AI spending remains strong! NVIDIA's Q4 revenue slows but still hits a record high, Blackwell generates $11 billion, Q1 guidance exceeds expectations | Earnings Report Insights

The spending frenzy of major clients like Microsoft in the field of artificial intelligence (AI) continues to be strong. The revenue growth of AI chip giant NVIDIA slowed down in the last quarter, but the degree of slowdown was not as significant as Wall Street expected, and the revenue guidance for this quarter is also above expectations.

The much-anticipated sales momentum of NVIDIA's new generation Blackwell architecture AI chips is strong, with over $10 billion in revenue in the first quarter of official shipments, exceeding NVIDIA's estimated level. From the sales of Blackwell, the impact of China's AI newcomer DeepSeek, which offers high-performance models with lower version NVIDIA chips, has not yet significantly affected the pace at which giants like Microsoft are heavily investing in AI infrastructure.

On February 26, Eastern Time, after the U.S. stock market closed, NVIDIA announced its financial data for the fourth quarter of fiscal year 2025 (referred to as Q4) ending January 26, 2025, as well as performance guidance for the first quarter of fiscal year 2026 (referred to as Q1).

1) Key Financial Data:

Revenue: Q4 operating revenue was $39.3 billion, a year-on-year increase of 78%, with analysts expecting $38.25 billion. NVIDIA's own guidance was $36.75 billion to $38.25 billion, with the previous quarter showing a year-on-year growth of 94%.

EPS: Q4 adjusted earnings per share (EPS) on a non-GAAP basis was $0.89, a year-on-year increase of 71%, with analysts expecting $0.84, and the previous quarter showing a year-on-year growth of 103%.

Gross Margin: Q4 adjusted gross margin was 73.5%, a year-on-year decrease of 3.2 percentage points, in line with analyst expectations. NVIDIA's guidance was 72.5% to 74%, with the previous quarter at 75%, flat compared to the same period last year.

2) Segment Business Data:

Data Center: Q4 data center revenue was $35.6 billion, a year-on-year increase of 93%, with analysts expecting $34.09 billion, and the previous quarter showing a year-on-year growth of 112%.

Gaming and AI PC: Q4 revenue from gaming and AI PC business was $2.5 billion, a year-on-year decrease of 11%, with analysts expecting $3.02 billion, and the previous quarter showing a year-on-year growth of 15%.

Professional Visualization: Q4 professional visualization revenue was $511 million, a year-on-year increase of 10%, with analysts expecting $507.6 million, and the previous quarter showing a year-on-year growth of 17%.

Automotive and Robotics: Q4 revenue from automotive and robotics business was $570 million, a year-on-year increase of 27%, with analysts expecting $460.7 million, and the previous quarter showing a year-on-year growth of 72%.

3) Performance Guidance:

Revenue: Q1 revenue is expected to be $43 billion, with a fluctuation of 2%, i.e., $42.14 billion to $43.86 billion, with the median analyst expectation at $42.3 billion

Gross Margin: The non-GAAP gross margin for the first quarter is expected to be between 70.6% and 71.0%, with a fluctuation of 50 basis points, meaning a minimum of 70.1% and a maximum of 71.5%. Analysts expect 72%.

After the earnings report was released, NVIDIA's stock price, which rose nearly 3.7%, fluctuated multiple times between gains and losses, initially turning down in after-hours trading, dropping over 2%, then turning up to rise over 3%, before turning down again. Some commentators noted that the post-market price drop indicated that investors felt NVIDIA's performance surprise was not significant enough.

Fourth Quarter Revenue and Data Center Revenue Both Hit Lowest Growth Rate in Nearly Two Years, Still Stronger Than Expected

The earnings report shows that after explosive growth in 2023 due to the AI boom, NVIDIA's revenue growth has continued to slow in the past year. The year-on-year growth rate for the fourth quarter is the lowest level in nearly two years since the first quarter of fiscal year 2024, less than one-third of the peak growth rate of 265% in the fourth quarter of fiscal year 2024.

However, the revenue growth rate of slightly below 80% in the fourth quarter is still higher than the analysts' expected growth rate of 73%, and revenue still set a record for a single quarter. By the end of last year, NVIDIA's revenue growth rate year-on-year had been below 100% for two consecutive quarters, but the annual revenue still grew by 114% compared to a year ago.

The growth rate of NVIDIA's core business, the data center, also slowed in the fourth quarter, marking the first time since the first quarter of fiscal year 2024 that year-on-year growth was below 100%, but still stronger than the analysts' expected growth rate of 85%. The revenue from data centers in the fourth quarter and the annual revenue of $115.2 billion set new highs for the quarter and the year.

Gaming Business Revenue Unexpectedly Declined by 11%, NVIDIA Attributes It to Limited Chip Supply

Among NVIDIA's major businesses, only the gaming business saw a decline in revenue in the fourth quarter. Analysts expected gaming chip revenue to grow by 4.1% year-on-year, while NVIDIA reported an actual year-on-year decline of 11%.

After the earnings report was released, NVIDIA CFO Kress explained during the performance commentary that the reason for the 11% year-on-year decline and 22% quarter-on-quarter decline in gaming revenue was due to limited supply of GPUs from the Blackwell and Ada architectures.

First Quarter Revenue Guidance Further Slows, Gross Margin Guidance Slightly Below Analysts' Expectations

NVIDIA's guidance indicates that total revenue for the first quarter will further slow.

Based on the guidance range, NVIDIA expects first-quarter revenue to grow year-on-year by 62.1% to 68.7%, with the median revenue growth of 65.4%, while analysts' expected level is close to the lower end of the guidance range, expecting a growth of 62.6%. NVIDIA expects a maximum gross margin of 71.5% for the first quarter, slightly below the analysts' expectation of 72%NVIDIA stated that the decline in the company's gross margin in the fourth quarter is due to the costs associated with launching new products, and it is expected that the gross margin will rebound in the second half of this year.

Jensen Huang claims Blackwell demand is astonishing, with first-quarter sales reaching billions of dollars

When announcing the third-quarter results last November, NVIDIA executives stated that they planned to start shipping Blackwell chips in the fourth quarter and accelerate the shipping pace over the following year, expecting supply to fall short of demand in fiscal year 2026, which is this fiscal year; revenue from Blackwell in the fourth quarter is expected to exceed the previously estimated billions of dollars.

NVIDIA CFO Kress revealed during the performance commentary that in the fourth quarter, chips based on the Blackwell architecture brought in $11 billion in revenue for the company. This scale indeed exceeded NVIDIA's previous estimate of billions of dollars. Kress stated that the sales revenue from Blackwell chips mainly comes from large cloud service providers, which contribute about half of NVIDIA's data center revenue.

In the announcement of the financial report, NVIDIA CEO Jensen Huang stated:

"The demand for Blackwell [chips] is astonishing, as inference AI has added another scaling law—more computing for training can make models smarter, and more computing for long-term thinking can make answers smarter."

Jensen Huang also revealed that sales revenue from Blackwell chips in the first quarter has already reached billions of dollars. He said:

"We have successfully achieved mass production of the Blackwell AI supercomputer, with first-quarter sales reaching billions of dollars. AI is developing at lightning speed, as agent AI and physical AI lay the foundation for the next wave of AI revolution that will fundamentally change the largest industries."