Like clockwork, Nvidia (NASDAQ: NVDA) delivered another round of explosive growth in its third-quarter earnings report, but investors seemed to miss the most impressive part of the performance. The company didn’t mention this in the earnings call or press release, but referred it to the “CFO comments” section of its earnings report.
By now, most investors know that the data center segment is driving Nvidia’s growth. While Nvidia’s businesses include everything from gaming to autonomous vehicles to visualization tools like the Omniverse, its success in the data center sector, driven by the explosive growth of AI, has stolen the story and now makes up the vast majority of Nvidia’s revenue.
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While total revenue in the third quarter of fiscal 2025 rose 94% from a year ago to $35.1 billion, growth in the data center segment was even stronger: up 112% from a year ago to $30, 8 billion.
However, Nvidia divides data center revenue into two categories. It generates revenue from ‘networking’ and ‘computing’. Compute refers to the components that run applications on a server, such as processors and memory chips. Networks include components such as switches and routers that provide the connectivity and security needed to run applications.
AI training and inference are powered by the computing components, so it makes sense that computing power makes up the majority of that revenue. Data center networking revenue grew just 20% year over year to $3.1 billion in the third quarter, while data center computing revenue rose 132% to $27.6 billion.
The data center number seems to best reflect the underlying growth of Nvidia’s business, even with the mismatch between supply and demand, as the company said several times during the earnings call that the company has supply constraints and expects these constraints to continue for a long time. in the coming quarters, especially on the Blackwell platform.
Data center computing revenues also increased 22% sequentially, more than 17% overall for the entire company. and 17% sequential growth in the data center. The chart below shows data center compute revenue performance over the past few quarters.
|
Revenue from data center computers |
Year-on-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 docs. (Note: Computing revenues were not reported in FY 2024)
The data center computing platform is at the core of Nvidia’s AI offering. It accelerates the most compute-intensive workloads and includes a wide range of products such as APIs, software development kits (SDKs), the DGX Cloud, an AI training-as-a-service platform, and GPUs, DPUs, and AI enterprise software. All of this makes it very difficult to compete with Nvidia and helps explain why its data center business is growing so quickly.
The other telling data point in the table above is that while Nvidia’s year-over-year revenue growth in the data center computing segment continued to slow, sequential revenue growth, which is perhaps a better barometer of growth, accelerated from 17% to 22%. , which lifted a similar acceleration in total revenue from 15% to 17%.
Sequential growth of 22% would translate to a 122% annualized growth rate if the company grew at that pace over four quarters. Given the launch of the new Blackwell platform and management’s commentary that demand will exceed supply in the coming quarters, the company could maintain a similar growth rate in the coming year.
Nvidia stock fell slightly on the earnings report. Investors appeared to find the expectations disappointing as the company called for annualized sales growth to slow to 70% in the fourth quarter, with sales reaching $37.5 billion, plus or minus 2%.
However, Nvidia has a long history of exceeding its expectations, and it seems like a good bet to do so again in the fourth quarter given the torrid growth of its data center computing business and the stuck demand for its Blackwell platform.
Don’t be surprised if Nvidia exceeds this forecast again in three months. The company is on fire. It continues to deliver great results, and there is little that can slow this down.
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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.
Nvidia is growing faster than you think. This table proves it. was originally published by The Motley Fool
