Pasteleosa: Nvidia earnings crush Wall Street estimates again, company tempers China outlook

Nvidia (NVDA) reported third quarter earnings after the bell on Tuesday that topped Wall Street expectations once again as the artificial intelligence boom continues to feed demand for the company's chips.

The chipmaker reported adjusted earnings per share of $4.02 on revenue of $18.12 billion, both of which topped analyst expectations. Analysts had expected adjusted earnings per share to tally $3.36 on revenue of $16.1 billion, according to data from Bloomberg.

Third quarter revenue increased 34% from the prior quarter and 206% from year ago, reflecting how increased demand for AI has boosted the company's sales throughout 2023.

The company's revenue guidance for the current quarter also topped estimates, coming in at $20 billion, plus or minus 2%; analysts had been projecting fourth quarter guidance of $17.8 billion.

The stock market reaction to the report was muted, however, as the company noted new restrictions on chip exports to China would weigh on results.

"Our sales to China and other affected destinations, derived from products that are now subject to licensing requirements, have consistently contributed approximately 20-25% of Data Center revenue over the past few quarters," Nvidia CFO Colette Kress said in a release.

"We expect that our sales to these destinations will decline significantly in the fourth quarter of fiscal 2024, though we believe the decline will be more than offset by strong growth in other regions."

The chipmaker reported data center revenue, which includes its AI chips, of $14.51 billion; the Street had expected revenue of $12.82 billion for this segment. Nvidia's gaming revenue came in at $2.86 billion for the quarter, also higher than the $2.7 billion analysts had projected. Annual growth in these segments clocked in at 279% and 81%, respectively, in the quarter.

Shares of the chipmaker were down about 1% after hours on Tuesday.

This report came after the stock closed at a record high of $504.09 per share on Monday. Nvidia stock fell about 0.9% on Tuesday ahead of the results along with the broader market.

Earlier this year, Nvidia's stock had been a notable mover following earnings releases.

In August, the stock hit an all-time high after Nvidia reported second quarter results that smashed Wall Street's expectations on both revenue and earnings per share, as well as guidance that exceeded lofty estimates. Back in May, one analyst referred to the company's forecast as "guidance for the ages."

The print could have significant implications for the overall market, too. Nvidia has been a driver of momentum in the stock market this year as a key member of the "Magnificent Seven" stocks — along with Apple (AAPL), Alphabet (GOOGL, GOOG), Microsoft (MSFT), Amazon (AMZN), Meta (META), and Tesla (TSLA).

Together, these stocks have gained more than 70% this year through mid-November against a 6% rise for the remaining 493 stocks in the S&P 500.

Evercore ISI senior managing director Julian Emanuel noted on Sunday that "it's still NVDA's world," and warned investors to be ready for "post-NVDA volatility" no matter which way the stock swings.