Nvidia Soars 8% After Beating Earnings, Guiding Higher Than Expected

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by Tyler Durden
Wednesday, Feb 22, 2023 - 10:11 PM

Many habitual gamblers were running out of nails to eat when nearly 50 minutes after the regularly scheduled earnings release time and just 10 minutes before its conference call was set to start, Nvidia still hadn't reported Q4 results. However, better late than never, and moments ago the video card (and AI) giant reported results which beat expectations across the board and also guided well above the median estimate.

Here is what the company just reported for Q4:

  • Adjusted EPS 88c vs. $1.32 y/y, beating estimate 81c
  • Revenue $6.05 billion, -21% y/y, beating the estimate $6.02 billion
    • Data center revenue $3.62 billion, +11% y/y, missing estimates $3.86 billion
    • Gaming revenue $1.83 billion, -46% y/y, beating estimates $1.6 billion
    • Professional Visualization revenue $226 million, -65% y/y, beating estimate $195.1 million

  • Adjusted gross margin 66.1% vs. 67% y/y, beating estimates of 65.8%
  • On the expense side NVidia reported R&D and operating expenses, both of which came in line:
    • R&D expenses $1.95 billion, +33% y/y, estimate $1.95 billion
    • Adjusted operating expenses $1.78 billion, +23% y/y, estimate $1.78 billion
  • Adjusted operating income $2.22 billion, -40% y/y, beating estimate $2.16 billion
  • Free cash flow $1.74 billion, -37% y/y, missing estimate $2.16 billion

And while AI has been around for years, Nvidia was quick to piggyback on the latest bout of investor euphoria. From the press release:

NVIDIA is partnering with leading cloud service providers to offer AI-as-a-service that provides enterprises access to NVIDIA’s world-leading AI platform. Customers will be able to engage each layer of NVIDIA AI – the AI supercomputer, acceleration libraries software or pretrained generative AI models – as a cloud service.

Using their browser, they will be able to engage an NVIDIA DGX™ AI supercomputer through the NVIDIA DGX Cloud, which is already offered on Oracle Cloud Infrastructure, with Microsoft Azure, Google Cloud Platform and others expected soon. At the AI platform software layer, they will be able to access NVIDIA AI Enterprise for training and deploying large language models or other AI workloads. And at the AI-model-as-a-service layer, NVIDIA will offer its NeMo™ and BioNeMo™ customizable AI models to enterprise customers who want to build proprietary generative AI models and services for their businesses.

What is more important was the company's cheerful forecast, which came in stronger than consensus forecasts:

  • Revenue is expected to be $6.50 billion, plus or minus 2%, above the exp. $6.35 billion.

Nvidia also forecast the following metrics:

  • GAAP and non-GAAP gross margins are expected to be 64.1% and 66.5%, respectively, plus or minus 50 basis points.
  • GAAP and non-GAAP operating expenses are expected to be approximately $2.53 billion and $1.78 billion, respectively.
  • GAAP and non-GAAP other income and expense are expected to be an income of approximately $50 million, excluding gains and losses from non-affiliated investments.
  • GAAP and non-GAAP tax rates are expected to be 13.0%, plus or minus 1%, excluding any discrete items.

Finally, the company revealed that during Q4, NVIDIA returned to shareholders $1.15 billion in share repurchases and cash dividends, bringing the return in the fiscal year to $10.44 billion.

In response to the stronger than expected results, NVDA stock surged 8% after hours...

... and since its $500BN market cap makes it one of the biggest tech names in the Nasdaq, the NQ futures were also sharply higher, and traded near session highs.