After the market closed today, Nvidia (NASDAQ: NVDA) published results for the second quarter of its current fiscal year -- which ended July 28. The red-hot artificial intelligence (AI) company has once again delivered big sales and earnings beats.
Nvidia's revenue surged 122% year over year, and its non-GAAP (adjusted) earnings per share rocketed 152% higher to hit $0.68. Meanwhile, the average analyst estimate as polled by LSEG had called for the business to report sales of $28.7 billion and earnings of $0.65 per share.
The artificial intelligence (AI) leader beat the midpoint Wall Street sales target by 4.5% and the midpoint earnings target by 6.25%. The company also crushed its own guidance, which called for revenue of $28 billion and an adjusted gross margin of 75.5%.
Nvidia serves up more huge wins in data center AI
Nvidia's data center segment was once again the standout performance driver in Q2. Segment sales increased 154% year over year to hit $26.3 billion and accounted for 87.7% of overall revenue. Sales were also up 16% on a sequential quarterly basis. With tech giants including Microsoft, Amazon, Meta Platforms, and Alphabet investing heavily to remain at the forefront of artificial intelligence, demand for Nvidia's AI-focused graphics processing units (GPU) has been sky-high.
Nvidia's GPUs have become the foundational hardware powering the artificial intelligence (AI) revolution, and the company has a stark performance lead when it comes to delivering processors to power today's most advanced artificial intelligence applications. Thanks to the dominance of its CUDA software platform for utilizing GPUs for AI and other accelerated computing applications, the company has created an ecosystem with a clear-cut performance edge and high switching costs. If the company can continue pairing meaningful hardware advantages with industry-standard software tools, its competitive moat will be very tough to breach.
While competitors, including Advanced Micro Devices and Intel, are trying to gain share in the data center GPU market, there's little sign that either is dampening Nvidia's momentum in the space. Some estimates put the company's share of the AI GPU and accelerator market at 95% or higher.
Nvidia's other segments also contributed to the blowout quarter
While the data center segment was the key standout and performance driver, Nvidia's other segments also posted encouraging results. Sales for the gaming segment increased 16% year over year to $2.9 billion and made up roughly 10% of quarterly sales in the period. Meanwhile, sales for the professional visualization segment rose 20% year over year to hit $454 million, and revenue from the automotive and robotics segment jumped 37% to hit $346 million.
The sales contributions from these other segments may seem relatively small compared to what's happening in the data center, but they're still significant. Lofty expectations from Wall Street analysts and other investors mean that Nvidia needed to be firing on all cylinders with its Q2 report, and the company has delivered.
What comes next for the red-hot AI leader?
In addition to blockbuster Q2 results, Nvidia issued performance targets for fiscal Q3. The company is guiding for sales to come in at approximately $32.5 billion -- suggesting annual growth of around 80%. Management is also guiding for an adjusted gross margin of 75% and adjusted operating expenses of roughly $3 billion.
As with its Q2 results, Nvidia's forward guidance looks very encouraging. The AI frontrunner's sales guidance comfortably exceeds the average analyst estimate's call for revenue of $31.7 billion in the period, and its gross margin target suggests that the business is seeing little erosion of pricing power when it comes to data center GPUs and accelerators. For comparison, the business posted an adjusted gross margin of 78.9% in this year's first quarter and a margin of 75.7% in Q2.
Nvidia is now shipping samples of its next-generation Blackwell chips, and the company expects that the new hardware will be its most successful product ever. While there's still some uncertainty about the release timing for its first Blackwell processors, the new platform is poised to be a major driver of sales and margins. Nvidia has passed the test with its recent quarterly report, and the company has never looked stronger.
Should you invest $1,000 in Nvidia right now?
Before you buy stock in Nvidia, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Nvidia wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $786,169!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of August 26, 2024
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Meta Platforms, Microsoft, and Nvidia. The Motley Fool recommends Intel and recommends the following options: long January 2026 $395 calls on Microsoft, short January 2026 $405 calls on Microsoft, and short November 2024 $24 calls on Intel. The Motley Fool has a disclosure policy.
Nvidia Has Delivered Another Blowout Quarter and Looks Poised for More Big Wins was originally published by The Motley Fool