Nvidia shares jump after earnings report. Here’s what has investors excited

Nvidia Corp (NASDAQ: NVDA) shares are moving higher in after-hours trading after the chip giant released another monster quarterly result.

The Nvidia share price finished Wednesday’s regular session down 1.59% at US$209.66, but quickly turned around after the result.

At the latest check, the shares were up 4.71% after hours to US$219.53.

The quarterly numbers were strong, but it was management’s longer-term outlook that really caught investors’ attention.

Let’s take a closer look at the numbers.

Another huge quarter

Nvidia reported second-quarter revenue of US$96.2 billion, up 18% from the previous quarter and 106% from a year earlier.

That comfortably beat Wall Street expectations of around US$92.3 billion.

Adjusted earnings came in at US$2.22 per share, also ahead of the US$2.09 analysts were expecting.

Once again, Data Center did most of the heavy lifting. Revenue from the division reached US$89 billion, up 117% year on year and representing more than 90% of total sales.

CEO Jensen Huang said AI had “reached its inflection point”, adding that demand continued to accelerate as more AI labs, cloud providers, and businesses increased spending.

The company’s next-generation Vera Rubin platform is also moving into full production, with systems already running at major cloud partners.

The company also returned around US$26 billion to shareholders through share buybacks and dividends during the quarter.

What stood out?

While the quarterly result was impressive, the biggest talking point came during the earnings call.

Management said it expects revenue to grow by around 70% in fiscal 2028, well ahead of the roughly 45% growth Wall Street had been expecting.

What makes that outlook even more interesting is that Nvidia is still struggling to keep up with demand. The company indicated it can currently meet only around 70% of demand, with supply still falling short.

WAM Global analyst Laura Hargrove said the one-year guidance “signals confidence in the durability of demand for AI chips”.

She also pointed out that demand is becoming broader, with enterprise customers, sovereign AI programs, and specialised cloud providers accounting for a growing share of revenue.

Investors clearly liked what they heard, with Nvidia shares climbing more than 4% in after-hours trading.

There was also plenty to like in the near-term outlook.

Nvidia expects third-quarter revenue of around US$108 billion, ahead of Wall Street estimates of roughly US$104 billion.

What should investors watch?

There are still a few areas worth keeping an eye on.

Gross margins are expected to slip slightly from 75% to around 74% in the third quarter as memory and component costs rise.

Management also expects margins to fall further later in the year before starting to recover.

So, if you own Nvidia shares, it’s worth seeing how this metric tracks over the next few quarters.

The post Nvidia shares jump after earnings report. Here’s what has investors excited appeared first on The Motley Fool Australia.

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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Nvidia. The Motley Fool Australia has recommended Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.