Nvidia share price sails to new highs as results demolish expectations

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The Nvidia Corp (NASDAQ: NVDA) share price is again leaving investors in shock and awe after unveiling its second-quarter results for FY2024.

Shares in the specialised computer chip company climbed 3.17% last night, leading up to its much-awaited results. Now the figures are released, Nvidia shares leapt to an all-time high of US$517.88 in after-hours trade. At the time of writing, the company’s share price is roughly 7% higher at US$503.47.

Expectations were high heading into these numbers, with the Nvidia share price already up nearly 230% in 2023. Despite the high bar, the AI powerhouse still surprised many by how much growth the company experienced in Q2.

As shown above, Nvidia shares are now up more than 240% year-to-date.

Without further ado, let’s unpack the sensational quarter.

During the last quarterly result, Nvidia founder and CEO Jensen Huang touted that there is “a trillion dollars of installed global data center infrastructure [that] will transition from general-purpose to accelerated computing.”

It sounded too good to be true for some. Hence, this morning’s results were essential to prove this supposed AI demand. Fortunately for Nvidia shareholders, the evidence was aplenty.

Analysts estimated Nvidia’s second-quarter revenue to be US$11.04 billion. Moreover, Nvidia’s own guidance from Q1 quoted US$11 billion as the expected number. Instead, the company reported an astonishing US$13.51 billion in revenue — beating estimates by 22%.

The main contributor to this record revenue result was Nvidia’s ‘Data Center’ segment. The income statement visualisation below shows that data center revenues increased by a mindblowing 171% from the prior corresponding period.

The blistering pace of AI-enabling hardware adoption in data centers illustrates the arms race between the likes of Amazon.com Inc (NASDAQ: AMZN), Microsoft Corp (NASDAQ: MSFT), and Alphabet Inc (NASDAQ: GOOG).

Huang commented on this rapid transition, saying:

A new computing era has begun. Companies worldwide are transitioning from general-purpose to accelerated computing and generative AI.

Huang added:

During the quarter, major cloud service providers announced massive NVIDIA H100 AI infrastructures. Leading enterprise IT system and software providers announced partnerships to bring NVIDIA AI to every industry. The race is on to adopt generative AI.

On top of record revenue, the chip company reported a quarterly net income of US$6.2 billion, increasing 843% from the prior year.

No, that’s not a typo… profits were almost tenfold more than a year ago as revenue doubled while expenses grew by only 10%. As a result, Nvidia’s gross margin expanded from 43.5% to 70.1% in the space of a year.

Additionally, the AI superstar guided for third-quarter revenue of US$16 billion (plus or minus 2%). This would represent an 18.4% improvement on its record second-quarter result.

Based on the current Nvidia share price and latest earnings, the company trades on a trailing price-to-earnings (P/E) ratio of 112 times earnings.