Nvidia’s Strong Quarter Driven by AI Growth, Blackwell Success

Nvidia (NASDAQ: NVDA) continues to excel, consistently exceeding analysts’ earnings expectations and achieving record revenues. This performance is largely attributed to the company’s leadership in the booming artificial intelligence (AI) sector—a $200 billion market anticipated to reach $1 trillion by the end of the decade. Nvidia produces the fastest graphics processing units (GPUs) crucial for AI tasks, alongside a variety of related products and services.

In its latest quarter and fiscal year, Nvidia’s momentum showed no signs of slowing down. The tech leader reported a remarkable 78% increase in fourth-quarter revenue, reaching a record $39 billion, and a 114% rise in full-year revenue to $130 billion. Additionally, the company forecasted current quarter revenue of $43 billion, reflecting a 65% year-over-year increase.

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This is encouraging news, but the narrative behind these figures offers even more insight into Nvidia’s future potential. Here are three key takeaways from Nvidia’s latest report that investors should consider.

Image source: Getty Images.

1. Blackwell’s Successful Launch Exceeds Expectations

The recent quarter was significant for Nvidia as it introduced the Blackwell architecture, a transformative product featuring customizable platforms. With seven distinct chips and additional functionalities, Blackwell has already generated $11 billion in its fastest rollout to date. Nvidia has surpassed its own expectations concerning system availability and the ability to deliver various configurations to clients.

This achievement is particularly noteworthy given the complexities involved in launching a customizable product, demonstrating Nvidia’s capability to produce substantial revenue quickly.

Furthermore, the company anticipates a “significant ramp” of Blackwell in the current quarter—the first of fiscal year 2026. Demand for Blackwell is said to be “extraordinary,” as noted by CEO Jensen Huang. The platform is designed to enhance reasoning inference, enabling models to address complex problems over time, positioning Nvidia for significant growth in the future.

2. Temporary Gross Margin Contraction

Despite its success, Nvidia is experiencing pressure on profitability as it accelerates manufacturing for Blackwell’s rollout. The company’s gross margin, previously in the mid-70% range, has declined into the low 70s. For the fourth quarter, gross margin stood at 73%, with expectations of further narrowing to around 70% in the current quarter.

This contraction in gross margin, while notable, should not be cause for concern. Even at 70%, Nvidia’s profitability remains robust. The company expects this dip to be short-term, anticipating a return to mid-70% margins once the Blackwell ramp is fully operational.

3. Deep Insights into Customer Investment Plans

Recently, a Chinese start-up, DeepSeek, claimed it trained its model at a fraction of the costs incurred by major tech players. Such news raised concerns among investors about potential spending cuts by these giants, which could impact Nvidia’s revenue. However, Nvidia maintains confidence in its growth trajectory, citing detailed forecasts and plans from its primary customers.

“We have a fairly good line of sight into the capital investments data centers are making,” stated Huang. He emphasized that accelerated computing and reasoning AI architectures will be critical, aligning with Nvidia’s capabilities.

Additionally, Nvidia is contributing to the advancement of AI technologies, from agentic AI applications in real-world challenges to supporting governments with the development of sovereign AI platforms.

Implications for Investors

Nvidia’s earnings and share prices have climbed dramatically in recent years, and these developments reinforce the notion that the company’s growth is far from over. The AI market remains in a nascent stage, with countless opportunities ahead. Nvidia’s ongoing innovations position it well to navigate through these evolving phases.

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Adria Cimino 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.