NVIDIA: The Universe's Strongest Stock, Explosive Rewards Keep Coming

NVIDIA (NVDA.O) released its financial report for the first quarter of the 2025 fiscal year (ending April 2024) after the U.S. stock market on May 23rd Beijing time:

1. Overall Performance: Record High Revenue & Gross Margin. In this quarter, NVIDIA achieved a revenue of $26.04 billion, a year-on-year increase of 262.1%, exceeding market expectations ($24.65 billion). The gross margin (GAAP) for this quarter reached 78.4%, also surpassing market expectations (76.6%). The record high gross margin was mainly driven by the strong performance of the data center business. The net profit for this financial report was $14.9 billion, a year-on-year increase of 628%, also reaching a historical high.

2. Core Business Situation: Data Center Continues to Drive Growth. The data center business accounts for 85.6% of NVIDIA's revenue, making it the company's most core business.

1) Gaming business grew by 18.2% year-on-year this quarter, with a slowdown in recovery. Dolphin Jun believes that the slowdown in the gaming business this quarter is mainly due to the lack of sustained demand downstream. Combined with the global PC market, shipments this quarter fell back below 60 million units. Although it has rebounded from the bottom, it fell again on a month-on-month basis.

2) Data center business grew by 426.7% year-on-year this quarter, reaching a new high, mainly driven by strong demand for large models, recommendation engines, and generative AI.

3. Key Financial Indicators: Expense ratio remains low. NVIDIA's operating expense ratio continued to decline to a low of 13.4% this quarter. This is mainly due to the surge in revenue, which significantly reduced the proportion of expenses. The inventory ratio is currently at a historical low, indicating that the company's current product situation is still in short supply.

4. Guidance for the Next Quarter: NVIDIA expects revenue of $28 billion (±2%) for the second quarter of the 2025 fiscal year, a year-on-year increase of 107%, exceeding market expectations of $26.8 billion; the second-quarter gross margin is expected to be 74.8% (±0.5%), slightly lower than the market expectation of 75.2%.

Overall, NVIDIA once again delivers outstanding performance. The company achieved record high revenue and gross margin this quarter, driven by the strong performance of the data center. With leading product capabilities, NVIDIA's performance demonstrates a clear alpha. Even though the performance data of peers (AMD & Intel) this quarter was mediocre, it does not affect the continuous high growth of Nvidia's performance.

Combining the company's guidance for the next quarter, the company's revenue for the second quarter is expected to be $28 billion (±2%) with a gross margin of 74.8% (±0.5%). The company will start shipping Blackwell in the second quarter, driven by new products to continue driving revenue growth. As for the gross margin, although the company did not provide higher guidance, it is still maintained at around 75%, which is good.

Currently, the company has fully focused its business on the data center business, with revenue accounting for around 85%. The continuous growth of the company's performance is mainly due to the company's leading technology and continuous iteration of products. The company basically launches new products every year to maintain its leading competitiveness.

From the capital expenditures of major technology companies, Microsoft, Google, Amazon, and others are increasing their capital expenditures, indicating growth in demand for the entire data center and AI. Unlike the weak data from AMD & Intel, Nvidia continues to maintain high growth. This is mainly due to its continued leading product capabilities, as Nvidia has secured the majority of capital expenditures in the AI chip field from major factories.

Although Nvidia's stock price has risen several times from the bottom, the performance delivered by the company can fully support the current stock price. The company has announced a 1-for-10 stock split in June, reducing the investment threshold, which is expected to further drive the company's trading volume. With leading computing power and product iteration capabilities, Nvidia will firmly hold the leading position in the AI chip market.

For a detailed analysis of Nvidia's financial report by Dolphin, please see below:

I. Core Performance Indicators: Revenue & Gross Margin Hit New Highs

1.1 Revenue: In the first quarter of the 2025 fiscal year, Nvidia achieved revenue of $26.044 billion, a year-on-year increase of 262.1%, exceeding the company's previous guidance ($24 billion). The company's revenue continued to rise this quarter, mainly due to the strong performance of downstream data center business.

Looking ahead to the second quarter of the 2025 fiscal year, the company's revenue is expected to continue growing. Nvidia expects second-quarter revenue to be $28 billion (±2%), a year-on-year increase of 107% , surpassing market expectations of $26.8 billion. Dolphin believes that with the shipment of Blackwell driving it, the company's revenue growth in the next quarter will still mainly come from the pull of the data center business

1.2 Gross Margin (GAAP): In the first quarter of the fiscal year 2025, NVIDIA achieved a gross margin (GAAP) of 78.4%, exceeding the upper limit of the guidance expectation (75.8%-76.8%), setting a new record for gross margin this quarter.

With the strong growth of the data center business, the company's gross margin level has been raised to over 70%. Part of the reason is that AI products themselves have relatively high gross margins, while another part reflects the current situation of supply shortage in the market, leading to an overall increase in product prices.

NVIDIA's expected gross margin for the second quarter of the fiscal year 2025 is 74.8% (±0.5%), slightly lower than market expectations (75.2%). Driven by demand for AI and other factors, the company's gross margin center has already increased from 65% to over 70%. Maintaining a gross margin around 75% is already a very good performance for the company.

1.3 Operating Metrics

1) Inventory/Revenue: The ratio for this quarter is 23%, a decrease of 1 percentage point compared to the previous quarter. Although the company's inventory has risen to $5.9 billion this quarter, compared to the company's high revenue growth, the proportion of inventory remains at a historical low. The company is still facing a serious supply shortage situation, and the gross margin is expected to continue to remain high.

2) Accounts Receivable/Revenue: The ratio for this quarter is 47%, an increase of 2 percentage points compared to the previous quarter. The proportion of accounts receivable is also at a relatively low level, and the company's collection situation remains good.

Core Business Situation: Data Center Continues to Rise

Driven by demand for AI and other factors, in the first quarter of the fiscal year 2025, NVIDIA's data center business continued to expand its share in the company's revenue, reaching 86.6% this quarter. The share of the gaming business has been squeezed to 10%, with the data center business being the most important factor affecting the company's performance.

2.1 Data Center Business: In the first quarter of the fiscal year 2025, NVIDIA's data center business achieved revenue of $22.563 billion, a year-on-year increase of 427%. This quarter, NVIDIA's data center business reached a new high, mainly due to the increased shipments of NVIDIA Hopper GPU computing platform for large language models, recommendation engines, and generative AI applications training and inference, as well as the InfiniBand end-to-end solution

From the capital expenditures of the four giants (Meta, Google, Microsoft, and Amazon), the total capital expenditures of the four companies reached $46.62 billion this quarter, a year-on-year increase of 36%. Among them, the capital expenditures of Google and Microsoft nearly doubled year-on-year. As more than half of NVIDIA's data center business revenue comes from cloud service providers, the company will benefit from the growth in capital expenditures by the giants.

Combining the strong revenue guidance of $28 billion for the next quarter provided by the company, Dolphin believes that this mainly still comes from the growth in demand for data center business. The company's Blackwell new products will also start shipping next quarter, further driving the company's performance growth.

2.2 Gaming Business: In the first quarter of the 2025 fiscal year, NVIDIA's gaming business achieved revenue of $2.647 billion, an 18.2% year-on-year increase. The gaming business rebounded this quarter but slowed down, mainly due to downstream demand. After going through inventory replenishment in the industry chain, soft terminal demand affected the continuous shipment of gaming graphics cards. Looking at the performance of Intel and AMD, although PC and gaming businesses have rebounded, the demand side has not shown a significant improvement.

Global PC market shipments saw year-on-year positive growth in the first quarter, but a slight decline on a quarter-on-quarter basis. According to the latest data from IDC, global PC market shipments in the first quarter of 2024 were 59.7 million units, a 4.9% year-on-year increase. Although the PC market has bottomed out, shipments have fallen back to below 60 million units, and there is no clear sustained demand yet.

2.3 Automotive Business: In the first quarter of the 2025 fiscal year, NVIDIA's automotive business achieved revenue of $329 million, an 11.1% year-on-year increase. NVIDIA's automotive business mainly comes from revenue from autonomous driving and AI cockpit solutions.

Although the company's automotive business has also shown a significant recovery, it currently accounts for a very small proportion of revenue (less than 2%). Currently, NVIDIA's performance is still mainly focused on the performance of data center and gaming businesses

3. Key Financial Indicators: Expense Ratio Maintains at a Low Level

3.1 Operating Profit Margin

In the first quarter of the 2025 fiscal year, NVIDIA's operating profit margin rose to 64.9%, reaching a new high. The rebound in operating profit margin this quarter was mainly due to the dual impact of the increase in gross margin and the decrease in expense ratio.

Analyzing the composition of the operating profit margin, the specific changes are as follows:

"Operating Profit Margin = Gross Margin - R&D Expense Ratio - Sales, Administrative Expense Ratio"

Gross Margin: This quarter was 78.4%, an increase of 2.4 percentage points compared to the previous quarter. After the gross margin returned to the normal range, the "supply shortage" in the data center business continued to drive the company's gross margin upwards.

R&D Expense Ratio: This quarter was 10.4%, a decrease of 0.8 percentage points compared to the previous quarter. Although the absolute value of the company's R&D expenses increased, the expense ratio decreased again due to the surge in revenue.

Sales, Administrative Expense Ratio: This quarter was 3%, a decrease of 0.2 percentage points compared to the previous quarter. Although the absolute value increased, the company's sales expense ratio has reached a historical low.

For the second quarter of the company's 2025 fiscal year, the guidance for operating expenses continues to rise to $4 billion, but compared to the growth on the revenue side, the operating expense ratio is expected to remain at around 14.3%. The high-speed growth on the revenue side will pull down the expense ratio.

3.2 Net Profit (GAAP) Margin

In the first quarter of the 2025 fiscal year, NVIDIA's net profit was $14.881 billion, a significant year-on-year increase. The net profit margin for this quarter continued to rise to 57.1%. The company's revenue side grew by over 200% year-on-year this quarter, with the gross margin reaching a new historical high. The operating expense ratio remained at a historical low, driving a substantial increase in profit.

Dolphin Research on NVIDIA's historical articles:

In-depth:

June 6, 2022: "Stock Market Tremors, Were Apple, Tesla, and NVIDIA Wrongly Killed?"

February 28, 2022: "NVIDIA: High Growth is Real, But the Value for Money is Still Lacking" December 6, 2021 "NVIDIA: Valuation Cannot Rely Solely on Imagination" (https://longbridgeapp.com/news/51511467)

September 16, 2021 "NVIDIA (Part 1): How did the chip giant grow 20 times in five years?" (https://longbridgeapp.com/topics/1152603?invite-code=032064)

September 28, 2021 "NVIDIA (Part 2): No longer driven by dual wheels, will Davis make a comeback with a double kill?" (https://longbridgeapp.com/topics/1170397?invite-code=032064)

Earnings Season

February 22, 2024 Earnings Call "Accelerating Computing, Global Data Centers to Double Again (NVIDIA 4QFY24 Summary)" (https://longportapp.cn/topics/11691780)

February 22, 2024 Earnings Review "NVIDIA: AI Dominance, the True King of Chips" (https://longportapp.cn/topics/11684931)

November 22, 2023 Earnings Call "The First Wave of Artificial Intelligence (NVIDIA 3QFY24 Earnings Call)" (https://longportapp.cn/zh-CN/topics/10504870)

November 22, 2023 Earnings Review "NVIDIA: Computing Power Tsar in Full Force? The "Virtual Fire" is Flickering" (https://longportapp.cn/zh-CN/topics/10503170)

August 24, 2023 Earnings Call "The Computing Revolution in the Name of "AI" (NVIDIA FY2Q24 Earnings Call)" (https://longportapp.cn/zh-CN/topics/9318917)

August 24, 2023 Earnings Review "NVIDIA: Exploding Again, the "One-Man Show" of AI King" (https://longportapp.cn/zh-CN/topics/9308139)

May 25, 2023 Earnings Call "Emerging from the Trough, Embracing the AI Era (NVIDIA FY24Q1 Earnings Call)" (https://longportapp.cn/zh-CN/topics/6420652)

May 25, 2023 Earnings Review "NVIDIA's Explosion: The New Era of AI, the Future is Already Here" (https://longportapp.cn/zh-CN/topics/6415879)

February 23, 2023 Earnings Call "Performance Bottoming Out Will Rebound, AI is the New Focus (NVIDIA FY23Q4 Earnings Call)" (https://longportapp.cn/en/topics/4299004) 2023 年 2 月 23 日财报点评 "Surviving the cyclical disaster, meeting ChatGPT again, NVIDIA's faith returns"

2022 年 11 月 18 日电话会 "Will the continuously rising inventory be digested in the next quarter? (NVIDIA FY2023Q3 conference call)"

2022 年 11 月 18 日财报点评 "NVIDIA: Profits slashed by two-thirds, when will the turning point come?"

2022 年 8 月 25 日电话会 "How does the management explain the 'flash crash' in gross margin? (NVIDIA FY2023Q2 conference call)"

2022 年 8 月 25 日财报点评 "NVIDIA stuck in the mud, is it going to repeat 2018?"

2022 年 8 月 8 日业绩预告点评 "Thunder rolling, NVIDIA's performance in free fall"

2022 年 5 月 26 日电话会 "With the pandemic and lockdown, gaming decline drags down second-quarter performance (NVIDIA conference call)"

2022 年 5 月 26 日财报点评 "Without the 'pandemic fat', NVIDIA's performance looks bleak"

2022 年 2 月 17 日电话会 "NVIDIA: Advancing with multiple chips, data center becomes the company's focus (conference call summary)"

2022 年 2 月 17 日财报点评 "NVIDIA: Hidden concerns behind the better-than-expected performance | Reading financial reports"

2021 年 11 月 18 日电话会 "How is NVIDIA building the metaverse? Management: Focusing on Omniverse (NVIDIA conference call)"

2021 年 11 月 18 日财报点评 "Profiting from computing power, empowered by the metaverse, will NVIDIA continue to be bullish?" Live Broadcast

May 26, 2022 - "NVIDIA Corporation (NVDA.US) Q1 FY2023 Earnings Conference Call"

February 17, 2022 - "NVIDIA Corporation (NVDA.US) Q4 2021 Earnings Conference Call"

November 18, 2021 - "NVIDIA Corporation (NVDA.US) Q3 2022 Earnings Conference Call"

Risk disclosure and statement for this article: Dolphin Research Disclaimer and General Disclosure