Nvidia on Wednesday reported strong quarterly results to end the fiscal year, but only beat the semiconductor giant’s guidance for the current quarter, showing that the AI boom continues to gain momentum. The company’s fiscal 2026 fourth-quarter revenue rose 73% from a year earlier to $68.13 billion, beating the Street’s expectations of $66.2 billion, according to estimates compiled by data provider LSEG. Adjusted earnings per share (EPS) rose 82% to $1.62, beating consensus estimates of $1.53, according to LSEG data. Nvidia stock fell slightly in extended trading, down about 50 cents to $195.35 per share. Immediately after the numbers were announced, the company’s stock was trading above $200 per share. It’s not at all surprising that the response has been subdued, even if one had hoped that the early gains would be maintained. Nvidia’s big post-earnings moves that were commonplace in the early days of the AI boom are long gone. NVDA 1Y Mountain Nvidia’s stock price performance over the past 12 months. Conclusion Let’s talk about a strong earnings report. While the results were good, the outlook for this quarter is really worth watching. Skeptics of the sustainability of the AI boom continue to wait for the party to stop. Nvidia has made it clear that the party is furious. Indeed, Nvidia’s quarterly revenue beat expectations by about $2 billion. But what’s even more impressive is that the team’s guidance for the quarter exceeded expectations by more than $5 billion, even though the Street had time to factor in the hyperscaler’s massive annual capex budget. In other words, analysts were right to raise their April quarter estimates in recent weeks. I just didn’t nurture it enough. Equally noteworthy, CFO Colette Kress said on the earnings call that Nvidia expects revenue to increase sequentially through 2026, exceeding the $500 billion revenue opportunity for Blackwell and Rubin generation chips that CEO Jensen Huang disclosed in the fall. Blackwell is the current chip family, and Rubin is expected to launch later this year. “We believe we have inventory and supply commitments in place, including shipments, to meet future demand extending into calendar 2027,” Kress said. As expected, NVIDIA was asked about rising memory costs and whether that poses a threat to the company’s ability to maintain impressive gross margins in the mid-70% range, an important level for investors (as explained in a preview a week ago). In response, Huang said the “single most important lever” Nvidia can pull to protect its margins is to deliver a “generational leap” in performance. Here’s our interpretation of that answer: If Nvidia’s products are still the best game in town, it’s easy to pass on higher input costs without sacrificing profits. Meanwhile, Kress also provided reassuring details about demand for Nvidia’s older data center AI chips. This could help resolve a major issue surrounding hardware depreciation cycles. “Even Hopper and many of the six-year-old Ampere-based products are sold out in the cloud because of the increased demand for Nvidia infrastructure,” Kress said. In the fall, some of Nvidia’s most important customers pushed back against extending depreciation periods in what critics called financial engineering designed to inflate profits. Mainstream media outlets, from my colleagues at CNBC to the Wall Street Journal, drew attention to their coverage by delving into discussions normally reserved for accountants’ rooms. We don’t mean to disparage those who are skeptical of longer depreciation schedules, but this is a reminder of why we say it’s important to listen to earnings calls and get information from the people who are actually working on it. That doesn’t mean you should blindly follow someone’s word. You need to be aware that there is almost always a contradiction. However, companies invest money because they believe it will lead to positive returns. The debate over the lifetime of these chips has received less attention recently, but it is still important. why? The fact that the six-year-old Ampere generation of chips is still in use is a sign of confidence for Nvidia’s customers, especially the cloud providers that drive much of its data center business. This means that cloud providers (both giants like Microsoft and Amazon, as well as neo-clouds like CoreWeave) can buy with confidence knowing that the chips they buy today are likely to generate revenue for years to come, even though NVIDIA releases new and improved products every year. There were questions about whether releasing new chips every year would cause some customers to “idle out” the cycle, creating an air pocket of demand. But this helps us understand why we haven’t seen it yet. Sure, older chips may not be suitable for cutting-edge AI initiatives, but that doesn’t mean everything done in the cloud requires it. We believe this will certainly continue to be the case, as today’s cutting-edge AI applications become tomorrow’s factory workloads. The bottom line is that as the demand for AI increases, the demand for Nvidia’s chips will only increase. Companies acknowledge that not having a plan for AI is similar to not having a plan for a website in the early 2000s or for mobile apps after the iPhone was released. Planning requires thinking about computing, and you can’t talk about computing without mentioning Nvidia. Custom chips, such as those made by club name Broadcom, will have a role in certain applications as volumes allow, but Nvidia’s status as the king of AI computing is unlikely to change anytime soon. Mr. Cress’ comments on demand are very bullish for the year ahead and, more importantly, supported by his announced spending intentions. As a result, we reiterate our $230 price target and 2 rating, equivalent to Hold. We’re still optimistic, just looking for better opportunities to upgrade. Commentary Data centers, the most important of Nvidia’s five business segments, saw revenue growth accelerate 75% year over year to $62.3 billion, beating expectations of $60.7 billion. Within the data center segment, computing revenue increased 58% year-over-year to $51.3 billion, and network revenue increased 263% to $10.98 billion. Hyperscale customers accounted for just over 50% of revenue here. But he liked what Kress said in his prepared remarks: “Other data center customers drove growth as we diversified our revenue.” We know that few companies on the planet can match the purchasing power of hyperscalers, but expanding the demand base is essential to cushioning the impact of one large customer cutting back on spending in the future. Revenue from the gaming division increased 47% year over year to $3.73 billion. However, it still fell short of the expected $4.03 billion. Growth was driven by demand for the company’s new Blackwell architecture. The team noted in the release that supply constraints are expected to be a headwind “starting in the first quarter of 2027” and that this could be due to memory shortages. Professional Visualization revenue increased 159%, beating expectations thanks to “extraordinary demand for Blackwell.” Meanwhile, the Automotive segment’s revenue increased 6% year-over-year due to continued adoption of self-driving platforms. OEM and Other segment sales increased 73% year over year to $161 million. This division of Nvidia covers partnerships with original equipment manufacturers, licensing, and other matters not considered in other segments. Guidance For the current first quarter of fiscal 2027, management’s outlook was significantly higher than expected. Revenue was $78 billion (plus or minus 2%), well above the LSEG consensus estimate of $72.6 billion. Adjusted gross margins are expected to be 75% plus or minus 50 basis points, better than the 74.5% forecast compiled by FactSet at the midpoint. Adjusted operating expenses for the first quarter are expected to be $7.5 billion. The team does not anticipate sales in China with this guide, so any progress in trade negotiations between now and the end of the quarter should lead to upside. (Jim Cramer’s charitable trusts are long NVDA and AVGO. See here for a complete list of stocks.) As a subscriber to Jim Cramer’s CNBC Investment Club, you will receive trade alerts before Jim makes a trade. After Jim sends a trade alert, he waits 45 minutes before buying or selling stocks in his charitable trust’s portfolio. If Jim talks about a stock on CNBC TV, he will issue a trade alert and then wait 72 hours before executing the trade. The above investment club information is subject to our Terms of Use and Privacy Policy, along with our disclaimer. No fiduciary duties or obligations exist or arise from your receipt of information provided in connection with the Investment Club. No specific results or benefits are guaranteed.
