Despite reporting record revenue and topping expectations for its fiscal second quarter, NVIDIA Corporation kicked off after-hours trading on August 28, 2024, down. The stock decline points out the great expectations over the company and the hurdles it faces to live up to those expectations, as its growth continues to spiral upward.
Nvidia’s Q2 fiscal 2024 results
Nvidia reported revenue of $30.0 billion for the second quarter of fiscal 2024 ended July 28, 2024, up 15 percent from $26.1 billion in the previous quarter and up 122 percent from $13.5 billion in the same period a year earlier. It was a record quarterly revenue for the company. GAAP earnings per diluted share were $0.67, up 12 percent from $0.60 in the previous quarter and up 168 percent from $0.25 in the same period a year earlier. Non-GAAP earnings per diluted share were $0.68, up 11% from last quarter and up 152% from a year ago.
The company’s Data Center revenue, inclusive of sales of chips for AI applications, reached an all-time record of $26.3 billion, up 16% from Q1, and up 154% from a year ago. Revenue from Gaming was $2.9 billion, up 9% from last quarter and up 16% from a year ago.
Nvidia’s future outlook
For Q3, Nvidia guided to revenue of $32.5 billion, give or take 2% versus the Street at $31.77 billion. This would represent an 80% increase year-over-year but equals a deceleration from the previous quarter. It also said gross margins for the full fiscal year are expected to come in the “mid-70% range,” while analysts expected forward full-year gross margins of .4 according to StreetAccount.
Why did Nvidia stock fall?
However, despite beating on both fronts and offering a strong outlook, Nvidia saw its stock lose around 7% in extended trading on August 28, 2024. Several reasons include the following:
- High expectations: Nvidia stock has surged over 150% in the year alone, so investors might have been looking for an even wider beat to justify the high valuation.
- Slight margin decline: Nvidia’s fiscal second-quarter gross margin fell slightly, which could have disappointed some investors.
- Blackwell chip launch delay: There is some skepticism around the timing of the release of the new generation Blackwell AI chip by Nvidia, which might impact future revenue growth.
- Tough year over year comparison: With its fast growth, year-over-year comparisons are bound to be increasingly difficult for Nvidia.
Moving effect to other tech stocks
The decline in Nvidia stock contributed to the decline of other AI-related companies and stocks lower in the broader tech sector. Broadcom Inc NASDAQ: AVGO dove almost 2% while AMD Inc NASDAQ: was down 2.75%, Microsoft NASDAQ: MSFT was down 0.78%, and Amazon NASDAQ:AMZN was down 1.34%.
Analyst comments
Despite this stock decline, some analysts still remained optimistic about the long-term prospects of Nvidia. Matt Britzman, senior equity analyst at Hargreaves Lansdown said: “Nvidia continues to defy gravity with its seventh straight quarter beating expectations on both the top and bottom line, showing masterful delivery of performance and guidance from Jensen Huang and the Nvidia team.”
Morningstar analyst Abhinav Davuluri reiterated his $105 a share fair value estimate for Nvidia. “We continue to remain confident in Nvidia, as the company continues to thrive off of insatiable demand for graphics processors, or GPU, and related products used in data centers to run artificial intelligence.”
