Nvidia earnings trounce estimates, China concerns linger

Nvidia (NVDA) reported third-quarter results crushed Wall Street expectations. The chipmaker reported adjusted earnings of $4.02 per share, well above the expected $3.36. The $18.12 billion in revenue was better than the $16.09 billion estimate. Revenue is up 206% from a year ago. However CFO Colette Kress cautioned that restrictions on AI chip exports to China could mean sales in the country "will decline significantly in the fourth quarter of fiscal 2024," though the company believes "the decline will be more than offset by strong growth in other regions."

Moor Insights and Strategy CEO and Chief Analyst Patrick Moorhead says Nvidia "could have done even better" if it wasn't for supply constraints.

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Video Transcript

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JULIE HYMAN: NVIDIA just reported earnings for the third quarter, beating on both the top and bottom lines. The shares right now are down about 3/4 of a percent, but really, they've been bouncing between gains and losses. On the plus side, almost all of the numbers beating estimates, the forecast leaving room to beat estimates, and once again, seeing just incredible amount of growth. On the downside, the company making a warning about sales in China.

Here to dig deeper into the numbers, Patrick Moorhead, CEO and founder of Moor Insights and strategy. Patrick, once again, Josh and I are just sort of flabbergasted by the size of the gains here. When you're talking about a 34% gain quarter-over-quarter, 206% gain in revenue year-over-year, but China, obviously, is a real issue. So, what do you think?

PATRICK MOORHEAD: So I'm surprised, but I'm not surprised. I mean, right now, when it comes to foundational models, the training of them, NVIDIA is the only game in town. And there might be-- there are some competitors coming up with inference solutions, like AMD, and Intel is getting this market, but they can name their price.

And it's in a there. Constrained environment. I think NVIDIA could have done even better in this marketplace, and quite frankly, as it relates to China, I think that we have to wait and listen to what they say on the call. But what's very clear in the CFO commentary is they're going to more than make up for this potential downfall in China with all the other regions out there.

JOSH LIPTON: So, and Patrick, it was great to see you, first of all.

PATRICK MOORHEAD: You too.

JOSH LIPTON: And I just want to double tap on that point you just made there. You think they could have even done better if Jensen Huang and his team, Patrick, had been able to get the supply of GPUs they needed to meet that demand?

PATRICK MOORHEAD: 100%. TSMC is constrained on wafers. Packaging, when it comes to these advanced solutions through TSMC, is hard to get as well. I mean, they could have easily hit 18 or 19 billion this quarter had they been able to meet demand for CSPs, for enterprises, for SaaS companies all across the board.

JULIE HYMAN: And so, I guess we'll be looking for commentary on that, too, whether they're going to be able to ramp up the supply chain even more.

PATRICK MOORHEAD: Absolutely. And they have a tight collaboration with TSMC, but there's a lot of other people vying for wafer time. You have Apple, you have Qualcomm, you have AMD. NVIDIA is important, but they're not TSMC's largest customer. And again, it's as much about the packaging, as we used to dismiss years ago, as it as it is about the wafer, or that core chip that used to be very simple to put together.