Nvidia Earnings Come Strong Yet Again But Data Centre Growth Still Lags

Global AI giant, Nvidia has reported quarterly results that once again exceeded Wall Street expectations, highlighting the sustained uptick in artificial intelligence demand. Despite higher than expected topline and bottomline, Nvidia’s revenue for the data centre division fell short of analyst forecasts for the second straight quarter, slightly dampening sentiment.

Following the earnings release,  shares of Nvidia, up 35% this year after almost tripling in 2024, fell in after-hours trading.

For the three months ended July, Nvidia posted adjusted earnings of $1.05 a share, above analyst estimates of $1.01, on revenue of $46.74 billion. That was 56% higher than the $30.04 billion reported a year ago, and ahead of forecasts of $46.06 billion, according to data from LSEG. Net income also rose 59% to $26.42 billion.

Further, the company said it expects revenue of around $54 billion in the current quarter, plus or minus 2%. The guidance falls roughly in the ballpark of analyst estimates which hovered around $53 billion.

However, the guidance excludes potential sales of the H20 chip in China, which remains subject to US export approvals. Finance chief Colette Kress said Nvidia could generate between $2 billion and $5 billion in H20 revenue this quarter if restrictions ease.

Data centre sales rose 56% year-on-year to $41.1 billion but came in just under the $41.34 billion expected. Within that, GPU sales – Nvidia’s main “compute” products came at $33.8 billion, down 1% from the first quarter as $4 billion of H20 sales failed to materialise. Networking hardware nearly doubled to $7.3 billion as demand for more complex systems grew.

Meanwhile, Blackwell, Nvidia’s latest generation of processors, has quickly become central to its business. The chips made up about 70% of data centre revenue, with sales up 17% from the prior quarter. Major cloud providers, including Microsoft, Amazon, Alphabet and Meta, remain key customers as they spend tens of billions of dollars each quarter on AI infrastructure.

Nvidia has already taken $4.5 billion in writedowns related to the H20 chip, which was designed specifically for the Chinese market. The company said the product could have added $8 billion to last quarter’s revenue if it had been cleared for sale. A small portion of inventory, worth $180 million, was redirected to customers outside China.

Despite that, Nvidia top boss, Jensen Huang remains hopeful. Huang said that there was a ‘real possibility’ of selling Blackwell chips in China if rules allow, predicting the country’s AI market could grow 50% next year.

Beyond AI, gaming revenue rose 49% to $4.3 billion, while robotics sales increased 69% to $586 million, though both remain smaller parts of the business.