Nvidia exceeds Wall Street’s expectations, but not its dreams

The only thing higher than Nvidia’s earnings growth?

What its earnings growth used to be. And, apparently, Wall Street’s unspoken expectations.

In the wake of a strong quarterly report, the stock is trading modestly lower in the after-hours session.

On the cold hard numbers, the chip designer that’s essential to the AI boom surpassed what analysts were looking for. Revenues of $30.8 billion handily exceeded the estimated $29.14 billion while earnings per share of $0.81 were seven cents higher than the Street’s bean counters penciled in. The outlook was solid, too: expected Q4 sales of $37.5 billion were above the consensus figure.

Notably, management flagged that demand for its new Blackwell GPU will exceed supply for several quarters as the firm wrestles with supply constraints. Even though the company isn’t selling as much as it could, it’s still poised to generate better-than-expected revenues. That’s a pretty picture, all in all. 

But what seems clear is that investors can’t count on much in the way of multiple expansion from Nvidia at a time when earnings and revenue growth — while still super elevated — are decelerating.

If Nvidia meets the bar that management set for the current quarter, that’s still a telegraphed slowdown to revenue growth of about 70% year on year.

While you can’t rely on much multiple expansion now that earnings and revenue growth are no longer accelerating, by the same token, it’s tough to call for valuations to cheapen aggressively when its operating performance is this robust.

And on the knee-jerk market response, it probably didn’t help that Nvidia has been trouncing its peers in the semi space ahead of earnings, which has typically led to lackluster relative performance thereafter. Zooming out, this time could be different, however, because of a decoupling of AI-linked chip demand and other sources of buying appetite for semiconductors.