Nvidia (NVDA) Earnings: Why This Q4 Beat Was Really Important

Nvidia earnings ()

Nvidia earnings ()

It appears the only thing now strong enough to stop Nvidia (NVDA) stock from climbing higher are investors’ expectations. Thanks to the company’s advancements in cutting-edge technologies such as deep learning and artificial intelligence (AI), NVDA shares have soared some 340% over the past year, crushing every important index.

As such, the California-based semiconductor giant had lot to prove Thursday. And with top- and bottom-line numbers that cruised by even the most bullish forecasts, Nvidia answered the call. But the shares appear muted, falling as much as 3% in the after-hour session. From my vantage point, this decline, which I consider inconsequential, is victory for Nvidia and its investors. I’ll get back to that in a moment.

Let’s go though the numbers.

In the three months that ended December, Nvidia reported net a income of $655 million, or 99 cents per share. On an adjusted basis, when taking out one-time gains and costs, earnings came to $1.30 per share, which beat consensus estimates by a whopping 30 cents. Fourth quarter revenue also beat, coming in 55% higher year over year to $2.17 billion. The Street was looking for revenue of $2.11 billion.

The strong bottom-line beat was driven by record quarterly GAAP gross margin at 60.0%, the company said, while non-GAAP gross margin at 60.2%. When looking back at fiscal 2016, the company broke several of its own records, including full-year revenue of $6.91 billion, which grew 38% from a year ago.

"We had a great finish to a record year, with continued strong growth across all our businesses," said CEO Jen-Hsun Huang in a statement. "Our GPU computing platform is enjoying rapid adoption in artificial intelligence, cloud computing, gaming, and autonomous vehicles. Huang also added that Nvidia’s deep learning GPUs (graphical processing units) has made a breakthrough approach to AI, which can now help in early cancer detection, weather prediction and is helping to tackle challenges such as self-driving cars.

All told, it is these breakthrough areas that continue to drive interest in NVDA stock. Admittedly, I wasn’t a believer until now. And while the tech battle has always been between Apple (AAPL) Alphabet (GOOGL), Amazon (AMZN) and Facebook (FB), those guys are not alone anymore.

In terms of the 3% decline on these solid numbers? Nvidia is being shown the respect it now deserves. Even if the stock were to decline 5% to 10% — after a 340% one-year rise — it would still imply the momentum story is still in place. And Nvidia’s Q1 outlook for revenue to be $1.9 billion, which surpass Wall Street estimates of $1.88 billion, suggests it sees no signs of slowing down.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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