* We are boosting our price target on Nvidia shares to $1,250 from $1,100 following the company’s beat and raise quarter.
The market was waiting for Nvidia’s (NVDA) earnings report this week, and the company did not disappoint, delivering a beat and raise quarter that is sending the shares and Wall Street price targets higher.
Sweetening the results and guidance, Nvidia announced a 10-for-1 stock split effective June 7 and an increase in its dividend to $0.01 per share on a post-split basis. We’ll admit that dividend appears to be more for show when you look at it on a post-split per share basis, but when viewed across Nvidia’s forthcoming share count it equates to returning $1 billion per year to shareholders vs. $100 million before the stock split.
While we can’t call Nvidia a dividend stock, that move speaks to the company’s confidence in its business prospects as we move past the early innings of AI adoption. That along with top and bottom line expectations moving higher is leading us to boost our NVDA price target to $1,250 from $1,100.
By the Numbers
Nvidia reported April quarter EPS of $6.12 per share well ahead of the $5.60 consensus on revenue that soared 262% higher year over year to $26.04 billion, easily clearing the $24.59 billion market forecast. While many will focus on those year-over-year comparisons, the company’s April revenue climbed almost 18% from its January quarter, which clearly shows demand is accelerating.
Now let’s have a look at Nvidia’s segment results for the quarter:
Data Center: Revenue was a record $22.6 billion, up 23% from the previous quarter and up 427% from a year ago. These increases reflect higher shipments of the Nvidia Hopper GPU computing platform used for training and inferencing with large language models, recommendation engines, and generative AI applications across enterprise and consumer internet companies.
At ~87% of revenue, this segment is the clear driver of Nvidia’s revenue and profits and one that should continue to benefit from ramping AI and data center spending from the likes of Big Tech and others. As generative AI makes its way into more consumer Internet applications, we expect to see that translate into AI compute demand. As it relates to Blackwell, management shared it is in full production, but demand is well ahead of supply, and as of now that looks to remain the case “well into next year.”
Gaming and AI PC: Revenue was $2.6 billion, down 8% from the previous quarter and up 18% from a year ago. The year-on-year increase primarily reflects higher demand. The sequential decrease reflects seasonally lower GPU sales for laptops, however, we see this segment benefitting from the coming AI-on-device upgrade cycle.
Professional Visualization: Revenue was $427 million, down 8% from the previous quarter and up 45% from a year ago. The year-on-year increase primarily reflects higher sell-in to partners following the normalization of channel inventory levels. The sequential decrease was primarily due to desktop workstation GPUs.
Automotive and Robotics: Revenue was $329 million, up 17% from the previous quarter and up 11% from a year ago. The year-on-year increase was driven primarily by self-driving platforms. The sequential increase was driven by AI Cockpit solutions and self-driving platforms. While this segment is kinda small potatoes for Nvidia today, when we look at the automotive industry roadmap, this segment could be a larger contributor to Nvidia in the coming years.
To that end, Nvidia expects its NVIDIA DRIVE Thor, the successor to Orin, powered by the new NVIDIA Blackwell architecture, will move into production next year with several leading EV makers, including Boyd Gaming (BYD) and XPeng (XPEV) .
Nvidia’s Outlook
For the current quarter, Nvidia guided its top line to $27.44-$28.56 billion, nicely ahead of the $26.62 billion market forecast and the $13.5 billion posted in the July 2023 quarter. Gross margins are targeted between 74.8%-75.5% compared to 70.0% in the year-ago quarter. This reflects the favorable mix shift that has Data Center accounting for a greater percentage of overall revenue compared to the last year.
For the full fiscal year, gross margins are expected to be in the mid-70% range compared to 73.74%, which means Nvidia will face tougher margin comparisons beginning with its October quarter. We are likely to see this become an area of greater focus in the coming quarters should Data Center margins start to top out. This means we will focus on further cost containment and pricing initiatives as well as margin prospects for its non-Data Center reporting lines.
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At the time of publication, TheStreet Pro Portfolio was long NVDA.