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    NVIDIA Corp (NVDA)

    Q2 2025 Summary

    Published Jan 10, 2025, 5:10 PM UTC
    Initial Price$87.60April 27, 2024
    Final Price$113.06July 27, 2024
    Price Change$25.46
    % Change+29.06%

    What went well

    • Strong demand for NVIDIA's current Hopper GPUs and upcoming Blackwell GPUs: Demand for Hopper remains very strong, and anticipation for Blackwell is incredible, with production ramp scheduled to begin in Q4 and several billion dollars in Blackwell revenue expected in that quarter. This is expected to drive significant revenue growth in the Data Center business.
    • Massive opportunity in the shift from general-purpose computing to accelerated computing: NVIDIA is at the forefront as data centers worldwide modernize with accelerated computing and generative AI. Customers are investing in NVIDIA's infrastructure due to its superior ROI, driving strong and sustained demand. The transition represents a $1 trillion market opportunity as the world's data centers shift to GPUs.
    • Accelerating momentum in generative AI driving demand for NVIDIA's AI platforms: The adoption of generative AI is rapidly expanding across industries, with enterprises beginning to invest to transform their businesses. NVIDIA's AI platforms are enabling this transformation, contributing to substantial growth in software and support revenue, which is expected to approach a $2 billion annual run rate exiting this year.

    What went wrong

    • Customer ROI concerns may impact future CapEx spending, as analysts highlighted "a pretty heated debate in the market on your customers and customers' customers return on investment and what that means for the sustainability of CapEx going forward" , which could affect NVIDIA's revenue growth.
    • Gross margins may decline due to higher costs and product transitions, particularly with the ramp-up of the Blackwell product line. Analysts questioned if gross margins could drop to "71 to 72 for Q4" due to "inventory provisions for low-yielding Blackwell material" and different cost structures.
    • Heavy reliance on China for revenue growth poses geopolitical risks, with significant sequential growth in China revenues while the United States was down. An analyst noted that "the United States was down sequentially while several Asian geographies were up a lot sequentially," raising concerns about exposure to geopolitical tensions.

    Q&A Summary

    1. Revenue Growth and Blackwell Shipments
      Q: Will Blackwell shipments boost revenue growth in Q4?
      A: Yes, NVIDIA expects to ship several billion dollars of Blackwell in Q4, adding to revenue alongside continued growth from Hopper GPUs. Demand for Hopper remains strong, and Blackwell's anticipation is incredible, contributing to revenue growth in the second half.

    2. Gross Margin Outlook
      Q: What is the expected gross margin trend into Q4?
      A: NVIDIA anticipates a gross margin of approximately 75% for Q3 and aims to maintain mid-70s for the full year. There may be slight differences in Q4 due to product transitions and cost structures, but overall margins are expected to remain strong.

    3. CapEx ROI and Sustainability
      Q: How is NVIDIA viewing customer ROI on CapEx investments?
      A: NVIDIA believes investing in its accelerated computing infrastructure offers immediate returns. Customers achieve fast ROI through cost savings and performance gains, making it the best computing infrastructure to invest in today.

    4. Demand for Hopper vs. Blackwell GPUs
      Q: How does demand for Hopper GPUs compare to Blackwell?
      A: Demand for Hopper remains strong and is expected to grow into the second half. Customers are investing in Hopper now to meet immediate needs while anticipating Blackwell, which will start shipping in Q4. Both products will coexist due to different customer requirements and timelines.

    5. Impact of Changes in Blackwell Design
      Q: Will changes in Blackwell's design affect production timing?
      A: No, the mask change for Blackwell is complete with no functional changes needed. NVIDIA expects to start production in Q4 without impacting the revenue profile.

    6. Geographical Sales Dynamics
      Q: How did different geographies perform, particularly China?
      A: Invoicing locations may shift due to where products are configured, which doesn't necessarily reflect end destinations. China performed well across gaming, Data Center, and automotive segments.

    7. Vertical Integration and Supply Chain
      Q: Is NVIDIA considering greater vertical integration due to complexities?
      A: NVIDIA prefers to utilize its ecosystem of ODMs and integrators for system integration and supply chain management. This allows the company to focus on technology development while partners handle integration close to customers.

    8. Rack-Scale Systems Mix with Blackwell
      Q: How will Blackwell affect the mix of rack-scale systems?
      A: NVIDIA designs rack systems but sells disaggregated components, as customers have varying needs. Integration is handled by partners close to data centers, providing flexibility and scalability in deployment.

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