Written by Antonio Di Giacomo, Senior Market Analyst at XS.com
On November 22, 2024, Nvidia, the tech giant specializing in artificial intelligence (AI) and graphic processing, announced outstanding financial results for the third quarter of fiscal 2024. Net revenue reached $35.082 billion, marking a year-over-year increase of 94%. However, this figure indicates a slowdown in the growth rate compared to previous periods. Net income rose to $20.010 billion, doubling that of the prior year, with earnings per share (EPS) of $0.81, a 103% increase compared to the same quarter in 2023.
Nvidia’s stellar performance was primarily driven by its data center unit, which achieved a record revenue of $30.8 billion. This segment saw a 112% year-over-year growth and a 17% quarter-over-quarter increase. Nvidia’s leadership in generative AI technologies and cloud computing has been vital to this growth, as enterprises and service providers continue to invest heavily in infrastructure reliant on Nvidia’s advanced chips and systems.
Despite exceeding market expectations, which anticipated revenues of $33.09 billion and earnings per share (EPS) of $0.75, Nvidia shares fell by more than 2.7% in after-hours trading. This behavior reflects investors’ sensitivity to future growth projections, especially in the context of high stock valuations. Following the announcements, the stock price closed at around $143.00 per share, a correction analysts attribute to the forecast of more moderate growth in the next quarter. However, on November 21, 2024, before the New York market opened, the shares rebounded in pre-market trading, reaching $149.00 per share. Nevertheless, they experienced a sharp drop after the opening, hitting $141.00 per share.
For the fiscal fourth quarter, Nvidia projects revenues of $37.5 billion and EPS of $0.82. The company also expects gross margins of 73.5% and operating expenses near $3.4 billion. These forecasts, while solid, align with market estimates, which may explain the subdued investor reaction. The consistency in these figures highlights a well-executed strategy but also suggests that growth may stabilize in a more competitive environment.
Nvidia’s slowing growth pace coincides with an uncertain macroeconomic landscape and increasing competition in the AI chip market. While Nvidia continues to lead this segment, rivals like AMD and emerging startups are gaining ground with innovative solutions. Additionally, trade restrictions between the U.S. and China could limit growth in one of the company’s largest markets.
In conclusion, Nvidia’s performance in fiscal Q3 2024 reaffirms its dominant position in the tech industry, especially in AI and data center applications. However, the market’s reaction underscores the high expectations the company faces and questions about its ability to sustain exceptional growth rates over the long term. With a solid outlook for the next quarter and emerging challenges, Nvidia must balance its innovation leadership with strategies that maintain investor interest and ensure sustainable growth.