Nvidia’s (NVDA) growth numbers aren’t impressing Wall Street as much as they used to.
Nvidia reported earnings on Wednesday that showed the company’s profit and revenue rose more than 100% year-over-year. But it also marked the company’s slowest year-over-year revenue growth, 122%, in a year, and the year-over-year growth rate was less than half of what Nvidia reported in the first two calendar quarters of 2024.
Early Thursday morning, shares fell as much as 3.5%.
This growth slowdown is the biggest concern for the stock right now, according to Gil Luria, CEO of DA Davidson, which is why he maintains a neutral rating on the AI giant.
“Next year we will at least see slower growth and possibly even a drop in turnover,” said Luria.
“If you look at the consensus estimates and the sell-side estimates, it’s going to continue to grow at a very, very high level. That’s very hard to justify, given that Nvidia’s revenues are these other companies’ margins.”
At some point, Luria argued, the big tech hyperscalers like Microsoft (MSFT), Amazon (AMZN), Alphabet (GOOGL, GOOG) and Meta (META) will slow their spending. And since they represent the lion’s share of Nvidia’s current AI chip sales, that would likely be a headwind to future revenue growth.
“The estimates for next year and the year after are completely out of control,” Luria said.
Nvidia’s earnings call was still quite optimistic. CEO Jensen Huang described demand for the AI leader’s new Blackwell chip as “incredible.” And many Wall Street analysts remained bullish on the stock, as fears of delays to the Blackwell chip were somewhat dispelled during the earnings call.
But for investors assessing a stock that has risen more than 1,000% since the current bull market began in October 2022, the slowing growth appears to be a sticking point. As Jefferies analyst Blayne Curtis wrote in a note to clients, Nvidia’s current-quarter revenue guidance of $32.5 billion — plus or minus 2% — seemed “good but not good enough.”
Nvidia’s results also failed to surprise Wall Street at the same pace as before.
The company delivered the smallest positive surprise to Wall Street revenue expectations since early 2023, beating earnings per share by about 5%, also marking the smallest surprise since the AI revolution took off in 2023.
“The magnitude of the earnings decline this time around was much smaller than we’ve seen to date,” Ryan Detrick, chief market strategist at Carson Group, wrote in response to the earnings release.
“Even forward guidance was raised, but again not in the same way as in previous quarters. This is a great company that is still growing revenues at 122%, but it seems the bar was set a little too high this earnings season.”
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
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