Nvidia Q3 - Did not disappoint

Nvidia is now the largest company in the world, so every time it releases results they are described as "the most important earnings report in history". We are certainly witnessing history in the making because no company has ever grown so fast, to such size and scale.

The quarterly results out on Wednesday night did not disappoint. Revenues grew 94% off an ever-larger base to $35 billion, $30.8 billion of that came from the data centre division which grew by 112%. Gross profit margins came in at an incredible 74.4% and earnings beat guidance, growing at 103%, to 74 cents per share.

After these results and Nvidia's amazing share price rally, the stock now trades at 48 times earnings. As earnings grow that ratio comes down, making it seem more reasonably priced. The expectations are for another 50% growth in earnings next year.

When you browse the internet, scroll your Instagram feed, or hop on a video call, chances are that service is being hosted on datacentres that run Nvidia GPUs. Cloud service providers (CSPs) were huge capex spenders again this quarter. According to some analysts, every $1 spent on Nvidia GPUs by the CSPs generates revenue of $1.25 per annum. Why would they not buy more chips?

You might be concerned that Nvidia's competition is going to catch up, because normally this kind of market dominance does not last forever. But it just seems that Nvidia is constantly two steps ahead. They are already working on the generation of chips after Blackwell, called The Rubin Platform, which will yield even more improvements. As one analyst puts it, other chip makers are sprinting to catch up, but Nvidia are sprinting too, making it very difficult to close the gap.

We feel very fortunate we have been on the Nvidia train for nearly a decade now. Our first client bought the share in March of 2015. We are still buying Nvidia with new client funds.