NVIDIA Corporation (NVDA) recently reported its second-quarter earnings results, surpassing expectations with revenue of $30 billion, up 122% year-over-year and 15% quarter-over-quarter. The adjusted earnings per share (EPS) of $0.68 also exceeded analysts’ forecasts of $28.6 billion and $0.64, respectively. However, despite the strong performance, NVDA stock dropped around 7% after hours, prompting questions about the reasons behind the decline.
Looking at NVIDIA Corporation’s outlook for the current quarter, the company expects revenue to reach $32.5 billion, plus or minus 2%. Additionally, GAAP and non-GAAP gross margins are forecasted to be 74.4% and 75.0%, respectively, plus or minus 50 basis points. For the full year, gross margins are anticipated to be in the mid-70% range. The company’s market cap was $3.1 trillion before the earnings report, indicating high expectations for future earnings potential comparable to mature companies like Alphabet Inc (GOOGL).
Despite reporting quarterly revenue and profit of $30 billion and $16.6 billion respectively, investors were surprised by NVDA’s projection of only an 8% quarterly revenue growth rate for the next quarter, compared to 15% in the previous quarter. This decline in growth rate raises concerns about the company’s ability to reach the level of annual profit demanded by its current stock price. As a result, investors may be responding by selling their shares, leading to a potential decline in NVDA’s stock price.
Insider Monkey’s co-founder and research director, who has been recommending a long position in NVDA since May 2023, acknowledges the disappointment in NVDA’s revenue projections and the resulting sell-off by investors. While recognizing the potential of NVDA as an AI investment, there may be other AI stocks with greater promise for delivering higher returns within a shorter timeframe. Investors looking for a promising AI stock trading at a lower earnings multiple may want to explore alternatives to NVDA.
In conclusion, despite NVDA’s strong second-quarter earnings report, the company’s outlook for future revenue growth and profit expansion has raised concerns among investors, leading to a decline in NVDA’s stock price. While NVDA remains a promising AI investment, there may be other AI stocks with greater potential for delivering high returns in a shorter timeframe. Investors should consider the implications of NVDA’s revenue projections and evaluate alternative investment opportunities in the AI sector.
