Nvidia reports record Q3 results driven by surging demand for AI

Nvidia reported record revenue today for its third fiscal quarter of fiscal 2024 (ending October 31, 2023), beating Wall Street’s expectations.

The graphics processing unit (GPU) and AI chip company reported record Q3 revenue of $18.2 billion, up 206% year-over-year and 34% sequentially. Nvidia’s data center segment grew 279% annually and 41% sequentially to $14.51 billion, representing 79% of total revenue for Q3.   

GAAP earnings per diluted share for the quarter were $3.71, up more than 12x from a year ago and up 50% from the previous quarter. Non-GAAP earnings per diluted share were $4.02, up nearly 6x from a year ago and up 49% from the previous quarter.

“Our strong growth reflects the broad industry platform transition from general-purpose to accelerated computing and generative AI,” said CEO Jensen Huang, in a statement. “Large language model startups, consumer internet companies and global cloud service providers were the first movers, and the next waves are starting to build. Nations and regional CSPs are investing in AI clouds to serve local demand, enterprise software companies are adding AI copilots and assistants to their platforms, and enterprises are creating custom AI to automate the world’s largest industries.”

He added, “Nvidia GPUs, CPUs, networking, AI foundry services and Nvidia AI Enterprise software are all growth engines in full throttle. The era of generative AI is taking off.”

Huang recently returned to the Denny’s restaurant in San Jose, California, where Nvidia began as a startup. Now its value is at $1.23 trillion.

Nvidia data center segment includes server GPUs, networking and AI cloud software.

Analysts expected Nvidia to report revenues of $16.18 billion for the October quarter, with earnings per share of $3.37.

For the fourth fiscal quarter ending January 31, 2024, they expect revenues of $17.86 billion and earnings per share of $3.77 a share. Nvidia’s after-hours stock price is $495.55 a share, down less than 1%.

Nvidia said its own outlook for the fourth quarter of fiscal 2024 is that revenue is expected to be $20 billion, plus or minus 2%. GAAP and non-GAAP gross margins are expected to be 74.5% and 75.5%, respectively, plus or minus 50 basis points.

GAAP and non-GAAP operating expenses are expected to be approximately $3.17 billion and $2.20 billion, respectively. GAAP and non-GAAP other income and expense are expected to be an income of approximately $200 million, excluding gains and losses from non-affiliated investments.

The U.S. government announced recently that high-end computing devices like Nvidia’s Hopper chips will be restricted in sales to China. Sales for such chips will decline significantly in the fourth quarter but will be more than offset in other regions, said Colette Kress, CFO at Nvidia, in an analyst call. Kress said the company is working to offer regulation-compliant solutions with the U.S. government for China and the Middle East. That could take multiple quarters.

Historically, China has been 20% to 25% of data center revenue and that could decline substantially in Q4 and the company doesn’t have good visibility on that for the long-term.

“It is too early to know whether [licenses] will be granted” in a significant way, Kress said.

In data centers, Nvidia announced the Nvidia HGX H200 with the new Nvidia H200 Tensor Core GPU, the first GPU with HBM3e memory, with systems expected to be available in the second quarter of next year. Huang said generative AI is the largest total available market expansion for Nvidia in decades.

“It’s changed almost everything,” he said, noting innovations like text-to-video or text-to-3D in natural language queries. “One of the areas which is really impactful is the software industry, which is a trillion dollars or so,” now benefits from AI copilots over time.

Huang said the Grace Hopper superchip platform is now in production.

Nvidia said its gaming division saw Q3 revenue of $2.86 billion, up 15% from the previous quarter and up 81% from a year ago. In the quarter, it release DLSS 3.5 Ray Reconstruction, which creates high-quality ray-traced images for intensive ray-traced games and apps, including Alan Wake 2 and Cyberpunk 2077. It also released TensorRT-LLM for Windows, speeding on-device LLM inference by up to four times. It added 56 DLSS games and over 15 Reflex games, bringing total RTX games to over 475. And GeForce Now has more than 1,700 games on its cloud gaming platform.

Professional visualization was $416 million in the quarter, up 10% from the previous quarter and up 108% from a year ago. Nvidia noted Mercedes-Benz is using Nvidia Omniverse to create digital twins to help plan and operte its manufacturing plants.

And third-quarter revenue for automotive was $261 million, up 3% from the previous quarter and up 4% from a year ago.

Kress said that it’s working with the government of India to help boost its internal computing infrastructure.

“National investment in computer infrastructure is a” new priority for governments around the world, Kress said.

“The number of sovereign AI clouds is really quite significant,” Huang added. He said Nvidia wants to enable every company to build its own custom AI models.