Nvidia earnings recap: CEO Jensen Huang talked up Blackwell but failed to satisfy Wall Street's sky-high expectations

In addition to emphasizing Hopper's continued demand, Huang highlights the top takeaways of the call before signing off.

His points include that the chipmaker is on its journey to modernize a trillion dollars worth of data centers from general-purpose to accelerated computing.

He also reminds analysts that Blackwell is an AI infrastructure platform, not just a GPU, and highlights its performance gains over Hopper.

Huang mentions the importance of NVLink, which is vital for low latency, high output, and large language models.

Huang also briefly discusses the rapid acceleration of generative AI and how it's evolving into different modalities. He mentions how Nvidia can assist different businesses with AI developments and ends the call.

The stock is still trading down more than 5% as the call concludes.

Huang talks up Nvidia's approach to the Blackwell system rack, and the various configurations it comes in, and the logistics hubs the company has scaled out with partners to make sure it can meet customers' specific demands for their data centers.

Kress says Hopper will continue to grow in the second half of the year, but isn't giving exact estimates on what's expected in the third or fourth quarter.

Revenue from the beginning of Blackwell's rollout will be on top of that in Q4.

The stock is still trading down more than 5% in after hours trading midway through the earnings call.

Huang says demand for Hopper is "really strong" while demand for Blackwell is "incredible."

Nvidia's CEO says gen AI companies spend the vast majority of invested capital into infrastructure, and these companies "need it now" — that's where Hopper chips come into play, as they're available now.

So while interest in Blackwell and its ramp is high, standing up Blackwell's capacity is still weeks or months away, and the Hopper series is there to catch immediate demand.

Kress said "there's more and more excitement" around AI models and what they can offer to different countries.

Huang does a brief dive into the state of gen AI following a question about how Nvidia is measuring customer return and how that impacts its capital expenditures.

"We're seeing momentum of generative AI accelerating," Huang says.

He mentions that frontier models are growing at a substantial rate and the industry is seeing the benefits of scaling.

To meet demand, Nvidia has to continue to drive down energy consumption and costs, the CEO says.

"There were no functional changes necessary," Huang said, reiterating that Blackwell production is expected to start in the fourth quarter.

Questions from analysts have begun. The first question is about any other changes to the Blackwell system.

Kress says data center revenue from China remains below previous levels due to export controls.

But data center revenue in China still grew sequentially in the second quarter and acted as a "significant contributor" to its total data center revenue, the CFO says.

Nvidia CEO Jensen Huang is on the call. CFO Colette Kress kicks off the call and begins delivering prepared remarks. The executives will field questions from analysts shortly.

Nvidia said it began shipping customer samples of its Blackwell architecture in Q2 and expects production to ramp up in Q4 and into the following year.

But analysts will likely try to needle in on the expected "several billion dollars in Blackwell revenue" the company expects in the fourth quarter, looking for additional color from executives on how big or small that number could be.

Emarketer technology analyst Jacob Bourne tells BI that Nvidia continues to benefit from Big Tech's investment in AI, which is fueling "massive demand" for Nvidia chips even as some of these companies work to develop their own rival chips.

"Nvidia once again delivered spectacular results, beating expectations with margins that rival its previous blockbuster quarters," Bourne said. "Despite growing economic uncertainties and AI bubble concerns."

Bourne added that the release of Nvidia's Blackwell chip will remain key in its continued dominance as companies like AMD ramp up their efforts to compete in the chipmaking arena.

Gross margins, a common measure of profitability in the chip business, declined from the first quarter of 2024 to the second quarter.

That was "primarily driven by inventory provisions for low-yielding Blackwell material and a higher mix of new products within Data Center," the CFO writes in the earnings release.

Nvidia forecast third-quarter revenue of roughly $32.5 billion. That was below some of the unofficial bullish estimates on Wall Street, known as "whisper" numbers.

Ahead of Wednesday's results, Dan Morgan, an investor at Synovus, said the Wall Street whisper number was $33 billion to $34 billion.

2nd quarter

Revenue: $30.04 billion, estimate $28.86 billion

• Data center revenue: $26.3 billion, estimate $25.08 billion
• Professional Visualization revenue: $454 million, +20% y/y,
  estimate $451.1 million
• Automotive revenue: $346 million, +37% y/y, estimate $347.9
  million

Adjusted gross margin: 75.7% , estimate 75.5%

• R&D expenses: $3.09 billion, +51% y/y, estimate $3.08 billion
• Adjusted operating expenses: $2.79 billion, +52% y/y, estimate
  $2.81 billion
• Adjusted operating income: $19.94 billion, estimate $18.85 billion
• Adjusted EPS: 68c, estimate 64c
• Free cash flow: $13.48 billion

Source: Bloomberg

Wedbush Securities' Dan Ives said now is the time to grab the popcorn, as Nvidia's earnings should blow Wall Street estimates out of the water.

The tech bull predicted that Nvidia will deliver another "drop the mic" performance, as appetite for its hardware is stronger than ever.

In his view, previous sector earnings indicate that AI demand has not dissipated, spurring upside for Nvidia.

"The cloud numbers and AI data points from Redmond, Amazon, and Google were very strong during earnings season the last few months as this indicates massive enterprise AI demand is now underway," he wrote in a new note on Wednesday.

Wedbush estimates that for each $1 spent on a Nvidia chip, there's a $8-$10 multiplier across the tech sector.

"We believe this is the most important earnings report for the stock market this year and potentially in years for the Street as Nvidia will be the earnings report heard around the world," Ives wrote.

Wedbush holds an "outperform" rating on Nvidia.

Nvidia's earnings will mirror past quarter to deliver another estimate-beating report as AI computing demand remains intact, Deutsche Bank analyst Ross Seymore wrote.

"While on the margin some may be paring back orders ahead of the launch of Blackwell, we still expect aggregate demand trends to remain healthy," he wrote.

The bank cited Nvidia's technology roadmap as one reason for Wall Street to expect further guidance strength from the firm. However, Seymore noted that shares in the company are already fully valued, as investors are well acquainted with Nvidia's fundamentals at this point.

Deutsche maintains a "Hold" rating on the firm.

Citi said Nvidia's earnings will fall short of the $2 billion estimate beat it achieved over the previous four quarters, given that the potential Blackwell hold-up could impede the firm's performance.

However, the bank still anticipates that Nvidia will outpace Wall Street forecasts by around $1 billion. Total quarterly sales should reach $28.5 billion, Citi said.

Citi analysts predict that consensus estimates will reach higher for the upcoming quarter, as Blackwell comments from Nvidia should reassure investors about a strong outlook for the next calendar year. Post-earnings, Nvidia's stock is likely to reach fresh 52-week highs.

Aside from Blackwell's possible delay, investors will seek guidance on Hopper demand, AI enterprise demand, and updates on Nvidia's ethernet-based networking product, Spectrum X. They will also seek comments on sovereign AI risk and Chinese GPU restrictions, Citi said.

Citi maintains a "Buy" rating on Nvidia with a target price of $150 per share.

According to Bank of America, there is a possibility that Nvidia's report underwhelms bullish investors.

"NVDA results have been a key driver of equity indices, and investors may be underpricing the risk of a disappointment," analysts wrote, suggesting that S&P put options are a good trade to hedge against this outcome.

That's likely as the Blackwell delay could mute near-term upside, the bank said in an earlier report.

However, this issue will more likely test third-quarter results, and Nvidia has ways to dampen any negative impact before then, BofA added. For instance, the firm could rely on larger Hopper chip shipments to make up for the Blackwell supply crunch.

"We see any selloff as enhanced buying opportunity as challenges are not in demand, but in (solvable) supply that will not fundamentally derail NVDA's longer-term momentum," the note said.

Strong Hopper demand this quarter should bolster sales to $28.6 billion, the bank said, outpacing Nvidia's $28 billion guidance.

Bank of America has a "Buy" rating on Nvidia and a price target of $150 per share.

Goldman analysts led by Toshiya Hari expect Nvidia's revenue and earnings-per-share to beat estimates, as the firm's fundamentals will support more upside.

Strength will come from data center revenue and the company's strong operating leverage, Goldman said. Meanwhile, the bank cited that Nvidia's hardware is still sought after by leading cloud service computers, and the firm maintains its competitive lead in the AI computing sector.

For investors concerned that AI spending has not yet yielded meaningful results, Nvidia's earnings should combat this narrative, Goldman said.

"We expect Nvidia management to provide ROI metrics available from select customers on this upcoming earnings call as a way to instill confidence in investors," Hari wrote.

However, investors should anticipate some immediate volatility, Hari wrote, given the Blackwell chip delay.

But this will be a short-term headwind, and Nvidia does not lack solutions. The impact will depend on three factors: the delay's extent, whether customers are willing to take on the older Hopper chip, and Nvidia's capacity to ramp up production of a simplified Blackwell model.

Goldman holds a "Buy" rating on Nvidia and a price target of $135 per share.

SECOND QUARTER

• Revenue estimate $28.86 billion
• Data center revenue estimate $25.08 billion
• Gaming revenue estimate $2.79 billion
• Professional Visualization revenue estimate $451.1 million
• Automotive revenue estimate $347.9 million
• Adjusted gross margin estimate 75.5%
• R&D expenses estimate $3.08 billion
• Adjusted operating expenses estimate $2.81 billion
• Adjusted operating income estimate $18.85 billion
• Adjusted EPS estimate 65c

Source: Bloomberg