Matt Britzman, senior equity analyst, Hargreaves Lansdown:
“This is another monster set of results from Nvidia, with revenue 4.4% ahead of expectations and adjusted earnings per share beating by 5.9%. The $108 billion midpoint for next quarter was also strong and, allowing for Nvidia’s usual habit of outperforming its own forecasts, points to revenue comfortably above $110 billion. The one blemish was the 74% gross margin guide, below the 75% level markets had hoped would hold through the end of the year. That looks to be driving the modest after-hours sell-off and will likely dominate analyst questions on the call.
Step back from the quarterly noise, and Nvidia remains an extraordinary business that just delivered triple-digit revenue and profit growth while trading at less than 20 times forward earnings. Demand for its computing platforms continues to surge, and the scale of its earnings and cash generation gives it the firepower to protect its lead. There are legitimate questions around margins, competition, and the returns customers will ultimately earn on their AI spending. But the valuation already reflects a healthy dose of scepticism, and that’s the disconnect. A powerhouse of a business at a valuation that suggests a material slowdown is coming. We’re comfortable underwriting continued strength in earnings, and while it's not clear when it will come, we think a multiple re-rating is long overdue.”
The author holds shares in Nvidia.
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