Nvidia (NVDA) reported third quarter earnings after the bell on Tuesday that topped Wall Street expectations once again as the artificial intelligence boom continues to feed demand for the company's chips.
The chipmaker reported adjusted earnings per share of $4.02 on revenue of $18.12 billion, both of which topped analyst expectations. Analysts had expected adjusted earnings per share to tally $3.36 on revenue of $16.1 billion, according to data from Bloomberg.
Third quarter revenue increased 34% from the prior quarter and 206% from year ago, reflecting how increased demand for AI has boosted the company's sales throughout 2023.
The company's revenue guidance for the current quarter also topped estimates, coming in at $20 billion, plus or minus 2%; analysts had been projecting fourth quarter guidance of $17.8 billion.
Shares of the chip giant were down about 3% on Wednesday following the report.
"Our strong growth reflects the broad industry platform transition from general purpose to accelerated computing and generative AI large language model startups. Consumer internet companies, and global cloud service providers are the first movers," Nvidia CEO Jensen Huang said on the company's earnings call Tuesday night. "The next waves are starting to build. Nations and regional [cloud service providers] are building AI clouds to serve local demand."
The stock market reaction to the report was muted, however, as the company noted new restrictions on chip exports to China would weigh on results.
"Our sales to China and other affected destinations, derived from products that are now subject to licensing requirements, have consistently contributed approximately 20-25% of Data Center revenue over the past few quarters," Nvidia CFO Colette Kress said in a release.
"We expect that our sales to these destinations will decline significantly in the fourth quarter of fiscal 2024, though we believe the decline will be more than offset by strong growth in other regions."
Kress expanded on the impact of export restrictions to Asia when addressing investors on Tuesday night. She noted that the fourth quarter guidance could've been higher if not for the restrictions but there is a possibility Nvidia could launch new products in coordination with the US government.
"The export controls will have a negative effect on our China business, and we do not have good visibility into the magnitude of that impact even over the long term," Kress said.
The chipmaker reported data center revenue, which includes its AI chips, of $14.51 billion; the Street had expected revenue of $12.82 billion for this segment. Nvidia's gaming revenue came in at $2.86 billion for the quarter, also higher than the $2.7 billion analysts had projected. Annual growth in these segments clocked in at 279% and 81%, respectively, in the quarter.
This report came after the stock closed at a record high of $504.09 per share on Monday. Nvidia stock fell about 0.9% on Tuesday ahead of the results along with the broader market.
Earlier this year, Nvidia's stock had been a notable mover following earnings releases.
In August, the stock hit an all-time high after Nvidia reported second quarter results that smashed Wall Street's expectations on both revenue and earnings per share, as well as guidance that exceeded lofty estimates. Back in May, one analyst referred to the company's forecast as "guidance for the ages."
The print could have significant implications for the overall market, too. Nvidia has been a driver of momentum in the stock market this year as a key member of the "Magnificent Seven" stocks — along with Apple (AAPL), Alphabet (GOOGL, GOOG), Microsoft (MSFT), Amazon (AMZN), Meta (META), and Tesla (TSLA).
Together, these stocks have gained more than 70% this year through mid-November against a 6% rise for the remaining 493 stocks in the S&P 500.
Josh Schafer is a reporter for Yahoo Finance.
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