly sales alone had exceeded Nvidia’s annual revenue from two years ago which was 27 billion. 

Without certain exclusions, profit was 89 cents a share, and with exclusions 84 cents a share which was estimated by Wall Street. 

Huang stated in a call with analysts, “We will grow strongly in 2025.” 

Nvidia gained from the data center unit being the largest source of revenue which generated 35.6 billion in sales, higher than the estimation of 34.1 billion. Previously considered the primary business of Nvidia, gaming related sales totaled up to 2.5 billion. The automotive sector was 570 million while an average of 3.02 billion was projected.

Currently, the data center segment alone generates more revenue than Intel and AMD combined. 

Nvidia’s brand revolves around selling graphics processors, but later realized that there are use cases for AI as well. During the training phase, when software models are learning to identify and respond to inputs, their chips assist in the training process. Nvidia’s components are further used in systems that run the trained software during the inference stage to power services like ChatGPT. 

Before the earning report, analysts were concerned regarding short-term growth for data center client markets. The main topic was whether supply chain issues and the transition to Blackwell would hinder growth. The new technology is indeed more advanced, but it poses manufacturing issues. 

With claims of needing far less resources to produce a model, DeepSeek exacerbated the situation by releasing a strong AI model. This statement in late January led to a major decline in AI stocks. Nvidia, in one day of trading, obliterated capital amounting to $589 billion which, astonishingly, is a record in the markets.

Microsoft Corp and other important clients of Nvidia, have managed to stick to their capital expenditure plans, indicating that AI spending will be strong moving forward. DeepSeek's model works on fine-tuning, which means it will require more working sessions compared to training of other software, Huang said. He went on to claim that, in fact, the systems might require millions of times greater computing power than they do now. Huang called it an excellent innovation, but also warned that future reasoning models would rely on massive amounts deep computing power. “That’s why I believe DeepSeek’s model is a excellent innovation.” Huang explained. According to Nvidia, Blackwell's benefits will only be fully noted in time, but implementing them comes with its own set of problems. According to Nvidia, the launch expense has caused a drop in profit margin, With the implementation of new supply chain logistics, the margins will improve greatly. Colette Kress, the Chief Financial Officer, stated that the gross margin will rise to the “mid 70's” by the end of the year. This means that the percentage of money retained after the cost of production will g=greatly improve.

During this quarter, that figure will be around 71 percent, Nvidia said, roughly a point below what analysts had predicted on average.

Nvidia has only missed analysts’ expectations on quarterly revenue in one of the last five years. And, in recent metrics, the company has consistently surpassed the estimates by over 10 percent, raising the bar for performance profitability greatly.

Nvidia’s most recent revenue projections few weeks back raised the height of their “expectation performance” bar once again but rounded off a missing target quarter. Edwards Jones’ Purk said, “We think it is going to be difficult for management to keep expanding that limit. “