A “macro event.” That’s how Nvidia’s Q2 results were billed by the financial media and analysts alike.
In the wake of the company’s stunning quarterly report in late May, Nvidia became the face of the generative A.I. revolution, the poster child for 2023’s unexpected US equity rally and, according to some, a harbinger of an epochal productivity boom with far-reaching macroeconomic consequences.
Is the hype overblown? Yes, almost surely. But not in the context of Nvidia’s potential to make or break the stock rally, which ran into a wall this month amid a steep rise in US yields.
On Wednesday afternoon, Nvidia said revenue for Q2 was $13.51 billion, up almost 90% from Q1, more than double the same period last year and $2.5 billion more than the company guided for in May. That guide, you’re reminded, was 50% above consensus at the time.
The company’s revenue outlook for Q3 was astounding. Sales this quarter will be $16 billion plus or minus 2%, Nvidia said. That was $3.5 billion better than the Street expected.
Jensen Huang didn’t miss the opportunity to gloat. “A new computing era has begun,” he declared, in characteristically enthusiastic remarks accompanying the results. “Companies worldwide are transitioning from general-purpose to accelerated computing and generative A.I.”
The revenue breakdown was $2.49 billion for gaming, $10.32 billion for data center and $253 million for automotive. Only the latter missed. The data center beat was enormous — consensus was looking for $7.98 billion. Adjusted gross margin was 71.2%, more than 100bps ahead of estimates.
“During the quarter, major cloud service providers announced massive NVIDIA H100 A.I. infrastructures,” Huang went on. The company’s A.I. is coming to “every industry,” he said, citing enterprise IT and software partnerships.
Adjusted EPS of $2.70 beat easily. Consensus was $2.07. GAAP earnings rose 854% YoY and more than tripled sequentially. Free cash flow of $6.05 billion was a mile ahead of estimates. Nvidia also announced an additional $25 billion in buybacks.
I suppose there’s some scope for a “buy the rumor, sell the news” dynamic to play out, particularly given the almost unfathomable run the stock’s already had in 2023. And it’s always perilous to draw conclusions before the call.
Still, it’s difficult to imagine anyone describing these results as disappointing. The bar for an encore was high, and if this doesn’t count as clearing it, I’m not sure what would.
Huang summed it up. “The race is on to adopt generative A.I.,” he said.