Nvidia Exceeds Revenue Expectations in Q4

Nvidia has delivered impressive results for the fourth quarter of fiscal 2025, significantly surpassing revenue expectations, especially in its data center segment. However, rising operational costs and tightening profit margins have raised some flags.

The semiconductor company, Nvidia (NVDA), revealed its earnings for the fourth quarter on February 26, showcasing a remarkable record revenue of $39.3 billion. This figure exceeded the company's guidance of $38.1 billion and reflected a spectacular year-over-year increase of 78%. Additionally, the adjusted earnings per share (EPS) reached $0.89, which was above the anticipated $0.85, demonstrating robust profitability.

Despite these strong results, Nvidia saw a decrease in its gross margin, which fell to 73.5% from 76.7% in the same quarter last year. This decline indicates rising cost pressures that the company will need to address in its future operations. While the overall quarterly performance signaled substantial growth, certain aspects of operational costs warrant scrutiny.

Metric	Q4 FY25	Analysts' Estimate	Q4 FY24	Change (YOY)
Adjusted EPS	$0.89	$0.85	$0.52	71%
Revenue	$39.3 billion	$38.1 billion	$22.1 billion	78%
Gross margin	73.5%		76.7%	(3.2 pps)
Data Center revenue	$35.6 billion		$18.5 billion	93%

(Source: Nvidia. Note: Analyst consensus estimates for the quarter provided by FactSet. YOY = Year over year. pps = Percentage points.)

Company Overview

Nvidia was founded in 1993 and has gained recognition as a leader in the semiconductor industry, primarily known for its graphics processing units (GPUs). These chips are essential in gaming, professional visualization, data centers, and the automotive sector. In recent years, Nvidia has transitioned from a focus on graphics alone to becoming a significant player in artificial intelligence (AI) and accelerated computing. The company's GPUs play a crucial role in AI infrastructure, facilitating advances in AI training and inferencing.

Nvidia's strategy has increasingly concentrated on enhancing its AI and accelerated computing dominance. This direction has driven consistent growth, with its AI technologies proving vital in high-performance and cloud computing sectors. The company's success is closely tied to its ability to innovate and deliver integrated solutions that combine hardware and software. Partnerships with major cloud service providers, such as Amazon and Microsoft, have further strengthened its market presence.

Quarterly Achievements

The impressive revenue of $39.3 billion for Q4 was supported by data center sales, which surged to $35.6 billion, nearly doubling from the previous year. This growth demonstrates Nvidia’s strong position in AI technology and cloud computing, driven by significant demand for its advanced semiconductor chips. Collaborations with major cloud companies have played a critical role in this expansion. Additionally, new partnerships within the automotive industry, including firms like Toyota and Hyundai, have opened new revenue channels.

In contrast, the gaming division and AI PC sales experienced a slight decline, pulling in $2.5 billion in revenue, which is a 22% drop sequentially. This decrease has been attributed to supply chain challenges, as noted by Nvidia's Chief Financial Officer, Colette Kress. On a positive note, the automotive segment saw remarkable growth, with a 103% rise in revenue compared to the previous year, thanks to strategic partnerships.

While revenue figures were strong, Nvidia's gross margins decreased to 73.5% from 76.7%. This trend highlights the need for efficiency improvements as operational costs increased. Operating expenses climbed to $4.7 billion, representing a 48% increase from the prior year. This rise outpaced revenue growth, signaling a potential need for cost optimization.

Outlook and Guidance

As Nvidia looks toward the first quarter of fiscal 2026, management anticipates continued momentum, with a projected revenue range of $43 billion, plus or minus 2%. This forecast suggests approximately 65% year-over-year growth. The expected GAAP and non-GAAP gross margins are around 70.6% and 71%, respectively, indicating slight pressure on margins. This outlook aligns with current trends and reflects ongoing cost pressures related to Nvidia's evolving product offerings.

Investors should remain vigilant as Nvidia expands its AI infrastructure while navigating geopolitical and logistical challenges. Management is focused on sustaining growth in AI and data center markets, which are crucial to the company’s competitive strength. The persistent demand for AI-specific hardware and strategic partnerships will be vital for Nvidia's success, although ongoing geopolitical tensions may introduce risks to supply chains and revenue stability.

Nvidia, Earnings, Revenue