Nvidia delivers stronger-than-expected results with datacenter revenue surging 75 percent year-over-year.
Nvidia Corp. sailed past analysts' earnings expectations once again in its fourth quarter, with data center revenue jumping more than 75% from a year earlier. Net profit jumped 94% to nearly $43 billion, or $1.76 per share, easily beating Wall Street's target of $1.53 per share. Overall revenue soared 73%, to $68.13 billion, surpassing the $66.21 billion consensus. While the stock headed higher in after-hours trading, investors were less impressed the following day as the stock declined more than 4% in midday trading Thursday.
The company's data center business, which manufactures chips for artificial intelligence workloads, generated $62.3 billion in the quarter, ahead of the Street's $60.69 billion target and now accounts for just over 91% of Nvidia's total sales. To cap it all off, Nvidia offered strong guidance for the coming quarter, saying it's looking for revenue of around $78 billion in the first quarter of fiscal 2027, plus or minus 2%, with Wall Street having expected total sales of just $72.6 billion. The company discounted all possible revenue from China in its forecast. Nvidia has outperformed all of its megacap peers so far this year, with shares gaining 5% year-to-date, while the broader tech-heavy Nasdaq index is down 0.4%.
Most analysts had anticipated Nvidia would deliver strong results, as capital expenditure forecasts from Alphabet Inc., Amazon.com Inc., Microsoft Corp. and Meta Platforms Inc. made clear that demand for Nvidia's chips is higher than ever—those four companies are expecting to spend almost $700 billion on building out their AI data centers this year. Nvidia's finance chief Colette Kress said that hyperscalers are still the company's "largest customer category," accounting for just over half of the revenue from its data center business. However, EMarketer analyst Jacob Bourne told SiliconANGLE that "the competitive picture is slowly shifting as companies like Meta diversify toward AMD and the big cloud players invest more in custom silicon," which puts the focus on maintaining dominance as the AI buildout matures. Within the data center segment, Nvidia sold more than $10.98 billion worth of networking gear, used to connect GPUs into massive clusters for large language models, with networking sales shooting up 263% from a year earlier through adoption of its NVLink technology and Spectrum-X Ethernet switches.
Fusion Collective analyst Yvette Schmitter noted that Nvidia only returned $4 billion to shareholders through dividends in the quarter despite generating more than $35 billion in cash flow—that's only 12% of its profit, compared to the 54% returned to shareholders a year ago. She questioned why the company was cutting buybacks by half at a time when Nvidia claims its Ampere chips being sold out is a good signal for demand. Despite hyperscale growth, Schmitter said "it doesn't mean Nvidia is bulletproof," noting that with gross margins flat at 75% despite everything that's been happening, "we could be witnessing its plateau."
The gaming segment posted record quarterly growth with revenue up 47% to $3.7 billion, though analysts have warned the business could suffer later this year due to a shortage of memory chips, as Nvidia prioritizes deliveries to the AI industry first. Kress told analysts that memory supply constraints will be a headwind for the gaming business beyond the first quarter of fiscal 2027. Looking ahead, Nvidia is preparing for the launch of its next-generation Vera Rubin rack-scale GPU systems, the successor to Grace Blackwell, which Kress said has now shipped its first samples to customers and is slated to begin production shipments in the second half of the year.