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Instant Reaction: Nvidia Forecast Shatters Estimates · Bloomberg Intelligence

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  Speaker 1: Bloomberg Audio Studios, podcasts, radio news. Let's get through it, guys.
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  Speaker 1: We've got a bunch of numbers, and we do have
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  Speaker 1: the stock shares of Nvidia up about four percent in
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  Speaker 1: the after hours, the big things announcing a ten for
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  Speaker 1: one forward stock split. And to the outlook we talked
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  Speaker 1: with our Ian King. This is going to be important.
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  Speaker 1: See second quarter revenue twenty eight billion plus or minus
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  Speaker 1: two percent. The estimate is twenty six point eight billion.
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  Speaker 1: Remember though the whisper number that Ian mentioned was about
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  Speaker 1: thirty billion or above.
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  Speaker 2: Billions on the range. We're saying up to thirty billion dollars,
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  Speaker 2: but it's interesting, higher than the consensus.
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  Speaker 1: Absolutely, but you know, it can be funny with that
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  Speaker 1: first quarter data revenue. This is important. This is the
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  Speaker 1: bulk of their business, right, twenty two point six billion.
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  Speaker 1: That is above street estimates of twenty one point thirteen billion.
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  Speaker 1: Gaming revenue much smaller part of the business. First quarter
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  Speaker 1: gaming revenue that was pretty much in line. Two point
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  Speaker 1: six billion. The estimate was for two point sixty two billion.
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  Speaker 1: And again the company boosting the quarter cash dividend to
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  Speaker 1: ten cents a share from four cents a share, so
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  Speaker 1: really paying back all of that cash that they've been
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  Speaker 1: generating a lot of it right giving it back to investors.
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  Speaker 2: Shares up right now about four point four percent. They
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  Speaker 2: climbed as much as five point one percent after that
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  Speaker 2: second quarter revenue. I looked topped estimates. You heard the
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  Speaker 2: numbers too there about its data center business. It did
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  Speaker 2: well in the fiscal first quarter. Revenues came in of
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  Speaker 2: twenty came in at twenty two point six billion. They
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  Speaker 2: were above the data center consensus of twenty one point
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  Speaker 2: one to three and then of course that ten for
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  Speaker 2: one forward stock split. Huge news.
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  Speaker 1: Well, and you use something you focused on earlier. Adjusted
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  Speaker 1: gross margin for the first quarter seventy eight point nine
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  Speaker 1: percent versus sixty six point eight percent year over year.
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  Speaker 1: The estimate on the street was seventy seven percent, So
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  Speaker 1: that's coming in higher than forecast R and D expenses
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  Speaker 1: two point seventy two billion, That is up forty five
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  Speaker 1: percent year over year. The estimate was for two point
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  Speaker 1: seven three billion, so a little bit lower. For the
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  Speaker 1: full year, gross margins are expected to be the mid
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  Speaker 1: seventy percent rate. Full your operating expenses are expected to
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  Speaker 1: grow in the low forty percent range, so we're getting
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  Speaker 1: some view and some thoughts in terms of the outlook.
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  Speaker 1: Right now, we've got cheers of Nvidia. They are up
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  Speaker 1: four point four percent in the after hour, and the
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  Speaker 1: company says it's poised for their next wave of growth.
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  Speaker 2: Ian King writing on the live blog right now that
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  Speaker 2: the twenty eight billion dollar revenue forecasts solidly above the
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  Speaker 2: CONCESSUS estimate, but as you mentioned, Carol, not as wildly
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  Speaker 2: optimistic as some projections, which had ranged to more than
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  Speaker 2: thirty billion dollars. Stock splits Ian Ads, in in Vidia's case,
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  Speaker 2: a ten for one exchange are usually done by companies
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  Speaker 2: to keep their shares affordable by as many investors as possible.
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  Speaker 2: This one, in notes is going to come into effect
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  Speaker 2: in a little less than a month that on June seventh.
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  Speaker 2: You could argue that stock splits don't matter as much
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  Speaker 2: anymore because you can just buy fractional shares easily.
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  Speaker 1: That's a good point, all right, So let's get to it.
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  Speaker 1: Let's get some analysis on this report. Dan Morgan is
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  Speaker 1: with US senior portfolio manager at Sonovs Trust Company, joining
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  Speaker 1: us from Atlanta. Also Kujohn Sabani Bloomberg Intelligence Senior Semiconductor
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  Speaker 1: lets Dan, let's start with you your initial thoughts on
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  Speaker 1: the release.
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  Speaker 3: All right, Tim, Hi, Carol. Quite frankly, I thought it
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  Speaker 3: was a fantastic quarter. I mean, Ian King, who I
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  Speaker 3: know very well, mentioned a whisper number at thirty billion
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  Speaker 3: dollars in revenues.
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  Speaker 4: I was hearing more close to twenty six billion.
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  Speaker 3: So obviously they you know, came in above that twenty
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  Speaker 3: six point eight. The beat in data center is really important.
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  Speaker 3: Obviously they came in at twenty two point six billion.
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  Speaker 4: That was a beat.
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  Speaker 3: And Carol and Tim, you know, heading into this report,
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  Speaker 3: we had a lot of people out there who were
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  Speaker 3: very concerned that there would be some sort of like
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  Speaker 3: air pocket between ordering patterns with the current chips that
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  Speaker 3: they're shipping, which are the Hopper series, and that there'd
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  Speaker 3: be some large customers that would hold off and wait
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  Speaker 3: intil the new Blackwell series was introduced sometime this fall,
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  Speaker 3: and then we would get some sort of slower period
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  Speaker 3: and growth in terms of data center revenues and the
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  Speaker 3: Really there is no indication of that on this current quarter.
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  Speaker 4: So hopefully this quarter will be able to answer back
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  Speaker 4: to some of those worries.
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  Speaker 3: And I thought across the board and you know, quite frankly,
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  Speaker 3: guys at ten for one stock sport is absolutely huge
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  Speaker 3: because like Amazon and Google and they both did twenty
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  Speaker 3: four one stock sports.
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  Speaker 4: Yeah, it really allows the retail.
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  Speaker 3: Investor to participate more in terms of buying more shares
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  Speaker 3: and it's a psychological thing, but it does boost the stock.
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  Speaker 5: Hey.
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  Speaker 1: I just also one eye popping number free cash flow.
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  Speaker 1: Maybe this is why they're doing that dividend and so on.
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  Speaker 1: Free cash flow fourteen point nine four billion dollars versus
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  Speaker 1: two point sixty four billion year over year, the estimates
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  Speaker 1: for twelve point two nine billion, So yeah, generating some stay.
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  Speaker 2: Looking really good. I want to bring in Kun John Savanni,
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  Speaker 2: Bloomberg Intelligence senior semiconductor analysts. Kunjohn just build on what
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  Speaker 2: we heard from Den Morgan. There is there anything in
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  Speaker 2: this in this most recent report from Nvidia that investors
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  Speaker 2: shouldn't love.
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  Speaker 5: I mean, look, the dividend increases massive, more than hundred percent,
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  Speaker 5: and the stock split I think not a negative, but
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  Speaker 5: the expectation was for a sort of low double digit
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  Speaker 5: at least beat on both the print and the guide.
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  Speaker 5: We didn't see that this one. For the past many
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  Speaker 5: quarters we have seen beats and raises in that range.
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  Speaker 5: So in the absence of the dividend increase in the
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  Speaker 5: stock split, we could have seen some volatility here because
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  Speaker 5: again it was good, but not as good as people expect.
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  Speaker 5: But I think in the call the dividend free cash
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  Speaker 5: flow in the split will be center stage.
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  Speaker 1: Well, Ku, John, I do wonder is there anything in
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  Speaker 1: it that makes us like reset our think and enthusiasm
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  Speaker 1: as investors that we have seen when it comes to
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  Speaker 1: kind of the AI investment story, because Nvidia obviously the
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  Speaker 1: lynchpin if you will, to so much of it when
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  Speaker 1: we talk about AI, right, if you're going to do AI,
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  Speaker 1: you need and video chips. So is there anything in
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  Speaker 1: this report that makes you rethink the expectations about the
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  Speaker 1: impact of ai jen ai and all that it might bring.
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  Speaker 1: And also as an investment story.
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  Speaker 5: Not really, you know, from a long term perspective, the
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  Speaker 5: fundamentals remain intact, the story remain intact. We were expecting
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  Speaker 5: some kind of you know, some folks are calling it
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  Speaker 5: the air pocket in this next quarter and the quarter
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  Speaker 5: coming in October is just a temporary timing situation where
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  Speaker 5: the new black Well chip starts ramping and before that
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  Speaker 5: customers wants to wait for that. So what you might
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  Speaker 5: see and V are seeing a sort of moderating sequential growth,
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  Speaker 5: But I don't think that should lead to any concerns
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  Speaker 5: whether this AI rally has legs or not.
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  Speaker 1: Jensen Wong in the press release, of course, the founder
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  Speaker 1: and CEO n Vidio, saying our data center growth was
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  Speaker 1: fueled by strong and accelerating demand for generative AI training
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  Speaker 1: and inference on the hyper platform. Beyond cloud service providers,
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  Speaker 1: generative AI has expanded to consumer internet companies and enterprise
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  Speaker 1: sovereign AI, automotive and healthcare customers, creating multiple multi billion
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  Speaker 1: dollar vertical markets. So, Dan Morgan, I mean, what are
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  Speaker 1: you hearing in terms of channel checks? Johnson Wang, No surprise,
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  Speaker 1: He's going to be all in. This is his bread
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  Speaker 1: and butter. But it does sound like it's broadening out
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  Speaker 1: in terms of the demand. Everyone trying to figure out
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  Speaker 1: what their AI play is for their business.
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  Speaker 3: You're right, Carol, And you know, if you look at
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  Speaker 3: kind of going back to that pocket issue. Coming into
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  Speaker 3: this quarter, estimates were that the Hopper one Hunter chip
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  Speaker 3: had about a ten days or ten week lag time
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  Speaker 3: between order periods, so there's still some slight overage of
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  Speaker 3: orders in that and they're trying to meet that. But
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  Speaker 3: you're right, Carol and Tim, it looks like we're spilling over.
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  Speaker 3: You know, we've been following the stock together, it seems
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  Speaker 3: like for five or six years on the radio show,
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  Speaker 3: and we've gone from a gaming company to a data
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  Speaker 3: center company, and now we're seeing it going from the
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  Speaker 3: data center into these other areas.
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  Speaker 2: There was a little crypto mining in there, just unimaginable.
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  Speaker 4: I'm sorry to there was.
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  Speaker 2: A little crypto mining in there too during that time, Dane.
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  Speaker 4: I had some crypto mining going in there for a
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  Speaker 4: while too.
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  Speaker 3: But you know, it's just amazing, Timmy Carroll that you know,
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  Speaker 3: before it was really a data center story using GPU
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  Speaker 3: chips in terms of AI, and now, like you mentioned
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  Speaker 3: in the press release, it's now spilling over into all
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  Speaker 3: aspects of different industry.
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  Speaker 4: So it just increases the.
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  Speaker 3: Amount of potential customers just beyond the big data center
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  Speaker 3: users that we keep talking to block aws and GCP
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  Speaker 3: and ASER and it just becomes a bigger and bigger story.
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  Speaker 2: Well, it raises the question, Kunjon, that I've had for
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  Speaker 2: months at this point, which is the whole basic thesis
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  Speaker 2: of successful companies that are building something at high margin
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  Speaker 2: and if they're the only ones doing it, then there's
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  Speaker 2: something wrong with it, or they at least have like
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  Speaker 2: an incredible mode. And I'm wondering how long in Nvidia
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  Speaker 2: can keep doing this. I mean, they've got first quarter
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  Speaker 2: just a gross margin of seventy eight point nine percent.
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  Speaker 2: Estimates were for seventy seven percent. How long can Nvidia
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  Speaker 2: keep doing this before a competitor is able to build
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  Speaker 2: something similar or catch up.
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  Speaker 5: I don't have an answer for how long, but I will,
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  Speaker 5: you know, last before the Blackwell announcement, before GDC, this
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  Speaker 5: was the exact questions we were getting a lot and
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  Speaker 5: the question was like after H one hundreds or H
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  Speaker 5: two hundred, will the next chip be competitive and provide
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  Speaker 5: a lot more of value that they can continue demanding
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  Speaker 5: such premium. And the Blackwell is showing that yes, in
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  Speaker 5: terms of performance increases, in terms of TCO for their customers.
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  Speaker 5: It came out and beat every other product or the
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  Speaker 5: wanna be products in the street, and hence that is
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  Speaker 5: going to command even more premium. So I think as
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  Speaker 5: long as they can keep on out competing themselves and
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  Speaker 5: their peers, they should be able to command this premium.
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  Speaker 1: So in video shares just to rehash, well, they're off
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  Speaker 1: their highs in the aftermarket, but still up about two
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  Speaker 1: point seven percent as we speak. And just to kind
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  Speaker 1: of go over some of the headlines that did cross
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  Speaker 1: just moments ago again and Video giving a strong forecast
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  Speaker 1: on sustained AI momentum, specifically, just going through some of
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  Speaker 1: the numbers here, boosting its quarterly cash dividend to ten
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  Speaker 1: cents of share from four cents of share. We talked
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  Speaker 1: about that ten for one forward stock split again. Data
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  Speaker 1: Center revenue for the first quarter the past quarter twenty
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  Speaker 1: two point six billion, that's a beat. Twenty one point
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  Speaker 1: thirteen billion was the estimate, and then the outlooks the
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  Speaker 1: second quarter revenue twenty eight billion plus or minus two percent,
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  Speaker 1: and the estimate on the street is below that at
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  Speaker 1: twenty six point eight billion. So Dan like, where do
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  Speaker 1: we go here from in terms of Nvidia? Does it
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  Speaker 1: kind of make sense based on the spending that we
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  Speaker 1: heard from the likes of you know, Alphabet, I feel
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  Speaker 1: like Microsoft, was it Apple, was it Metal? Like they
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  Speaker 1: all kind of talked about right cap spend when it
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  Speaker 1: comes to AI specifically, So the enthusiasm maybe we've heard
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  Speaker 1: through the earning season from some of the big tech players.
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  Speaker 1: Does it match up with what we got from Nvidia?
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  Speaker 4: I think so, Carol.
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  Speaker 3: You know, the estimate going into the two thousand or
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  Speaker 3: physical year twenty twenty four, if we were to take
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  Speaker 3: meta Microsoft, Amazon, and Google and combine their campex that
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  Speaker 3: they're mostly dedicated towards AI, you're looking at about one
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  Speaker 3: hundred and eighty one hundred and eighty five billion dollars.
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  Speaker 3: So it's a huge number, and most of them have
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  Speaker 3: very healthy CAMPEX.
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  Speaker 4: Expectations going into this year, and of course everyone's scrambling
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  Speaker 4: to outdo each other in terms of AI initiatives.
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  Speaker 3: So, you know, Caroll and Tim, this report just keeps
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  Speaker 3: reiterating the amount of spending that's going into this and
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  Speaker 3: of course and videos are kind of waiting with their
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  Speaker 3: catcher's mitt and catching a large portion of it.
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  Speaker 4: So I don't see any changes right now.
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  Speaker 3: Based on the campex guidance that we got at the
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  Speaker 3: beginning of the first quarter from the big tech names,
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  Speaker 3: and then in Nvidia coming in with this beat and
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  Speaker 3: then also strong guidance for the second quarter twenty five,
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  Speaker 3: they did come in above expectations. So maybe that'll put
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  Speaker 3: the bed some of these worries about this transition that
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  Speaker 3: we talked about between Hopper and Blackwell as we move
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  Speaker 3: into the fall quarter, and you would expect those quarters
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  Speaker 3: to be huge anticipation of the fact that they'll have
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  Speaker 3: a new product cycle going and starting to.
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  Speaker 4: Shift the new Blackwell.
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  Speaker 3: So to me, everything's operating on all cylinders right now.
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  Speaker 4: Front Video.
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  Speaker 2: Hey, Kunjohn, before we let you go, twenty five minutes
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  Speaker 2: to go until the call starts for in video, shareholders, investors,
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  Speaker 2: and of course analysts as well like yourself. What's the
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  Speaker 2: question that you'd want to ask on the call today.
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  Speaker 5: Yeah, a couple of things. Just again going through the
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  Speaker 5: press release right now. One key thing we noticed this
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  Speaker 5: time was that the cloud customers are now somewhere between
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  Speaker 5: mid forties. Until last quarter they have been above fifty
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  Speaker 5: percentage of data center revenue, So that is interesting. You know,
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  Speaker 5: we think in terms of long term that's a positive
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  Speaker 5: because we do want that cloud concentration to moderate along
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  Speaker 5: with revenue growth, so that could be a long term positive.
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  Speaker 5: We'll have to get more details on what droped that was.
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  Speaker 5: It just that the cloud customers are going with more
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  Speaker 5: of their own a six, so that would be something
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  Speaker 5: important that we are going to look out for.
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  Speaker 1: All right, great, and so after the call we go
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  Speaker 1: all right. Shares of Nvidia right now up about two
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  Speaker 1: point four percent here in the aftermarket thanks to our ku.
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  Speaker 1: John Sabani Bloomberg Intelligence senior semiconductor analysts will be watching
• 13:34
  Speaker 1: out for his research into the Thursday trade. Dan Morgan
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  Speaker 1: also watching out for his research as now that we've
• 13:41
  Speaker 1: got all the details if you will, from Nvidia. He,
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  Speaker 1: of course, senior portfolio manager at Sonova's trust company.