NVIDIA Offered Strong Q2 FY2024 Guidance, Driven By Artificial Intelligence Demand

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NVIDIA Q1 FY2024 Results

The chip designer released on Wednesday somewhat mixed results, for the three-month period ended April 30 2023 (Q1 of Fiscal Year 2024) that were mostly worse than a year ago, but improved compared to the previous quarter. [1]

NVIDIA saw its overall Revenue drop 13% y/y, to $7.192 billion, although the figure marked a sequential increase. Similarly, Gross Margins of 64.4% narrowed on a yearly basis, but widened on a quarterly comparison. Net Income of $2.043 billion, constituted an increase of 26% y/y and 44% q/q.

The Gaming business disappointed with 38% y/y drop in sales, caused by weak demand "due to the macroeconomic slowdown and lower shipments to normalize channel inventory levels". Still, the business performance was better that in the previous quarter, driven by the ramp up of the new GeForce RTX 40 Series GPU.

Although roughly unchanged from the previous quarter, Revenues of the Automotive division more than doubled from a year ago, in the firm's largest percentage increase. Sales of self-driving platforms and AI cockpit solutions were the culprits, as the electric vehicle markets grows swiftly.

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The highlight of the Q1 FY2024 results though, was the record Revenue of the Data Center business, which grew around 15% on both yearly and quarterly basis. Data Center has been of increasing importance, as demand for cloud services skyrocketed during the pandemic lockdowns and the current blow-up of generative AI creates fresh momentum.

Demand for generative AI and large language models was the main generator of the Data Center surge, but also of the strong Revenue guidance for the current Q2 FY2024, projected at $11.00 billion and up 11% q/q. During Wednesday's subsequent earnings call, CFO Colette Kress noted that this growth is driven by Data Center and reflects a "steep increase" in demand for Artificial Intelligence (AI) infrastructure.

Towards the end of the previous year, OpenAI took the world by storm with the release of ChatGPT, its AI-powered conversational chatbot. This sparked an intense race among tech giants such as Microsoft and Alphabet, to offer similar services. Nvidia provides GPUs that train and deploy such AI applications and has been well positioned to reap the benefits of this transformation, with its accelerated computing.

During the earnings call, CEO Jensen Huang alluded to this, noting that "companies are now racing to deploy accelerated computing for the generative AI era", adding that the firm is ramping up its supply to meet their "surging demand".

After a losing 2022, NVIDIA's stock is having a blockbuster year. NVDA.us gains more than 100% in 2023 as of Wednesday's close, approaching the November 2021 record highs (346.38). During today's pre-market, the stock surges around 25%, as markets cheered the strong forward guidance and the Data Center performance, due to AI demand.

Nikos Tzabouras

Senior Financial Editorial Writer

Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.

With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.

References

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Retrieved 01 Mar 2024 https://investor.nvidia.com/financial-info/financial-reports/

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