Nvidia surpassed market expectations with its quarterly results but fell short of analysts' estimates for growth in the current quarter. As a result, its shares fell during extended trading hours, as concerns emerged of a slowdown.
ADVERTISEMENTNvidia, the leading AI chipmaker, reported its second-quarter earnings for the 2025 fiscal year, exceeding market expectations and announcing a $50bn (€45bn) share buyback plan. However, the tech giant fell short of lofty forecasts when providing guidance for the current quarter, leading to a 7% share slump during after-hours trading.
Despite this decline, Nvidia's shares have risen by 150% this year, following an impressive 239% gain in 2023. The company has been a key beneficiary of the AI boom, supplying its Graphics Processing Units (GPUs) to hyperscalers to support Large Language Model (LLM) training.
In May, Nvidia joined the trillion-dollar valuation club, driven by rapid growth since 2023. It briefly surpassed Apple and Microsoft in market capitalisation in June, becoming the world's most valuable company.
However, the pace of growth appears to have slowed in the latest quarter, with guidance falling short of some high-end analysts' estimates. This slowdown suggests the AI industry may be entering a phase of capacity bottlenecks, with heavy infrastructure spending also raising concerns among investors.
Slowing growth momentum
Nvidia reported earnings per share of $0.68 (€0.61) on revenue of $30.04bn (€27.01bn), surpassing the estimates of $0.63 and $28.6bn, respectively. While revenue maintained a strong year-on-year growth rate of 122%, this pace marked a slowdown from the previous three quarters, which had seen increases of over 200%, largely due to lower bases in yearly comparisons.
The core segment, data centre revenue, reached an all-time high of $26.27bn (€23.62bn), exceeding the estimated $25bn and representing a 154% increase from the previous year.
Additionally, gaming revenue rose by 16% year-on-year. However, Nvidia's gross margin fell to 75.1% in the second quarter, down from 78.4% in the previous quarter, attributed to higher operating expenses. The margin is expected to continue slipping to around 74.4% as the company anticipates further expense growth of more than $3bn in the current quarter.
Nvidia provided guidance for revenue of $32.5bn (€29.2bn), plus or minus 2% for the current quarter, only slightly above the average estimate of $31.9bn but well below the high end of the forecasted range of $38bn.
The overall report suggests that Nvidia's period of explosive growth, which began in the second quarter of fiscal year 2024, may be tapering off, reflecting a broader trend among major tech giants such as Microsoft, Alphabet, and Amazon, which have also reported growth slowdowns.
Concerns surrounding Blackwell
Nvidia's Blackwell AI chips, seen as the company's next major growth driver in data centre sales, have become the focal point of the business.
Unlike the currently high-demand Hopper series chips, Blackwell is expected to significantly reduce LLM inference operating costs and energy consumption by up to 25 times.
"Hopper demand remains strong, and the anticipation for Blackwell is incredible," said CEO Jensen Huang. "Nvidia achieved record revenues as global data centres are in full throttle to modernise the entire computing stack with accelerated computing and generative AI."
Shortly before its earnings report, Nvidia revealed that its most advanced AI chip, Blackwell, could be delayed by three months due to "design flaws." Nvidia confirmed that it had shipped samples of Blackwell chips during the second quarter.
During the conference call with analysts, CFO Colette Kress stated, "In the fourth quarter, we expect to ship several billion dollars in Blackwell revenue." It is important to note that Nvidia’s fiscal fourth quarter corresponds to the first quarter of the 2025 calendar year, indicating that mass shipments are indeed being delayed.
Shareholder returns
Nvidia will pay a cash dividend of $0.01 (€0.009) per share on 3 October. During the first half of fiscal year 2025, the company returned $15.4bn (€13.85bn) to shareholders through share repurchases and cash dividends. On 26 August, the board of directors approved an additional $50bn (€45bn) share buyback programme, with no expiration date.
