NVIDIA's Q1 revenue tripled, profits increased fivefold, announced a 10-for-1 stock split, and rose 7% to a new high after hours | Financial Report Insights

After the U.S. stock market closed on Wednesday, May 22, NVIDIA, the chip giant that has been leading the AI trend since last year, released its financial results for the first quarter of the fiscal year 2025 ending in April.

NVIDIA's total revenue and data center revenue for the quarter both reached record highs, growing several times compared to the same period last year. The revenue guidance for the next quarter exceeded expectations, and the company also announced a 10-for-1 stock split and a significant increase in dividend payouts.

NVIDIA's stock surged more than 7% after hours. If this momentum continues to the opening of the market tomorrow, the stock price will surpass $1000 for the first time, driving up shares of other AI concept stocks such as Arm Holdings, AMD, TSMC ADR, Micron Technology, Marvell Technology, and Advanced Micro Devices after hours.

Some analysts pointed out that NVIDIA's quarterly revenue is more than three times that of the same period last year, at $7.192 billion, significantly higher than market expectations, indicating strong AI investment in the technology industry.

Some netizens commented that the shaky skyscraper of the U.S. stock market is now being supported by NVIDIA.

On Wednesday, NVIDIA closed down 0.5%. On Tuesday, it hit a historic closing high of $953.86, up nearly 92% year-to-date, significantly outperforming the S&P 500 and Nasdaq, which rose more than 11%.

The company's market value has soared to $2.3 trillion, ranking third in the U.S. stock market after Microsoft and Apple. Since hitting a low point in October 2022, the stock has rebounded by nearly 750%, surging 240% in the past year.

Wall Street's expectations for NVIDIA's financial report remain high. 40 analysts rated it as "Buy," 2 as "Hold," with no one recommending "Sell." The average target price of $1057.76 represents an 11% upside potential.

NVIDIA's total revenue has increased by over 200% for three consecutive quarters to a new high, with profits increasing fivefold, and a 10-for-1 stock split

The financial report shows that NVIDIA's first-quarter revenue hit a record high of $26 billion, up 18% quarter-on-quarter and 262% year-on-year. Adjusted earnings per share were $6.12, up 19% quarter-on-quarter and 461% year-on-year. Net profit surged over 620% to $14.81 billion.

This is the third consecutive quarter that NVIDIA's revenue growth has exceeded 200% year-on-year, surpassing Wall Street's expectations of a significant increase of 240% to $24.6 billion, as well as the company's official guidance of $24 billion. The market had initially expected a net profit increase of 540% to $13.1 billion NVIDIA's gross profit margin for the quarter was 78.9%, significantly higher than expected. Analysts originally expected a slight increase from the previous quarter's 76.7% to 77%. EPS also exceeded expectations at $5.65 per share, more than five times the $1.09 per share in the same period last year.

The company expects second-quarter revenue to be $28 billion (plus or minus 2%), better than the market's expected $26.8 billion. However, the expected non-GAAP gross margin is projected to decrease to 75.5% (fluctuating by 50 basis points), narrowing the annual gross margin to around 70%, which is in line with market expectations.

The company also stated that it expects GAAP and non-GAAP operating expenses to be approximately $4 billion and $2.8 billion, respectively, with full-year operating expenses expected to increase in the range of 40% to 45%.

Wall Street predicts that NVIDIA's quarterly sales at the end of the current fiscal year in January next year will exceed $30 billion, with second-quarter revenue potentially increasing to $26.67 billion, and annual revenue surpassing $110 billion. Revenue in the previous fiscal year increased by 126% to $60.9 billion, reaching a historical high.

Starting from June 10th, NVIDIA will complete a 10-for-1 stock split. Shareholders on record before the close of June 6th will receive an additional 9 shares for each common share held, making it easier for employees and investors to hold shares at a lower price. The company will also increase its dividend by 150% to $0.01 per share for shareholders on record before June 11th.

Some analysts point out that NVIDIA's stock price has surged 25 times in the past five years, while Alphabet, Amazon, and Tesla are all planning stock splits in 2022.

Some netizens commented that Huang Renxun's attendance at the earnings call is like a superstar taking the stage at a concert in front of thousands of screaming fans.

Others liken NVIDIA to selling shovels for digging gold to various tech giants during the gold rush

Data Center Revenue Increases Fivefold to a New High, Gaming Business Adds AI PC Category, Automotive Business Adds Robot Category

In terms of business segments, data center revenue has long surpassed the gaming GPU business to become a key area of rapid growth for NVIDIA. Revenue in the first quarter reached a record high of $22.6 billion, exceeding market expectations of $21.1 billion, with a 23% increase quarter-on-quarter and a 427% increase year-on-year.

Specifically, data center computing revenue was $19.4 billion, with a 29% increase quarter-on-quarter and a 478% increase year-on-year, benefiting from the increased shipments of NVIDIA Hopper GPU computing platform used for large language models, recommendation engines, and generative AI applications for training and inference.

Additionally, due to strong growth in InfiniBand end-to-end solutions, networking revenue increased by 242% year-on-year to $3.2 billion. Analysts noted that NVIDIA deliberately emphasized the strong sales of networking parts, as these components are becoming increasingly important as enterprises build clusters consisting of tens of thousands of interconnected chips.

Company executives stated that the strong growth in data center revenue over multiple quarters is being driven by all customer types, led by enterprise and consumer internet companies. "Large cloud providers are deploying and enhancing NVIDIA's AI infrastructure at scale, continuing to drive strong growth, accounting for approximately 45% of our data center revenue."

The once largest gaming business generated quarterly revenue of $2.6 billion, in line with market expectations, with an 8% decrease quarter-on-quarter and an 18% increase year-on-year. The year-on-year growth mainly reflects increased demand, while the quarter-on-quarter decrease is due to the seasonal decline in laptop GPU sales.

Of note, NVIDIA has added the "AI PC" category to its traditional "gaming" business, which is expected to be a focus in future financial reporting periods. In the first quarter, NVIDIA introduced new AI performance optimizations and integrations for Windows systems, supporting chatbot functionality.

The third largest business category is professional visualization, with quarterly revenue of $427 million, below market expectations of $480 million, with an 8% decrease quarter-on-quarter and a 45% increase year-on-year, mainly reflecting increased sales to partners after channel inventory levels normalized.

The fourth largest business category is automotive, with quarterly revenue of $329 million, a 17% increase quarter-on-quarter and an 11% increase year-on-year, higher than the market expectation of a 1% to 2.9 billion decrease. The year-on-year growth is mainly driven by the autonomous driving platform, while the quarter-on-quarter growth is driven by the AI cockpit solutions and autonomous driving platform. Of note, the "automotive" business has added the "robot" category.

Huang Renxun: Ready for the Next Wave of Growth, Blackwell to Ship in the Second Quarter, Bringing in Substantial Revenue This Year

NVIDIA founder and CEO Jensen Huang stated that the upcoming Blackwell super AI chip to be launched in the second half of the year will bring more growth:

"The next industrial revolution has already begun - enterprises and countries are collaborating with NVIDIA to transform tens of trillions of dollars of traditional data centers into accelerated computing, and establish a new type of data center - artificial intelligence factory - to produce a new commodity: artificial intelligence.

Artificial intelligence will bring significant productivity improvements to almost every industry, helping businesses improve cost efficiency and energy efficiency, while expanding revenue opportunities.

We are ready for the next wave of growth. The Blackwell platform is fully in production, laying the foundation for trillion-parameter scale generative artificial intelligence.

The strong and growing demand for generative AI training and inference on the Hopper platform is driving the growth of our data center revenue. In addition to cloud service providers, generative artificial intelligence has expanded to consumer internet companies as well as enterprise, sovereign artificial intelligence, automotive, and healthcare customers, creating multiple multi-billion dollar vertical markets."

Huang stated during the earnings call that the next-generation super chip Blackwell is "in full production" and there will be "a large amount of Blackwell chip revenue" this year. Blackwell chip products will be shipped in the second quarter of this year, ramped up in the third quarter, and deployed to data centers in the fourth quarter.

He also mentioned that the inference workload is "significantly" growing. Electronic computing (computers) are transitioning from retrieving information to producing skills, "over a longer period, we will redesign the way computers operate. Future computers will generate answers, not just retrieve (information)."

The financial report also stated that non-GAAP operating expenses in the first quarter increased by 43% year-on-year and 13% quarter-on-quarter, mainly reflecting the growth in employee headcount and compensation benefits. Cash and equivalents at the end of the quarter were $31.4 billion, higher than $15.3 billion a year ago and $26 billion in the previous quarter. $7.7 billion in stock repurchases and $980 million in cash dividends were made during the quarter.

Why It Matters

NVIDIA is the undisputed leader in the field of artificial intelligence chip production and one of the most obvious beneficiaries of the AI trend. In addition, its stock price increase accounts for one-fourth of the S&P 500 index's increase this year. It is no wonder that some analysts consider this to be the most important earnings report of the quarter or even the year, as it will not only provide the latest insights into the field of artificial intelligence but also influence AI concept stocks and even the overall stock market performance.

The NVIDIA financial report will also serve as a key test indicator for whether investment and demand in artificial intelligence in the technology industry can continue. According to Bernstein, mega-cap companies such as Google, Amazon, Microsoft, Meta, and Apple are expected to have a total capital expenditure of $200 billion this year, with a significant portion used to purchase AI chips and other specialized infrastructure, with NVIDIA occupying about 80% of the AI chip market Investment bank Stifel pointed out that investors' attention may still be focused on the mid-term sustainability of accelerated investment in AI infrastructure. Bernstein stated that it is currently unknown how long this investment cycle will last and how much excess capacity will be generated during this time to prevent AI development from progressing as quickly as expected.

How does Wall Street view this?

Wall Street first focuses on Nvidia's revenue guidance and AI outlook. On one hand, for a company of Nvidia's massive scale, its profit growth rate is almost unprecedented, and maintaining a high profit margin is also rare.

In the second half of this year, Nvidia's next-generation most powerful chip, Blackwell GB200, will be officially launched, which is expected to continue to increase profits. KeyBanc Capital Markets believes that the most powerful chip may bring in over $200 billion in revenue for data centers by 2025.

CFRA analysts believe that with the continued shift to AI servers, early-stage expansion of central processors, and the drive towards new software applications and a greater focus on energy efficiency in potential target markets, Nvidia still has significant room for growth.

However, some have pointed out that given the stock price reactions of AMD and Arm in this earnings season, Nvidia's performance meeting expectations may lead to a stock price decline, or it may need close to $26 billion in quarterly revenue and similar high-growth guidance to meet the market's high expectations.

The second focus is on whether profit margins have reached recent peaks and capital expenditures. Some are concerned that Nvidia's profit margin will narrow in the second half of the year as capital expenditures behind the launch of new products accelerate. Operating expenses in the last quarter increased by 25% year-on-year to $2.21 billion, and it is expected that the scale of expenses in the first quarter may be close to $3 billion.

The third focus is whether the company's management will evaluate the sales substitution effect of the Blackwell super chip for the existing H100 Hopper chip, as well as the competitive risks from self-developed AI chips by super large tech companies such as Microsoft, Google, and Amazon.

Gene Munster, co-founder of asset management firm Deepwater, and analysts from Bank of America are concerned that the official launch of Blackwell in the second half of the year will suppress Nvidia's recent chip sales. "A major product being preheated six months before its launch may have some consequences, with disappointing revenue in the next two quarters, and the quarter-on-quarter growth rate may fall below 10% for the first time."

Regarding concerns about Nvidia's customers developing self-developed chips, Piper Sandler analysts straightforwardly stated not to overthink it, as even if companies like Google develop their own custom chips, Nvidia will still maintain at least 75% of the AI accelerator market share. Raymond James also stated that with the upcoming launch of the Blackwell chip, any price pullback by Nvidia will be short-lived