Nvidia’s Third Quarter Earnings Reveal Strong Data Center Growth
In its third-quarter earnings report, Nvidia (NASDAQ: NVDA) showcased remarkable growth, yet investors overlooked a key highlight shared in an understated section of the report.
Data Center Growth Takes Center Stage
Most investors are aware that Nvidia’s data center segment is a powerful driver of revenue. While the company operates across various industries, including gaming and autonomous vehicles, AI has significantly boosted its data center business, which now represents the bulk of Nvidia’s revenue.
Overall revenue for the fiscal 2025 third quarter surged 94% from last year, totaling $35.1 billion. The data center segment showed even greater expansion, with a 112% increase year-over-year to $30.8 billion.
Nvidia categorizes its data center revenue into two segments: “networking” and “compute.” The compute segment includes server components like processors and memory chips that run applications, while networking covers switches and routers crucial for connectivity and security.
Since AI training and inference primarily depend on compute components, this category generates most of the data center revenue. Q3 revenue from data center networking rose by 20% to $3.1 billion, while compute revenue soared by 132% to $27.6 billion.
The compute revenue figure is likely the best indicator of Nvidia’s overall business health, despite the company highlighting multiple supply constraints that may persist for several quarters, particularly regarding the Blackwell platform.
Sequentially, data center compute revenue also grew by 22%, outpacing the company’s overall sequential growth of 17%. The table below illustrates performance in data center compute revenue over recent quarters.
| Data center compute revenue | Year-over-year growth | Sequential growth | Dollar Amount (in billions) |
|---|---|---|---|
| Q2 2024 | 171% | 141% | N/A |
| Q3 2024 | 324% | 38% | N/A |
| Q4 2024 | 488% | 27% | N/A |
| Q1 2025 | 478% | 29% | $19.4 |
| Q2 2025 | 162% | 17% | $22.6 |
| Q3 2025 | 132% | 22% | $27.6 |
Source: Nvidia filings. (Note: compute revenue was not reported in fiscal 2024)
The data center compute platform underpins Nvidia’s AI services, supporting high-compute workloads. It includes a suite of innovative products, such as APIs, software development kits (SDKs), and GPUs. This extensive product range strengthens Nvidia’s competitive edge, allowing the data center segment to expand rapidly.
Image source: Getty Images.
Accelerating Revenue Growth
Another significant detail is that, although Nvidia’s year-over-year revenue growth in data center compute segments is decelerating, sequential revenue growth has accelerated from 17% to 22%. This uptick aligns with an overall company growth increase from 15% to 17%.
If this 22% sequential growth continues, it could lead to a 122% year-over-year growth rate. With the introduction of the Blackwell platform and management’s feedback on demand exceeding supply, Nvidia might sustain similar growth for the upcoming year.
Future Projections for Nvidia
After the earnings report, Nvidia’s stock dipped slightly as investors reacted to cautious guidance. The company forecasts a 70% year-over-year revenue growth for the fourth quarter, expecting revenue around $37.5 billion, with a margin of error of plus or minus 2%.
Historically, Nvidia has often exceeded its projections, and the robust growth from the data center compute sector suggests it could do so once more in the fourth quarter.
Given these factors, it’s reasonable to expect Nvidia to surpass the anticipated figures three months from now, as the company remains on a strong upward trajectory without significant obstacles in sight.
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Jeremy Bowman 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 the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
