Nvidia posted second-quarter revenue of $46.74 billion, up 56% year over year, and earnings per share of $1.08. Gross margins rose to 72.4% from 61% the prior quarter. Data center revenue narrowly missed estimates, triggering a greater market reaction that sent shares down more than 3% after hours and lower pre-market. Management forecasted $54 billion for the next quarter, short of some Street projections as high as $63 billion. Elevated valuation and investor sensitivity to any shortfall, combined with AI-bubble concerns, amplified the negative response despite substantial underlying growth.
The more Nvidia beats Wall Street's expectations, the harder it seems to satisfy them. The chipmaker reported second-quarter revenue of $46.74 billion, with sales up 56% year over year, and earnings per share of $1.08, easily topping Wall Street's forecasts. The company's gross margins also surged to 72.4%, up from 61% last quarter. For most other companies, the results would be a home run. But for Nvidia, whose quarterly financials have become a litmus test for the AI boom, Wall Street wasn't convinced. Shares fell more than 3% in after-hours trading as the chipmaker came up short of most of Wall Street's most optimistic forecasts. The stock was trading lower in pre-market, down about 1.3%.
The market reaction is somewhat paradoxical: Nvidia's core business is still booming, with the company reporting a jump in sales of more than 50%. However, the company narrowly missed data center revenue estimates. "The miss on data center revenue weighs on the name in spite of the broader beat. Though Nvidia is forecasting $54bn in revenue next quarter, traders may see this as a bearish catalyst given some on the Street had estimates as high as $63bn," senior vice president of product and strategy at Direxion, Ryan Lee, said.
Investors largely ignored a similar miss last quarter, but this time, likely prompted by recent nervousness that the AI sector may be in a dangerous financial bubble, the stock faltered after the earnings report. "Being priced to perfection leaves little room for error, and traders were left wanting more this quarter," Direxion's head of capital markets, Jake Behan, said. "When any company trades at such high multiples, anything short of exceptional starts to look like a problem. Nvidia's revenue forecast wasn't bad, but it lacked the lofty upside the market was looking for."
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