Nvidia Corp executives forecast record sales far in excess of anything the company had experienced on Wednesday, propelling shares toward all-time highs as margins improve with data center sales.
Nvidia NVDA forecast second-quarter revenue of $11 billion, up or down 2%; The chipmaker has never reported quarterly revenue higher than $8.29 billion, which it generated in its fiscal first quarter a year ago. According to FactSet, analysts on average were expecting $7.17 billion, up from the $6.7 billion in revenue Nvidia posted in the second fiscal quarter last year.
The company forecast an adjusted gross margin of 70% for the second quarter after reporting 66.8% for the first quarter. “The sequential increase reflects lower gaming costs and higher data center margins as we scale out our hopper architecture,” the company said.
Nvidia didn’t provide guidance for the full year, but CEO Jensen Huang was effusive in his predictions that an increased focus on AI from big-tech partners like Microsoft Corp. MSFT and Alphabet Inc. GOOGL GOOG will lead to sales increases in the near future. Speaking to the media at Nvidia’s developer conference in March, he said that generative AI had only accounted for a “tiny, tiny, tiny” single-digit percentage of sales over the past 12 months, but predicted that sales would fall over the next year Generative AI will “get pretty big – it’s hard to say exactly how big.”
In a statement accompanying the report on Wednesday, Huang said, “$1 trillion in installed global data center infrastructure will transition from general purpose to accelerated computing as companies struggle to apply generative AI to every product, service and business process.”
Shares are up more than 20% in after-hours trading after falling 0.5% in the regular session to $305.38. Nvidia’s record close is $333.76 and all-time intraday high is $346.47; Prices outperformed both in after-hours trading, with shares rallying above $350. Meanwhile, shares in rival Advanced Micro Devices Inc. AMD are up 6% in after-hours trading.
Nvidia reported first-quarter earnings of $2.04 billion, or 82 cents a share, on revenue of $7.19 billion, down from $8.29 billion a year ago but well above Expectations. Adjusted for stock compensation and other effects, the chipmaker reported earnings of $1.09 per share, down from $1.36 per share a year ago. According to FactSet, analysts on average were expecting adjusted earnings of 92 cents a share on sales of $6.53 billion.
Gaming revenue fell 38% to $2.24 billion in the first quarter, while Nvidia’s data center revenue rose 14% to a record $4.28 billion, “led by growing demand for generative AI and large language models with GPUs based on our Nvidia Hopper and Ampere architectures.”
“The revenue growth reflects strong demand from major internet companies for consumers and cloud service providers,” the company said in a statement. “Enterprise demand for GPU platforms was strong, although general networking solutions declined both sequentially and year-on-year.”
Analysts had expected gaming revenue of $1.97 billion — nearly half of last year’s $3.62 billion — and data center revenue of $3.9 billion, up 4% from last year corresponds to the previous year. Autochip sales rose 114% year over year to $296 million.
Nvidia’s profit and revenue have both declined in recent quarters as the company struggles with market glut as shortages turned into oversupply during the pandemic after demand for personal computers and gaming gear had declined. However, analysts expect that trend to end with this report as demand for devices capable of powering artificial intelligence continues to surge amid a host of promises from tech companies about the power of generative AI.
Nvidia stock has soared to an all-time high amid the hype surrounding generative AI, launched after the successful debut of OpenAI’s ChatGPT service. Shares have more than doubled so far this year, up 109%, while the S&P 500 index SPX is up 8%.