Nvidia and Their Blockbuster Q3 Report 

Nvidia and their Blockbuster Q3 Report 

Investors were eagerly anticipating Nvidia’s (NVDA) fiscal 2025 third-quarter financial report, released after the market closed on Wednesday, and for good reason. Nvidia has become a bellwether for the tech industry and a barometer of the artificial intelligence (AI) revolution.

The chipmaker delivered results that exceeded Wall Street’s lofty expectations, reaffirming its leadership in the AI-driven tech shift. Yet, buried within the impressive numbers was one potential red flag that investors should monitor.

Here’s a breakdown of the results, a glimpse into the future, and the key area investors should watch.

By the Numbers

Nvidia had a stellar quarter. The company posted record revenue of $35.1 billion, marking a 94% year-over-year increase and a 17% rise sequentially. Adjusted earnings per share (EPS) came in at $0.81, surging 103%.

For context, analysts had projected revenue of $33.13 billion and EPS of $0.75, so Nvidia easily beat expectations.

Driving the impressive performance was its data center business, the main engine of Nvidia’s growth. Revenue for the segment, which powers cloud computing, data centers, and AI applications, soared 112% year-over-year to $30.8 billion, fueled by surging AI demand.

However, there was a slight dip in Nvidia’s gross margin, which fell to 74.6% from 75.1% in the previous quarter. CFO Colette Kress attributed this to a product “mix shift from H100 systems to more complex and higher-cost systems.” While the margin dip is notable, it remains well above Nvidia’s historical averages.

On the balance sheet, Nvidia’s cash and marketable securities skyrocketed 110% over the past year, hitting $38.5 billion. Free cash flow also jumped 138% to $16.8 billion.

Blackwell AI Architecture and Supply Constraints

Nvidia updated investors on its highly anticipated Blackwell AI architecture, scheduled to begin shipping in the fourth quarter of fiscal 2025:

“We completed a successful mask change for Blackwell, our next Data Center architecture, that improved production yields. Blackwell production shipments are scheduled to begin in the fourth quarter of fiscal 2025 and will continue to ramp into fiscal 2026 … Both Hopper and Blackwell systems have certain supply constraints, and the demand for Blackwell is expected to exceed supply for several quarters in fiscal 2026.”

This suggests Nvidia’s growth trajectory remains strong, though supply chain challenges could temper its pace into next year.

What’s Next for Nvidia?

Management remains optimistic. Nvidia projects record fourth-quarter revenue of $37.5 billion, representing a 70% year-over-year increase. This outlook slightly surpasses Wall Street’s consensus estimate of $37 billion.

At approximately 35 times next year’s expected earnings, Nvidia’s stock may seem pricey, but it’s a fair valuation for a company with projected earnings growth of 121% this year and 47% in fiscal 2026.

The Warning Sign Investors Must Watch

One potential risk lies in Nvidia’s heavy reliance on cloud service providers, which accounted for roughly 50% of its data center revenue last quarter. This means that 44% of Nvidia’s total revenue — about $15.4 billion — comes from major cloud providers like Amazon Web Services, Microsoft Azure, and Google Cloud.

These companies are expected to continue investing heavily in AI infrastructure, a trend that benefits Nvidia, which holds a commanding 98% share of the data center GPU market. However, this dependence is a double-edged sword. If demand from cloud providers slows for any reason, it could put billions of dollars in Nvidia’s revenue at risk.

Bottom Line

Nvidia is well-positioned to lead the AI revolution, but its reliance on a handful of major customers and looming supply constraints are risks worth noting. While the future looks bright, investors should stay vigilant.

As always, it’s essential to consider the broader market and diversification when deciding whether to add Nvidia to your portfolio.

Should you invest $1,000 in Nvidia right now?

Before you buy stock in Nvidia, consider this:

Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at that time, you’d have $894,029!

If you just invested $10,000 in Nvidia at $138 per share when we ran our first story on October 20th, 2024, your investment would now be worth approximately $10,797.10 at the current price of $149 per share. 

How to Buy Nvidia

If you’re looking to invest in Nvidia stock through Fidelity, it’s a simple process. First, you open a Fidelity account. If you don’t, you can easily sign up on the Fidelity website. Once your account is set up, log in and navigate to the “Trade” tab on the dashboard. In the stock search bar, type in “Nvidia” or its ticker symbol, NVDA. After selecting the stock, enter the amount you wish to invest or the number of shares you’d like to purchase, review the order details, and click “Submit.” Fidelity offers helpful research tools, so before making any trades, you can review Nvidia’s stock performance, analyst ratings, and financials to ensure you’re making an informed decision.

Disclaimer: The information provided in this article is for informational purposes only and should not be considered as stock or financial advice. Investing in stocks involves risk, and you should always do your own research or consult with a licensed financial advisor or professional before making any investment decisions.