Nvidia reported mixed second quarter earnings on Wednesday, meeting some market expectations but missing others.
The company posted revenue of $46.74 billion, up 56% from a year ago. The number is higher than the $45 billion Nvidia shared in earnings guidance last quarter, and is just barely above the projected market consensus of $46.23 billion, according to Bloomberg.
Adjusted earnings per share came in at $1.05, above the average market estimate of $1.01.
Roughly $41.1 billion of that revenue was from the company’s data centers business, which was up 56% from a year ago, but missed the market consensus expectation of $41.29 billion.
Shares dipped 4% initially on that data centers miss, but have since pared back those gains to around 2%.
Nvidia also announced that it has approved an additional $60 billion for a share buyback, a move that usually lulls investors but has not stopped share price wobbles in post-market trading.
Ahead of the report
The S&P 500 surged ahead of earnings results to hit a record high of 6,481.40 Wednesday just ahead of quarterly earnings from the world’s largest company, chipmaker Nvidia.
“Nvidia is going to produce humongous revenue gains over the next nine months, on top of an already humongous revenue base,” said Jed Ellerbroek, portfolio manager at Argent Capital, told Reuters. “Investors should prepare themselves for a world where Nvidia is a double-digit percentage of the S&P 500.”
Why do Nvidia’s earnings move the market so much?
Nvidia dominates the AI market, which means the company’s earnings results are highly anticipated each quarter. But the stakes were particularly high going into Wednesday’s earnings.
Last month, Nvidia became the first company to hit $4 trillion market value, and the pressure was on for the tech giant to justify that valuation.
Also weighing on investors were talks of an AI bubble, stemming from a worrisome new AI report from MIT researchers. The report spooked investors with its finding that despite the bold investments, AI pilot programs in the corporate world have failed to translate to substantial revenue gains.
Investor fears were stoked further when in the same week, OpenAI CEO Sam Altman confirmed that he believes AI is a bubble.
Trump/China trade tensions weigh on Nvidia
Back in May, Nvidia executives had to revise their revenue expectations for this quarter down by about $8 billion due to President Trump’s decision to impose export control restrictions on the company’s sales to China.
The company has been on a policy rollercoaster ride in its efforts to sell AI chips in China, one of Nvidia’s major markets, as the trade war between the U.S. and China escalates.
After banning the sale of Nvidia’s H20 chips to China, President Trump reversed that decision in July, thanks to Huang’s efforts. In first quarter earnings, Nvidia incurred $4.5 billion in charges from excess H20 inventory. Nvidia executives had shared that they expected to have recorded an additional $2.5 billion in H20 chip sales, but it failed to materialize due to the restrictions.
But in exchange for the policy reversal, Trump demanded that Nvidia and competitor AMD both give the U.S. government a 15% cut of their chips revenue in China.
In response to that, Beijing has reportedly started raising concerns about Nvidia’s chips having kill switches and backdoors, and urged Chinese companies to not use them.
Nvidia’s robotics bet
The numbers come as Nvidia has started to grow its bet on robotics and autonomous vehicles in the past few months.
At the company’s annual shareholders meeting in June, Huang said that he expects robotics to provide the largest growth for the company after AI. The two combined, he told investors, represent “a multitrillion-dollar growth opportunity.”