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Nvidia Q4 earnings beat, generative AI reaching a 'tipping point'

Nvidia (NVDA) reported fourth-quarter results that topped Street estimates on both the top and bottom lines. The chip giant reported adjusted earnings per share of $5.16 compared to estimates of $4.60. Revenue was $22.10 billion compared to estimates $20.41 billion. Data center revenue was $18.4 billion, topping the expected $17.21 billion. In the release, founder and CEO Jensen Huang says, “Accelerated computing and generative AI have hit the tipping point. Demand is surging worldwide across companies, industries and nations."

Yahoo Finance's Julie Hyman and Josh Lipton break the report down.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: This article was written by Stephanie Mikulich.

Video transcript

JULIE HYMAN: Well, those Nvidia earnings are out here. And indeed, the company is beating estimates. Let me run through the numbers here for you. First of all, fourth quarter revenue, $22.1 billion versus the $20.4 that was estimated. The company's first quarter revenue forecast looks like it also is above estimates at $24 billion, plus or minus 2%. Analysts had been looking for $21.9 billion.

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So we are not seeing the kind of magnitude of forecast beats like we have in the past. That could account for the decline we're seeing in the shares here. Data center revenue at $18.4 billion. That's better than the $17.2 that was estimated. Gaming revenue of $2.9 billion. Gaming revenue, by the way, which had been a softer area in some of the recent quarters, that coming in better than estimated. And automotive revenue, a smaller but growing part of their business at $281 million. $272 million was the average analyst estimate. Their gross margin in the fourth quarter by the way also ahead of estimates at 76.7%.

So I'm seeing most of the numbers here coming out and beating estimates. The shares, initially, I think, rose a little bit and now are falling back. The company talking in the release that generative AI has hit the tipping point. So, you know, what we discussed going into this was what could possibly be a scenario where we could see the stock continue to move higher, because expectations, even with the decline that we've seen in recent days, expectations were so very lofty for this company.

So it looks like at least at first blush here, the forecast and what they're saying is not quite lofty enough to keep the stock going.

JOSH LIPTON: Although, now, it's kind of fighting back to the flat line here in the after hours. We actually saw it. The first edition was down about 4%, Julie. And now you can see what kind of battling back to the flat line here. To your point, there was some commentary, given the size of the move in the stock, you're up almost 40% already this year. Some folks were saying, even if you had good news, what good news could be good enough, right? And now we've actually just-- we did flip green there for a second.

I think it'll be really interesting, if you go to the internals as you did, data center beat and gaming beat and the forecast looking at Q1 forecasts for revenue looks stronger than the Street was expecting. Some issues on the call that I think will be really interesting here from Jensen Huang, data center revenue. That's where all eyes are on as our own Dan Howley was talking about. What do they see in terms of puts and takes in the quarters ahead for that unit in particular? Competition will be in focus. When you have the kind of run that Nvidia has had, it certainly attracts a lot of competition-- AMD and Intel.

And I would also expect a lot of questions about China as well. Given export restrictions, Nvidia can't sell anymore its latest and greatest chips to China. There was some expectation that, OK, they're going to have a regulation compliant, new chip on the way. We'll see if we can get color on that as well.

JULIE HYMAN: And now the stock is higher again. So obviously, investors are trying to figure out what to make of this. I wanted to bring more of Jensen Huang's comments to you from the statement here, the CEO, of course, of NVIDIA, when I mentioned. He said generative AI has hit the tipping point. He says, accelerated computing and generative AI have hit the tipping point. Demand is surging worldwide across companies, industries, and nations, he says. And he's also talking about the data center platform powered by increasingly diverse drivers, he says. Demand for data processing training and inference from large cloud service providers and GPU specialized ones.

So basically, he's saying there's a diverse source of customers for this across a diverse number of industries. So that's kind of the first blush commentary that we're getting from Jensen Huang. And investors are trying to figure out what to do.