Nvidia’s Q1 Results Impress, but Stock Dips
Nvidia recently released its first-quarter results, which came in better than what many analysts anticipated. CEO Jensen Huang emphasized some new product lines that could potentially broaden the company’s revenue streams, reaching beyond just AI chips. However, despite the strong performance, the stock saw a decline during Thursday afternoon trading.
The reported revenue was $81.62 billion, surpassing the average expectation of $78.86 billion. The data center division, a key growth area, brought in $75.2 billion instead of the expected $72.8 billion. Adjusted earnings per share were at $1.87, compared to a consensus estimate of $1.76.
Interestingly, even with the good news, the stock dropped about 1.4% as of the latest update, indicating that perhaps expectations had been set too high for the AI leader.
Looking ahead to the second quarter, Nvidia projected revenue of $91 billion, significantly higher than the street estimate of $86.84 billion. They also announced a notable $80 billion share repurchase program and increased the quarterly cash dividend from a mere $0.01 per share to $0.25.
Despite the favorable financials, Nvidia’s stock seemed to trade cautiously in the premarket session, likely due to worries about increasing competition in the AI chip space. Some major clients have been investing heavily in their own custom chip development, which could pose a future threat to Nvidia’s dominant position.
During the earnings call, Huang worked to assure investors about the company’s growth prospects. He pointed out a diversified customer base, especially highlighting a growing segment of AI-focused cloud companies that are now generating revenue at a pace that rivals larger customers. Huang expressed confidence that Nvidia would outgrow these hyperscale giants.
A key focus of his remarks was the introduction of Nvidia’s new Vera central processor. He claimed that it opens a $200 billion addressable market opportunity, estimating Vera chip revenue could reach $20 billion by fiscal year-end. This figure far exceeds the initial $1 trillion forecast for Blackwell and Rubin AI chips expected between 2025 and 2027.
“We anticipate that Vera will be a significant driver of revenue, surpassing even Blackwell and Rubin’s $1 trillion potential,” Huang stated, while also admitting that supply might be limited when it comes to Vera Rubin’s composite chip platform expected later this year.
Additionally, Nvidia disclosed $30 billion in cloud computing contracts, up from $27 billion last quarter, which they noted would support research and development efforts.
Reactions from Wall Street were largely positive, with many analysts maintaining a bullish outlook. Goldman Sachs noted clearer paths to exceeding expectations, given projected increases in hyperscale capex and enhanced capital allocation that could boost investor confidence. They mentioned that Nvidia is reducing token costs by over 70% annually, while token prices remain steady or are increasing.
Bank of America analysts highlighted Nvidia’s various growth avenues across hyperscale and AI cloud divisions. These areas currently represent similar portions of the business, but the company expects AI cloud to grow quicker as AI adoption accelerates, maintaining a near-monopoly in sectors that custom chips can’t penetrate.
Bernstein described the quarter as solid and somewhat typical for Nvidia, with strong results that have become expected. The firm noted an unexpected ongoing demand for Blackwell chips and confidence in the expected trajectory for Blackwell and Rubin through 2027.
Raymond James emphasized the growth impact that Vera introduced to the CPU market, forecasting that Nvidia’s CPU sales could reach close to $20 billion this year. They noted the total addressable market for CPUs at $200 billion by 2030, which starkly contrasts with AMD’s forecast of $120 billion for the same time frame.
In light of these outcomes, Stifel raised its price target to $282 and issued guidance for fiscal 2029 while showing an optimistic bias. McCauley remarked on the high demand for GPUs, noting increases in rental prices for the A100 and H100. Evercore ISI mentioned that the dividend increase combined with new buyback authorizations suggests that capital returns could be higher than previously expected by 2026.
