Nvidia Beats Expectations Again on AI Chip Demand, Announces Share Buyback

Artificial intelligence chipmaker Nvidia's quarterly results once again beat Wall Street expectations, driven by strong demand for its high-end AI chips.

The company said on Wednesday it reported a net income of $58.32bn (€53.7bn) or $2.39 per share in the February-April period, up from $18.78bn (€17.3bn) or 76 cents per share in the same period a year earlier. Excluding one-time items, Nvidia earned $1.87 per share.

Revenue rose 85% to $81.62 bn (€75.1bn) from $44.01 bn (€40.5bn).

Analysts, on average, were expecting earnings of $1.75 per share and revenue of $78.91 bn (€72.6bn), according to a poll by FactSet. Nvidia's results have exceeded analyst projections since its high-end chips emerged as key components of AI systems three years ago.

“The buildout of AI factories — the largest infrastructure expansion in human history — is accelerating at extraordinary speed,” CEO Jensen Huang said in a statement.

Nvidia’s dominance in GPUs (Graphics Processing Units) has powered its recent growth.

"While Nvidia focuses primarily on GPUs, it remains the biggest player in CPUs (Central Processing Units), dwarfing AMD and Intel with $20bn of sales in CPU,” said Ben Barringer, head of technology research at Quilter Cheviot.

CPUs are the general-purpose processors that run most computing tasks, while GPUs are specialised chips that handle intensive workloads such as artificial intelligence.

Alongside higher profit and revenue, however, Nvidia's operating expenses rose 49% to $7.75bn (€7.1bn).

The company is also looking to diversify its customer base, aiming to rely less on large data centre operators as governments and other industries become a bigger source of demand for AI chips, Bloomberg reported.

It comes as competition intensifies and major customers develop in-house alternatives.

For the current quarter, Nvidia forecast revenue of about $91bn (€83.7bn), while analysts are expecting $87.29bn (€80.3bn).

Despite the solid results and outlook, many investors remain cautious about a potential slowdown after a three-year boom that has seen Nvidia’s market value surge from $400 bn (€368bn) at the end of 2022 to $5.4 trn (€5tr) as of Wednesday.

Shares of the Santa Clara, California-based company fell slightly in after-hours trading to $222.12 after closing at $223.47 in the regular session.

“The problem for Nvidia is that when you are the behemoth that it is, it is very difficult to make significant gains, and thus the market will be more punishing," Barringer continued.

“The narrative remains very good for Nvidia, and its valuation isn’t stretched to concerning levels, but there are potentially better growth opportunities out there in the semiconductor world just now.”

Analysts also flagged changes to the company's reporting structure. Barringer welcomed a move to break out revenue from hyperscalers separately, saying it would let investors track performance against the capital spending of those companies — and give a clearer read on the firm's market share in that space.

This is significant because hyperscalers, such as major cloud computing firms, are among Nvidia’s biggest customers, and their spending is a key driver of demand for its chips.

The company also announced plans to return money to shareholders, authorising a $80bn (€73.6bn) share buyback programme and increasing its quarterly dividend to 25 cents per share from 1 cent.

The company "is upping its dividend and share buyback, going on the trajectory Apple once did by increasing shareholder returns," said Barringer, adding that "while the returns remain tiny, it is hoped this is the start of the journey for more returns."