Nvidia’s Impressive Quarter Signals Strong AI Demand
Nvidia (NASDAQ: NVDA) showcased remarkable growth in its fiscal 2025 Q3 results, which ended on October 27, 2024, demonstrating that it remains a key player in the artificial intelligence (AI) landscape. The company generated a profit this quarter that exceeded its revenue from the same period last year, a rare achievement for a company of its size.
Though the stock price did not spike in response to the latest earnings, it has nearly tripled since the beginning of the year. Following this strong performance, let us examine Nvidia’s recent results to assess whether the stock’s surge can continue.
Revenue Growth Remains Strong
Nvidia’s fiscal 2025 Q3 revenue saw a 94% increase to $35.1 billion, although this growth has moderated from the unsustainable highs seen earlier this year. In fiscal Q1, revenue soared by 262%, followed by a 122% increase in fiscal Q2. Adjusted earnings per share (EPS) also more than doubled to $0.81, surpassing analyst expectations for adjusted EPS of $0.75 on projected revenue of $33.2 billion.
Leading this growth was Nvidia’s data center business, which experienced a 112% year-over-year increase, reaching $30.8 billion. This surge was driven by demand for the Hopper graphics processing unit (GPU) platform, particularly the H200 Hopper chip. During the quarter, Nvidia shipped 13,000 samples of its next-generation Blackwell GPU architecture. Notably, the company claimed to have the largest inference platform, with significant revenue growth in this area.
Cloud service providers accounted for about half of the data center revenue, but Nvidia emphasized that enterprise AI is emerging as a major trend. Thousands of companies are utilizing Nvidia’s accelerated inference microservices, known as Nvidia NIM, to operate large language models (LLMs) on its GPUs. The company is also witnessing increased demand for industrial and robotic AI solutions.
Other segments of Nvidia’s operations also reported solid growth, albeit on a smaller scale compared to the data center division. Gaming revenue increased 15% to $3.3 billion, professional visualization rose 17% to $486 million, and automotive and robotics revenue surged 72% to $449 million. The firm continues to produce exceptional cash flow, boasting an operating cash flow of $17.6 billion and free cash flow of $16.2 billion. By the end of the quarter, Nvidia had net cash and marketable securities totaling $38.5 billion and only $8.5 billion in debt.
Image source: Getty Images
Looking Ahead: Promising Projections
Nvidia projects fiscal Q4 revenue to be around $37.5 billion, indicating approximately 70% year-over-year growth. This increase will be primarily driven by the Hopper platform and the ramp-up of the new Blackwell GPU architecture. Nvidia noted that demand for Blackwell currently exceeds supply, but expects revenue from Blackwell alone to exceed previous expectations by several billion dollars.
Interestingly, the older foundation models will require about 100,000 Hopper GPUs, while the latest models will need the same number of Blackwell GPUs. This change signals where future growth is likely to come from, especially as Nvidia looks to capitalize on its large existing customer base while expanding its inference services.
Nvidia: A Stock Worth Watching?
Although Nvidia’s stock has nearly tripled this year, it remains relatively reasonably priced. Currently, it trades at a forward price-to-earnings (P/E) ratio of just over 34 times next year’s earnings estimates, and it has a price/earnings-to-growth (PEG) ratio of 0.85. A PEG ratio below 1 is generally seen as undervalued, and many growth stocks often trade at multiples above 1.
NVDA PE Ratio (Forward 1y) data by YCharts
Nvidia’s continued strong growth is noteworthy, especially given the constraints on supply. Demand for the company’s GPUs remains robust as more businesses look to build out their AI capacities.
Significantly, Nvidia is starting to experience strong demand from sectors beyond just cloud computing, including enterprise and industrial customers. As it begins to tap into inference demand, this diversification is vital for its ongoing success and presents a positive outlook moving forward.
Given the strong demand for AI infrastructure alongside its attractive valuation, Nvidia is certainly an appealing option for potential investors.
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Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
