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NVIDIA shares are down around 7 percent in the aftermath of its latest quarterly earnings report as investors digest an otherwise stellar financial scorecard, albeit marred by the specter of the peak growth phase that is now patently visible, leading to the requisite after-party hangover and a shaving of the stock's nosebleed premium at the margins.
This is a key page for anyone interested in Nvidia! Highly recommended reading!
Update for Nvidia's 3Q guidance:
1. Revenue over $32.5B
2. Still very strong gross margin at 74.4%
3. Operating profit just under $19.9B!!!!
4. Operating margin very stron at 61.2%
5. Opex $4.3B
6.… pic.twitter.com/79sBLFMZEx— AJ (@alojoh) August 28, 2024
On the surface, NVIDIA delivered another squeaky-clean quarterly performance by beating the analysts' consensus estimates for the top-line and bottom-line metrics and pronouncing another whopper guidance for the ongoing quarter of $32.5 billion in revenue, which exceeded the consensus estimates by around $600 million.
NVIDIA's net profit margin moved down slightly to 55% in Q2 from a record 57% in Q1. This is the first decline in its profit margin since Q2 2022. $NVDAhttps://t.co/l5IYmkf6Ih pic.twitter.com/X81qgSzRVc
— Charlie Bilello (@charliebilello) August 28, 2024
However, under the hood, there are some giant caveats. First, NVIDIA's net profit margin has declined for the first time since the second quarter of 2022.
Also, consider the fact that NVIDIA is now guiding to a gross profit margin of 74.4 percent for the ongoing quarter, which is below not only the June-ending quarter's actual margin of 76.7 percent but also below that quarter's guidance of 74.8 percent.
$NVDA: Data center revenue in China grew sequentially and was a “significant contributor” to overall revenue.
Data center revenue in China was below levels seen prior to the imposition of export controls...the market there will remain competitive.
— Wall St Engine (@wallstengine) August 28, 2024
As another potential kink in NVIDIA's armor, do note that its data center-related, China-sourced revenue has fallen below the levels seen prior to the imposition of export controls by the US.
On the Blackwell front, NVIDIA confirmed the rumors of a minor design flaw but noted that the shortcomings were rectified by making some changes to the photomask - a specific template that is used to create bespoke patterns on semiconductor wafers.
With these changes, the company expects to start shipping Blackwell products in the December-ending quarter, with Hopper shipments expected to ramp-up in H2 2024.
Blackwell's minor delay, however, comes with a steep cost: NVIDIA noted during the earnings call that it will "see weaker margins in the fourth quarter."
Savage$NVDA pic.twitter.com/caAbHj0ETd
— The Maverick of Wall Street (@TheMaverickWS) August 28, 2024
So, here it is: the era of unbridled, uninterrupted, and immaculate growth for NVIDIA has now ended. Of course, the company still remains a potent cash-generating force. But the stock market is an efficient discounting machine and it is now incorporating a growth hiatus - even if temporary and only related to some metrics - within NVIDIA's stock price by shaving off some of its vertigo-inducing premium.
$NVDA earnings showed profit margin compression, that's why the market is freaking out despite a higher revenue guidance.
Usually when profit margins begin rolling over, revenue isn't far behind.
— Financelot (@FinanceLancelot) August 29, 2024
Do you think NVIDIA's revenues have peaked? Let us know your thoughts in the comments section.
About the author: Writing is my one incontrovertible passion. Over the past six years, he has authored over 2,200 distinct articles on financial and tech-related topics, spanning nearly 1 million words. And he has been a member of Wcctech mobile team since 2025. As an alumnus of the University of Toronto, Rotman Commerce Program, I bring nuance, in-depth knowledge, and a unique perspective to every topic that I cover. When I'm not writing, I'm traveling the world, exploring hidden confectionaries and restaurants as an aspiring food connoisseur.
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