Nvidia forecast fourth-quarter earnings slightly above estimates on Wednesday, but still fell short of the lofty expectations of some investors that have made it the world’s most valuable firm.
Shares of the Santa Clara, Calif.-based company fell roughly 1% in extended trading. They were down 0.8% during the regular trading session.
Nvidia is in the midst of launching its powerful Blackwell family of artificial intelligence chips, which will weigh on the company’s gross margins initially but will improve over time.
The new line of processors has been embraced by Nvidia’s customers, and the company will exceed its initial forecast by several billion dollars in processor sales in the fourth quarter, Chief Financial Officer Colette Kress told analysts on a conference call on Wednesday.
“We will deliver this quarter more Blackwells than we had previously estimated,” said CEO Jensen Huang.
Initially the new chip line will have gross margins in the low 70% range, but will increase to the mid-70% range as production ramps up, Kress said.
The company forecast revenue of $37.5 billion, plus or minus 2%, for the fourth quarter, compared with the average analyst estimate of $37.09 billion, according to data compiled by LSEG.
Still an impressive growth rate thanks to strong demand for the company’s chips that make up the brains of complex AI-generating systems, it marks a clear slowdown from previous quarters when Nvidia mostly posted sales that at least doubled.
“The era of AI is in full steam, driving a global shift in NVIDIA computing,” said Nvidia CEO Jensen Huang. “Demand for Hopper and expectations for Blackwell — in full production — are incredible as foundational modelers scale pre-training, post-training and inference,” he said, referring to the two high-performance AI chips .
Expectations were high ahead of the results, with Nvidia shares up more than 20% over the past two months. The stock has nearly quadrupled so far this year and is up more than ninefold over the past two years.
“Investors are used to big hits from this company, but doing so is becoming increasingly difficult,” said Ryan Detrick, chief market strategist at Carson Group. “That was still a very solid report, but the truth is that when the bar is that high, it makes things a lot more difficult.”
While demand is growing for the company’s chips that make up the brains of complex AI-generating systems, supply chain bottlenecks have made it harder for Nvidia to report the big beats in revenue that have helped make it a darling of Wall Street.
One of the obstacles to its chip supply has been limited capacity for advanced manufacturing techniques at the company’s manufacturing partner TSMC.
The company reported third-quarter adjusted earnings of 81 cents per share, compared with estimates of 75 cents per share.
Sales in the data center segment, which accounts for the bulk of Nvidia’s revenue, rose 112% to $30.77 billion in the quarter ended in October. 27. The segment had recorded an increase of 154% in the previous quarter.
Nvidia’s sales have been boosted by cloud companies’ continued spending on its chips as they expand data centers capable of handling the complex processing needs of generative AI.
The company said it had fixed a design flaw with its Blackwell chips by changing the blueprints used by TSMC to manufacture it.
“Rings of potential supply chain issues are clearly causing concern,” said analyst Bob O’Donnell of TECHnalysis Research.
The company said adjusted gross margin shrank to 75%.
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