NVIDIA reports 78% sales growth driven by ramping production of next-generation Blackwell GPUs.
Nvidia Corp. delivered strong fourth-quarter results, reporting earnings before certain costs of 89 cents per share, beating the analyst estimate of 84 cents, with revenue reaching $39.33 billion, up 78% from a year ago and surpassing Wall Street's $38.05 billion forecast. Net profit improved to $22.09 billion during the quarter, up from $12.29 billion in the year-ago period. Looking ahead to the current quarter, Nvidia is forecasting sales of $43 billion, plus or minus 2%, suggesting growth of about 65% from a year earlier, which exceeds Wall Street analysts' guidance for $41.78 billion in the first quarter of fiscal 2026.
While investors initially responded positively with Nvidia's stock gaining just over 1% in extended trading and more than 3% during the regular trading session, the company's balance sheet revealed a notable weakness: gross margin declined to 73%, down 3% compared to a year earlier. According to Nvidia, this decline was related to higher costs and complexity of its newest data center products. The market's optimism proved short-lived, as shares fell more than 5% the following day.
The company's rapid growth continues to be driven by unprecedented demand for its graphics processing units powering AI workloads, with the next-generation GPU Blackwell—which began shipping late last year—accounting for more than $11 billion in sales in the last quarter. Nvidia Chief Executive Jensen Huang said the company is seeing "amazing" demand for the new chips, while Chief Financial Officer Colette Kress indicated she's expecting a "significant ramp" in Blackwell sales during the current quarter. Blackwell sales were led by large cloud service providers, representing approximately 50% of the company's data center revenue. The data center business segment accounted for 91% of total revenue during the quarter, up from 83% one year ago and just 60% in the fourth quarter of 2023, with data center revenue reaching $35.6 billion, increasing 93% on an annual basis and surpassing the Street's forecast of $33.65 billion.
Recent investor concerns about demand stemming from China's DeepSeek and its low-cost reasoning model prompted management reassurance from Kress, who noted that newer models designed to "think" more carefully will likely require significantly more computing power. "Long-thinking, reasoning AI can require 100 times more compute per task compared to one-shot inferences," Kress told analysts. Huang emphasized that the "vast majority of compute today is actually inference" and believes newer-generation AI models may even need "millions of times" the current amount of computing capacity. Regarding competitive threats from Amazon Web Services Inc., Google LLC, and Microsoft Corp. developing customized AI accelerators, Huang stated, "Just because the chip is designed doesn't mean it gets deployed." Third Bridge analyst Lucas Keh acknowledged that competitors are taking some toll on Nvidia's market position but assessed the impact as not material at this point, predicting Nvidia should continue delivering double-digit sequential growth in its data center segment.