Instant Reaction: Nvidia Forecast Shatters Estimates

Bloomberg Audio Studios, podcasts, radio news. Let's get through it, guys. 0:00:07.800 --> 0:00:09.119 We've got a bunch of numbers, and we do have 0:00:09.119 --> 0:00:11.520 the stock shares of Nvidia up about four percent in 0:00:11.520 --> 0:00:13.960 the after hours, the big things announcing a ten for 0:00:14.040 --> 0:00:17.680 one forward stock split. And to the outlook we talked 0:00:17.680 --> 0:00:19.479 with our Ian King. This is going to be important. 0:00:19.800 --> 0:00:22.880 See second quarter revenue twenty eight billion plus or minus 0:00:22.920 --> 0:00:25.680 two percent. The estimate is twenty six point eight billion. 0:00:25.920 --> 0:00:29.240 Remember though the whisper number that Ian mentioned was about 0:00:29.280 --> 0:00:30.480 thirty billion or above. 0:00:30.320 --> 0:00:33.480 Billions on the range. We're saying up to thirty billion dollars, 0:00:33.560 --> 0:00:35.840 but it's interesting, higher than the consensus. 0:00:35.920 --> 0:00:38.120 Absolutely, but you know, it can be funny with that 0:00:38.800 --> 0:00:41.360 first quarter data revenue. This is important. This is the 0:00:41.360 --> 0:00:43.840 bulk of their business, right, twenty two point six billion. 0:00:43.880 --> 0:00:48.000 That is above street estimates of twenty one point thirteen billion. 0:00:48.479 --> 0:00:51.800 Gaming revenue much smaller part of the business. First quarter 0:00:51.800 --> 0:00:54.279 gaming revenue that was pretty much in line. Two point 0:00:54.360 --> 0:00:57.760 six billion. The estimate was for two point sixty two billion. 0:00:57.800 --> 0:01:00.960 And again the company boosting the quarter cash dividend to 0:01:01.160 --> 0:01:04.319 ten cents a share from four cents a share, so 0:01:04.840 --> 0:01:07.280 really paying back all of that cash that they've been 0:01:07.319 --> 0:01:10.039 generating a lot of it right giving it back to investors. 0:01:10.160 --> 0:01:12.240 Shares up right now about four point four percent. They 0:01:12.240 --> 0:01:14.360 climbed as much as five point one percent after that 0:01:14.360 --> 0:01:17.240 second quarter revenue. I looked topped estimates. You heard the 0:01:17.319 --> 0:01:19.679 numbers too there about its data center business. It did 0:01:19.720 --> 0:01:22.000 well in the fiscal first quarter. Revenues came in of 0:01:22.000 --> 0:01:24.360 twenty came in at twenty two point six billion. They 0:01:24.400 --> 0:01:26.920 were above the data center consensus of twenty one point 0:01:26.959 --> 0:01:29.319 one to three and then of course that ten for 0:01:29.400 --> 0:01:31.440 one forward stock split. Huge news. 0:01:31.520 --> 0:01:34.319 Well, and you use something you focused on earlier. Adjusted 0:01:34.360 --> 0:01:36.800 gross margin for the first quarter seventy eight point nine 0:01:36.840 --> 0:01:39.720 percent versus sixty six point eight percent year over year. 0:01:39.959 --> 0:01:42.400 The estimate on the street was seventy seven percent, So 0:01:42.480 --> 0:01:46.479 that's coming in higher than forecast R and D expenses 0:01:46.480 --> 0:01:49.680 two point seventy two billion, That is up forty five 0:01:49.720 --> 0:01:52.760 percent year over year. The estimate was for two point 0:01:52.800 --> 0:01:55.800 seven three billion, so a little bit lower. For the 0:01:55.880 --> 0:01:58.280 full year, gross margins are expected to be the mid 0:01:58.440 --> 0:02:02.680 seventy percent rate. Full your operating expenses are expected to 0:02:02.680 --> 0:02:05.160 grow in the low forty percent range, so we're getting 0:02:05.880 --> 0:02:08.720 some view and some thoughts in terms of the outlook. 0:02:08.760 --> 0:02:11.240 Right now, we've got cheers of Nvidia. They are up 0:02:11.360 --> 0:02:13.519 four point four percent in the after hour, and the 0:02:13.600 --> 0:02:17.040 company says it's poised for their next wave of growth. 0:02:17.280 --> 0:02:19.720 Ian King writing on the live blog right now that 0:02:19.760 --> 0:02:22.360 the twenty eight billion dollar revenue forecasts solidly above the 0:02:22.360 --> 0:02:25.919 CONCESSUS estimate, but as you mentioned, Carol, not as wildly 0:02:25.960 --> 0:02:28.520 optimistic as some projections, which had ranged to more than 0:02:28.680 --> 0:02:32.959 thirty billion dollars. Stock splits Ian Ads, in in Vidia's case, 0:02:32.960 --> 0:02:35.120 a ten for one exchange are usually done by companies 0:02:35.120 --> 0:02:38.200 to keep their shares affordable by as many investors as possible. 0:02:38.520 --> 0:02:40.560 This one, in notes is going to come into effect 0:02:41.240 --> 0:02:43.440 in a little less than a month that on June seventh. 0:02:43.480 --> 0:02:45.240 You could argue that stock splits don't matter as much 0:02:45.240 --> 0:02:47.480 anymore because you can just buy fractional shares easily. 0:02:47.560 --> 0:02:49.000 That's a good point, all right, So let's get to it. 0:02:49.080 --> 0:02:52.519 Let's get some analysis on this report. Dan Morgan is 0:02:52.560 --> 0:02:55.519 with US senior portfolio manager at Sonovs Trust Company, joining 0:02:55.600 --> 0:02:59.840 us from Atlanta. Also Kujohn Sabani Bloomberg Intelligence Senior Semiconductor 0:03:00.120 --> 0:03:03.280 lets Dan, let's start with you your initial thoughts on 0:03:03.560 --> 0:03:04.440 the release. 0:03:04.440 --> 0:03:07.840 All right, Tim, Hi, Carol. Quite frankly, I thought it 0:03:07.880 --> 0:03:11.840 was a fantastic quarter. I mean, Ian King, who I 0:03:11.880 --> 0:03:15.720 know very well, mentioned a whisper number at thirty billion 0:03:15.720 --> 0:03:16.679 dollars in revenues. 0:03:16.760 --> 0:03:19.040 I was hearing more close to twenty six billion. 0:03:19.160 --> 0:03:22.360 So obviously they you know, came in above that twenty 0:03:22.400 --> 0:03:26.320 six point eight. The beat in data center is really important. 0:03:26.560 --> 0:03:28.840 Obviously they came in at twenty two point six billion. 0:03:29.440 --> 0:03:30.200 That was a beat. 0:03:30.280 --> 0:03:32.400 And Carol and Tim, you know, heading into this report, 0:03:32.480 --> 0:03:34.680 we had a lot of people out there who were 0:03:34.760 --> 0:03:36.720 very concerned that there would be some sort of like 0:03:36.840 --> 0:03:42.320 air pocket between ordering patterns with the current chips that 0:03:42.360 --> 0:03:45.400 they're shipping, which are the Hopper series, and that there'd 0:03:45.400 --> 0:03:48.760 be some large customers that would hold off and wait 0:03:48.920 --> 0:03:53.440 intil the new Blackwell series was introduced sometime this fall, 0:03:53.840 --> 0:03:56.720 and then we would get some sort of slower period 0:03:56.720 --> 0:03:59.600 and growth in terms of data center revenues and the 0:03:59.680 --> 0:04:02.360 Really there is no indication of that on this current quarter. 0:04:02.520 --> 0:04:06.520 So hopefully this quarter will be able to answer back 0:04:06.560 --> 0:04:07.600 to some of those worries. 0:04:07.840 --> 0:04:11.200 And I thought across the board and you know, quite frankly, 0:04:11.280 --> 0:04:13.880 guys at ten for one stock sport is absolutely huge 0:04:13.920 --> 0:04:17.279 because like Amazon and Google and they both did twenty 0:04:17.320 --> 0:04:18.400 four one stock sports. 0:04:18.560 --> 0:04:20.840 Yeah, it really allows the retail. 0:04:20.480 --> 0:04:23.839 Investor to participate more in terms of buying more shares 0:04:23.880 --> 0:04:27.200 and it's a psychological thing, but it does boost the stock. 0:04:27.600 --> 0:04:27.760 Hey. 0:04:27.800 --> 0:04:30.760 I just also one eye popping number free cash flow. 0:04:31.279 --> 0:04:33.640 Maybe this is why they're doing that dividend and so on. 0:04:33.880 --> 0:04:37.440 Free cash flow fourteen point nine four billion dollars versus 0:04:37.480 --> 0:04:40.920 two point sixty four billion year over year, the estimates 0:04:40.960 --> 0:04:45.520 for twelve point two nine billion, So yeah, generating some stay. 0:04:45.240 --> 0:04:48.000 Looking really good. I want to bring in Kun John Savanni, 0:04:48.000 --> 0:04:51.680 Bloomberg Intelligence senior semiconductor analysts. Kunjohn just build on what 0:04:51.720 --> 0:04:53.960 we heard from Den Morgan. There is there anything in 0:04:53.960 --> 0:04:57.800 this in this most recent report from Nvidia that investors 0:04:57.839 --> 0:04:58.520 shouldn't love. 0:05:00.240 --> 0:05:03.760 I mean, look, the dividend increases massive, more than hundred percent, 0:05:03.839 --> 0:05:07.400 and the stock split I think not a negative, but 0:05:07.520 --> 0:05:10.919 the expectation was for a sort of low double digit 0:05:11.000 --> 0:05:13.480 at least beat on both the print and the guide. 0:05:13.640 --> 0:05:16.160 We didn't see that this one. For the past many 0:05:16.200 --> 0:05:19.120 quarters we have seen beats and raises in that range. 0:05:19.240 --> 0:05:21.640 So in the absence of the dividend increase in the 0:05:21.640 --> 0:05:25.560 stock split, we could have seen some volatility here because 0:05:25.720 --> 0:05:28.440 again it was good, but not as good as people expect. 0:05:28.640 --> 0:05:31.120 But I think in the call the dividend free cash 0:05:31.160 --> 0:05:33.119 flow in the split will be center stage. 0:05:33.200 --> 0:05:34.960 Well, Ku, John, I do wonder is there anything in 0:05:35.000 --> 0:05:38.360 it that makes us like reset our think and enthusiasm 0:05:38.400 --> 0:05:41.159 as investors that we have seen when it comes to 0:05:41.320 --> 0:05:45.359 kind of the AI investment story, because Nvidia obviously the 0:05:45.440 --> 0:05:47.760 lynchpin if you will, to so much of it when 0:05:47.800 --> 0:05:49.919 we talk about AI, right, if you're going to do AI, 0:05:49.960 --> 0:05:52.960 you need and video chips. So is there anything in 0:05:53.000 --> 0:05:56.680 this report that makes you rethink the expectations about the 0:05:56.760 --> 0:06:00.320 impact of ai jen ai and all that it might bring. 0:06:00.440 --> 0:06:02.520 And also as an investment story. 0:06:03.600 --> 0:06:06.520 Not really, you know, from a long term perspective, the 0:06:06.600 --> 0:06:10.960 fundamentals remain intact, the story remain intact. We were expecting 0:06:11.240 --> 0:06:14.080 some kind of you know, some folks are calling it 0:06:14.120 --> 0:06:17.039 the air pocket in this next quarter and the quarter 0:06:17.080 --> 0:06:20.680 coming in October is just a temporary timing situation where 0:06:20.760 --> 0:06:23.400 the new black Well chip starts ramping and before that 0:06:23.600 --> 0:06:26.320 customers wants to wait for that. So what you might 0:06:26.400 --> 0:06:30.000 see and V are seeing a sort of moderating sequential growth, 0:06:30.160 --> 0:06:33.360 But I don't think that should lead to any concerns 0:06:33.440 --> 0:06:35.760 whether this AI rally has legs or not. 0:06:36.080 --> 0:06:38.599 Jensen Wong in the press release, of course, the founder 0:06:38.640 --> 0:06:40.640 and CEO n Vidio, saying our data center growth was 0:06:40.640 --> 0:06:44.120 fueled by strong and accelerating demand for generative AI training 0:06:44.520 --> 0:06:48.200 and inference on the hyper platform. Beyond cloud service providers, 0:06:48.240 --> 0:06:52.560 generative AI has expanded to consumer internet companies and enterprise 0:06:53.040 --> 0:06:57.840 sovereign AI, automotive and healthcare customers, creating multiple multi billion 0:06:57.880 --> 0:07:01.240 dollar vertical markets. So, Dan Morgan, I mean, what are 0:07:01.320 --> 0:07:04.680 you hearing in terms of channel checks? Johnson Wang, No surprise, 0:07:04.720 --> 0:07:06.440 He's going to be all in. This is his bread 0:07:06.440 --> 0:07:09.640 and butter. But it does sound like it's broadening out 0:07:09.800 --> 0:07:12.360 in terms of the demand. Everyone trying to figure out 0:07:12.560 --> 0:07:15.080 what their AI play is for their business. 0:07:15.360 --> 0:07:17.400 You're right, Carol, And you know, if you look at 0:07:17.520 --> 0:07:20.600 kind of going back to that pocket issue. Coming into 0:07:20.680 --> 0:07:24.440 this quarter, estimates were that the Hopper one Hunter chip 0:07:24.440 --> 0:07:27.160 had about a ten days or ten week lag time 0:07:27.160 --> 0:07:30.640 between order periods, so there's still some slight overage of 0:07:30.760 --> 0:07:33.040 orders in that and they're trying to meet that. But 0:07:33.160 --> 0:07:35.800 you're right, Carol and Tim, it looks like we're spilling over. 0:07:36.160 --> 0:07:39.360 You know, we've been following the stock together, it seems 0:07:39.360 --> 0:07:41.440 like for five or six years on the radio show, 0:07:41.600 --> 0:07:44.480 and we've gone from a gaming company to a data 0:07:44.480 --> 0:07:47.880 center company, and now we're seeing it going from the 0:07:47.960 --> 0:07:49.880 data center into these other areas. 0:07:49.920 --> 0:07:52.800 There was a little crypto mining in there, just unimaginable. 0:07:52.800 --> 0:07:53.640 I'm sorry to there was. 0:07:53.600 --> 0:07:56.400 A little crypto mining in there too during that time, Dane. 0:07:56.240 --> 0:07:57.880 I had some crypto mining going in there for a 0:07:57.880 --> 0:07:58.320 while too. 0:07:58.440 --> 0:08:02.360 But you know, it's just amazing, Timmy Carroll that you know, 0:08:02.440 --> 0:08:06.679 before it was really a data center story using GPU 0:08:06.800 --> 0:08:09.960 chips in terms of AI, and now, like you mentioned 0:08:10.160 --> 0:08:12.560 in the press release, it's now spilling over into all 0:08:12.600 --> 0:08:15.200 aspects of different industry. 0:08:15.320 --> 0:08:16.560 So it just increases the. 0:08:16.520 --> 0:08:21.239 Amount of potential customers just beyond the big data center 0:08:21.320 --> 0:08:23.960 users that we keep talking to block aws and GCP 0:08:24.080 --> 0:08:26.679 and ASER and it just becomes a bigger and bigger story. 0:08:26.760 --> 0:08:30.560 Well, it raises the question, Kunjon, that I've had for 0:08:30.640 --> 0:08:34.440 months at this point, which is the whole basic thesis 0:08:34.480 --> 0:08:39.880 of successful companies that are building something at high margin 0:08:40.520 --> 0:08:42.680 and if they're the only ones doing it, then there's 0:08:42.679 --> 0:08:45.480 something wrong with it, or they at least have like 0:08:46.040 --> 0:08:50.120 an incredible mode. And I'm wondering how long in Nvidia 0:08:50.200 --> 0:08:52.560 can keep doing this. I mean, they've got first quarter 0:08:52.720 --> 0:08:55.360 just a gross margin of seventy eight point nine percent. 0:08:55.520 --> 0:08:58.520 Estimates were for seventy seven percent. How long can Nvidia 0:08:58.760 --> 0:09:02.520 keep doing this before a competitor is able to build 0:09:02.520 --> 0:09:03.800 something similar or catch up. 0:09:04.080 --> 0:09:06.679 I don't have an answer for how long, but I will, 0:09:07.480 --> 0:09:11.320 you know, last before the Blackwell announcement, before GDC, this 0:09:11.520 --> 0:09:13.640 was the exact questions we were getting a lot and 0:09:14.200 --> 0:09:17.160 the question was like after H one hundreds or H 0:09:17.240 --> 0:09:21.600 two hundred, will the next chip be competitive and provide 0:09:21.720 --> 0:09:24.679 a lot more of value that they can continue demanding 0:09:24.720 --> 0:09:27.960 such premium. And the Blackwell is showing that yes, in 0:09:28.040 --> 0:09:32.880 terms of performance increases, in terms of TCO for their customers. 0:09:33.240 --> 0:09:35.720 It came out and beat every other product or the 0:09:35.800 --> 0:09:38.440 wanna be products in the street, and hence that is 0:09:39.080 --> 0:09:41.840 going to command even more premium. So I think as 0:09:41.920 --> 0:09:46.000 long as they can keep on out competing themselves and 0:09:46.040 --> 0:09:49.760 their peers, they should be able to command this premium. 0:09:50.080 --> 0:09:52.800 So in video shares just to rehash, well, they're off 0:09:52.800 --> 0:09:55.400 their highs in the aftermarket, but still up about two 0:09:55.480 --> 0:09:59.640 point seven percent as we speak. And just to kind 0:09:59.679 --> 0:10:03.040 of go over some of the headlines that did cross 0:10:03.480 --> 0:10:07.280 just moments ago again and Video giving a strong forecast 0:10:07.400 --> 0:10:12.200 on sustained AI momentum, specifically, just going through some of 0:10:12.200 --> 0:10:14.920 the numbers here, boosting its quarterly cash dividend to ten 0:10:14.960 --> 0:10:17.520 cents of share from four cents of share. We talked 0:10:17.559 --> 0:10:21.400 about that ten for one forward stock split again. Data 0:10:21.440 --> 0:10:25.200 Center revenue for the first quarter the past quarter twenty 0:10:25.240 --> 0:10:28.160 two point six billion, that's a beat. Twenty one point 0:10:28.200 --> 0:10:31.040 thirteen billion was the estimate, and then the outlooks the 0:10:31.200 --> 0:10:34.800 second quarter revenue twenty eight billion plus or minus two percent, 0:10:35.120 --> 0:10:37.080 and the estimate on the street is below that at 0:10:37.120 --> 0:10:40.840 twenty six point eight billion. So Dan like, where do 0:10:40.920 --> 0:10:43.960 we go here from in terms of Nvidia? Does it 0:10:44.040 --> 0:10:46.680 kind of make sense based on the spending that we 0:10:46.760 --> 0:10:49.800 heard from the likes of you know, Alphabet, I feel 0:10:49.800 --> 0:10:52.600 like Microsoft, was it Apple, was it Metal? Like they 0:10:52.640 --> 0:10:56.240 all kind of talked about right cap spend when it 0:10:56.280 --> 0:11:00.720 comes to AI specifically, So the enthusiasm maybe we've heard 0:11:00.760 --> 0:11:03.720 through the earning season from some of the big tech players. 0:11:03.960 --> 0:11:06.920 Does it match up with what we got from Nvidia? 0:11:07.000 --> 0:11:07.880 I think so, Carol. 0:11:07.960 --> 0:11:10.199 You know, the estimate going into the two thousand or 0:11:10.240 --> 0:11:12.600 physical year twenty twenty four, if we were to take 0:11:13.400 --> 0:11:18.320 meta Microsoft, Amazon, and Google and combine their campex that 0:11:18.320 --> 0:11:21.320 they're mostly dedicated towards AI, you're looking at about one 0:11:21.400 --> 0:11:24.520 hundred and eighty one hundred and eighty five billion dollars. 0:11:24.559 --> 0:11:27.880 So it's a huge number, and most of them have 0:11:28.120 --> 0:11:29.920 very healthy CAMPEX. 0:11:29.520 --> 0:11:33.240 Expectations going into this year, and of course everyone's scrambling 0:11:33.280 --> 0:11:36.360 to outdo each other in terms of AI initiatives. 0:11:36.360 --> 0:11:39.800 So, you know, Caroll and Tim, this report just keeps 0:11:39.880 --> 0:11:43.720 reiterating the amount of spending that's going into this and 0:11:43.760 --> 0:11:45.960 of course and videos are kind of waiting with their 0:11:46.000 --> 0:11:48.680 catcher's mitt and catching a large portion of it. 0:11:48.800 --> 0:11:51.440 So I don't see any changes right now. 0:11:51.600 --> 0:11:54.880 Based on the campex guidance that we got at the 0:11:54.880 --> 0:11:57.880 beginning of the first quarter from the big tech names, 0:11:58.280 --> 0:12:01.160 and then in Nvidia coming in with this beat and 0:12:01.200 --> 0:12:04.960 then also strong guidance for the second quarter twenty five, 0:12:05.000 --> 0:12:08.719 they did come in above expectations. So maybe that'll put 0:12:08.760 --> 0:12:11.960 the bed some of these worries about this transition that 0:12:12.000 --> 0:12:15.439 we talked about between Hopper and Blackwell as we move 0:12:15.480 --> 0:12:18.959 into the fall quarter, and you would expect those quarters 0:12:18.960 --> 0:12:22.760 to be huge anticipation of the fact that they'll have 0:12:22.800 --> 0:12:25.240 a new product cycle going and starting to. 0:12:25.160 --> 0:12:26.280 Shift the new Blackwell. 0:12:26.400 --> 0:12:29.920 So to me, everything's operating on all cylinders right now. 0:12:29.960 --> 0:12:30.520 Front Video. 0:12:30.679 --> 0:12:33.960 Hey, Kunjohn, before we let you go, twenty five minutes 0:12:34.000 --> 0:12:39.320 to go until the call starts for in video, shareholders, investors, 0:12:39.600 --> 0:12:42.360 and of course analysts as well like yourself. What's the 0:12:42.440 --> 0:12:46.160 question that you'd want to ask on the call today. 0:12:46.280 --> 0:12:48.560 Yeah, a couple of things. Just again going through the 0:12:48.559 --> 0:12:51.440 press release right now. One key thing we noticed this 0:12:51.520 --> 0:12:54.679 time was that the cloud customers are now somewhere between 0:12:55.000 --> 0:12:59.240 mid forties. Until last quarter they have been above fifty 0:12:59.280 --> 0:13:03.000 percentage of data center revenue, So that is interesting. You know, 0:13:03.120 --> 0:13:06.040 we think in terms of long term that's a positive 0:13:06.480 --> 0:13:12.200 because we do want that cloud concentration to moderate along 0:13:12.240 --> 0:13:14.840 with revenue growth, so that could be a long term positive. 0:13:14.840 --> 0:13:17.280 We'll have to get more details on what droped that was. 0:13:17.320 --> 0:13:19.680 It just that the cloud customers are going with more 0:13:19.679 --> 0:13:21.680 of their own a six, so that would be something 0:13:21.720 --> 0:13:23.160 important that we are going to look out for. 0:13:23.360 --> 0:13:25.440 All right, great, and so after the call we go 0:13:25.600 --> 0:13:28.160 all right. Shares of Nvidia right now up about two 0:13:28.200 --> 0:13:31.120 point four percent here in the aftermarket thanks to our ku. 0:13:31.240 --> 0:13:34.559 John Sabani Bloomberg Intelligence senior semiconductor analysts will be watching 0:13:34.559 --> 0:13:37.640 out for his research into the Thursday trade. Dan Morgan 0:13:37.800 --> 0:13:41.600 also watching out for his research as now that we've 0:13:41.600 --> 0:13:44.000 got all the details if you will, from Nvidia. He, 0:13:44.080 --> 0:13:46.880 of course, senior portfolio manager at Sonova's trust company.