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Nvidia (NASDAQ: NVDA) Share prices are falling on Thursday following the release of the company’s second-quarter earnings results. The artificial intelligence (AI) leader’s stock price was down 3.2% as of 10:15 a.m. ET, according to data from S&P global market information.
Nvidia released its second-quarter results after the market closed yesterday, delivering results that were significantly ahead of most Wall Street targets. The company also issued guidance for the third quarter that beat the average analyst estimate. But expectations were sky high in the run-up to the report, and comments from the investor conference call suggested that investors may have to wait longer for the semiconductor specialist’s next generation of Blackwell processors.
Nvidia has recorded non-GAAP (adjusted) earnings of $0.68 per share on revenues of $30 billion in the second quarter of the current fiscal year ended July 28. Meanwhile, the average analyst estimate should have seen the company post an adjusted profit of $0.64 on revenue of $28.7 billion. . The company’s revenue rose 122% year-over-year during this period and adjusted earnings per share rose 152% compared to the same period last year.
It was a fantastic quarter for the company, with AI-related demand driving another round of big growth from data center customers. Segment revenue increased 154% year over year, and high sales prices for graphics processing units (GPUs) and accelerators in this category helped the company achieve an adjusted gross margin of 75.7%. That was slightly lower than the 78.9% margin it posted in the first quarter, but it still exceeded its target margin of 75.5% and indicated that Nvidia’s pricing power on its most advanced hardware remains very strong.
Strong expectations for the third quarter do not overshadow concerns about Blackwell delays
For the third quarter, Nvidia expected revenue of $32.5 billion – a target that exceeded the average Wall Street estimate of revenue of $31.7 billion in the period. The company also targeted an adjusted gross margin of 75%. While this suggests that gross margin will decline on a quarter-over-quarter basis, the decline here appears very small and should actually reduce concerns about pricing power.
But despite strong second-quarter results and third-quarter expectations, investors are focusing on some uncertainty surrounding the launch of Nvidia’s Blackwell processors. The company said production of its next-generation chip platform will ramp up in the fourth quarter of this year, suggesting the new processors could miss their initially announced 2024 release window and push into 2025.
The possibility of Blackwell being delayed due to a design flaw was already widely reported before Nvidia’s earnings report, so the likelihood of the release being pushed back to next year isn’t shocking. But expectations were so high in the run-up to the report that investors appear to be focusing on the implications of a relatively short slowdown amid signs that the company is continuing to run at full speed.
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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool holds positions in and recommends Nvidia. The Motley Fool has one disclosure policy.
Why Nvidia Stock is Falling Today was originally published by The Motley Fool