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Previewing Nvidia’s First-Quarter Earnings: What to expect?

NVIDIA’s Silicon Valley campus, seen from San Tomas Expressway in Santa Clara, California
NVIDIA’s Silicon Valley campus, seen from San Tomas Expressway in Santa Clara, California Copyright Jeff Chiu/Copyright 2023 The AP. All rights reserved
Copyright Jeff Chiu/Copyright 2023 The AP. All rights reserved
By Tina Teng
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Nvidia is set to release its first-quarter earnings for the fiscal year 2025. Investors will be particularly focused on the performance of its data centre.

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The US earnings season is set to conclude with Nvidia's quarterly results, which will be pivotal for the enthusiasm surrounding artificial intelligence (AI) stocks. The company will report its first-quarter earnings for the fiscal year 2025 after the US market closes on 22 May.

Nvidia has benefited the most from the AI boom, becoming the world's third-largest company by market capitalisation, following Microsoft and Apple. The company's share price has more than doubled in one year and surged an impressive 92% year to date in 2024.

Since the second quarter of 2023, the AI chip maker's revenue growth has accelerated due to increased demand for its advanced Graphics Processing Units (GPUs). While the revenue from its Data Centre remains a focal point, the newly launched Blackwell Platform could be crucial in driving further growth.

Data centre revenue may be tripled

Data Centre and Gaming are the two main segments of Nvidia. During the pandemic era, Gaming led Nvidia's revenue growth due to the stay-at-home effect. Since the second quarter of the fiscal year 2023, the Data Centre segment has become the biggest revenue contributor to the company because of a renewed demand for computer GPUs. Since the second half of 2023, the Microsoft-led chatbot boom has spurred demand for AI chips for training Large Language Models (LLMs). The Data Center sales account for nearly 76% of the overall sales in the final quarter of fiscal year 2024.

Nvidia's Data Centre revenue surged 271% year-on-year to $10.32 billion in the second quarter of fiscal year 2024. In the second half of 2023, its Data Centre segment repeatedly achieved new highs, reaching $18.4 billion in the second quarter. The segment's growth accelerated, jumping 379% and 509% year-on-year in the third and fourth quarters, respectively. Analysts expect Data Centre revenue to reach $21.2 billion for the April quarter this year, indicating a year-on-year growth of 495%, according to Visible Alpha.

Nvidia's non-GAAP gross margin surged to a notable 77% in the final quarter of last year, thanks to the lucrative AI chip business. Prior to the first quarter of 2023, its gross margin was around the mid-60% range. The company expects the gross margin to remain at a similar level in the upcoming earnings report.

In the last earnings call, CEO Jensen Huang stated that demand for AI chips would remain strong in 2025 and beyond. Analysts expect Nvidia to report earnings per share of $5.17 on overall revenue of $24.65 billion, representing increases of 630% and 343%, respectively, from the same quarter last year. The net income is forecasted to be $12.87 billion, compared to $2.04 billion in the same quarter last year.

The Blackwell Platform in focus

Since the announcement of the Nvidia Blackwell Platform in March, this advanced computing technology has become a new focal point. Blackwell is a powerful GPU that "enables Trillion-Parameter-Scale AI Models" which, according to Nvidia, can "reduce LLM inference operating costs and energy consumption by up to 25 times". The intense competition in AI-led technology among tech companies is likely to continue supporting Nvidia's accelerated growth. The company states that Blackwell is expected to be adopted by Amazon Web Services, Dell Technologies, Google, Meta, Microsoft, OpenAI, Oracle, Tesla, and xAI.

China export restrictions

In early October 2023, the US banned the export of Nvidia's most popular AI chips, including the H100 and A800, to China. In March, the US Department of Commerce updated restrictions on AI chip exports to China. The new rules prohibited the shipment of advanced chips, including laptops containing those chips. During the earnings call for the last quarter of fiscal year 2024, CEO Jensen Huang mentioned that Data Centre sales were affected by these restrictions. This may impact Nvidia’s performance in the first quarter, though China may not be a major concern for its overall growth. Huang indicated that the company was redesigning suitable chips for Chinese customers to comply with US regulations.

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