Hyper-Growth Nvidia Blow Q3 Estimates NASDAQ NVDA

Nvidia Corporation reported strong quarterly earnings, with revenue up by more than 200%, but shares may not rise further in the near term.

NVIDIA Corporation (NASDAQ:NVDA) recently announced its quarterly earnings, surpassing estimates and providing strong guidance for the current quarter. The company has seen significant growth this year, with shares reflecting this enthusiasm and the valuation being rather high. Despite the exceptional business execution of Nvidia, it is uncertain whether shares will continue to rise in the near term.

The most recent quarterly earnings results of NVIDIA Corporation were revealed after the market's close. The company's revenue experienced a substantial increase, with a growth of more than 200%. This growth is almost unprecedented, especially considering the company's already large size. Additionally, revenues increased by 34% sequentially, indicating sustained growth over the past few months.

Following the earnings report, the market's reaction was mixed, with shares fluctuating in after-hours trading. While the immediate response showed a 0.5% increase, this could change as investors and analysts interpret the results and guidance provided by Nvidia.

Nvidia's remarkable revenue growth was primarily driven by data center revenue gains, which increased by 279% year-over-year. The company also experienced strong sequential growth in data center revenue, indicating a sustained upward trajectory.

The surge in data center growth can be attributed to AI investments, with large tech companies such as Meta Platforms, Alphabet, and Amazon driving the demand for computing power. Nvidia's advanced chips for AI tasks position the company as a key beneficiary of increased AI investments and computing power spending by major tech companies.

While revenue growth is significant, the company's profit growth is even more impressive. Nvidia achieved a nearly 6x growth in adjusted earnings per share over the past year, an exceptional feat for a large company. This substantial profit growth, coupled with an increase in gross margins, is attributed to the high demand for Nvidia's AI chips, allowing the company to command premium prices.

Nvidia's ability to grow profits rapidly is supported by operating leverage tailwinds and higher gross margins. The company's strong guidance for the current quarter suggests that business growth will continue, with a projected sequential revenue increase of around 10%.

However, it is important to consider that this rapid growth may not be sustainable in the long term. While Nvidia's strong market position and growth prospects are favorable, the current valuation of the company's shares, trading at around 45x net profits, may pose a risk. Waiting for a better entry point could be a prudent approach, despite the company's exceptional growth and guidance.