By Arsheeya Bajwa and Stephen Nellis
(Reuters) -Nvidia forecast second-quarter revenue above estimates on Wednesday and announced a ten-for-one forward stock split, impressing investors who have already tripled the chipmaker’s market value in the past year on AI optimism.
Nvidia shares hit a record in extended trade and were last up 2.7% at $978. The AI poster child’s stock has risen more than 90% so far this year.
The Santa Clara, California-based company said the ten-for-one stock split would be effective on June 7. It also said it was raising its quarterly dividend by 150% to 1 cent per share, on a post-split basis.
“Death, taxes, and NVDA beats on earnings. Even in the face of huge expectations, the company once again stepped up and delivered,” said Ryan Detrick, chief market strategist at Carson Group. “The always important data center revenue was strong, while future revenue was also impressive.”
Wall Street’s main event so far this week, Nvidia’s quarterly report could add fresh fuel to a stock market rally that has lifted indexes to record highs this year.
Demand for Nvidia’s graphics processing units, or GPUs, stands unparalleled as enterprises spend billions to procure advanced semiconductors to power data centers capable of processing complex AI tasks.
Alphabet, Microsoft, Amazon.com and other technology companies have been competing for a limited supply of Nvidia’s high-end chips as they race to dominate AI computing.
Nvidia’s contract chipmaker, Taiwan Semiconductor Manufacturing, has also been working to increase its advanced packaging capacity, a key supply-chain constraint for the processors.
The Taiwanese company said in April it expects to more than double its advanced packaging capacity this year.
Nvidia forecast second-quarter revenue of $28 billion, plus or minus 2%. Analysts on average were expecting revenue of $26.66 billion, according to LSEG data.
First-quarter revenue surged 262% year-over-year to $26.04 billion, beating estimates of $24.65 billion. Net income soared 628% to $14.88 billion.
“Demand for NVIDIA’s GPU chips remains white-hot,” said Logan Purk, an analyst at Edward Jones. “These results are likely enough to satiate investors’ appetites, and reassure the market that AI investment has not seen a slowdown yet.”
Dominating more than 80% of the market for AI chips, Nvidia stands in a unique position as both the largest enabler as well as beneficiary of surging AI development.
Sales at the data center segment, its largest by revenue, grew 427% to $22.6 billion in the first quarter ended April 28, coming in above estimates of $21.320 billion, according to data from FactSet.
Among Nvidia’s customers is Meta Platforms, which last month increased the midpoint of its 2024 capital expenditure forecast by about $4 billion.
The high performance of Nvidia’s chips makes them difficult to replace in present AI data centers. Adding to this lead is its proprietary CUDA software framework that developers use to program the AI processors.
While most so-called hyperscalers are also developing their own custom AI chips, analysts do not expect these to eat away at Nvidia’s market share.
Nvidia expects second-quarter adjusted gross margin to be 75.5%, plus or minus 50 basis points. Analysts on average forecast gross margin to be 75.8%.
Nvidia reported first-quarter adjusted gross margin of 78.9% compared with estimates of 77%. Aspiring competitor Advanced Micro Devices had recorded an adjusted margin of 52% in its fiscal first quarter.
Excluding items, the company earned $6.12 per share in the first quarter, beating estimates of $5.59.
(Reporting by Arsheeya Bajwa in Bengaluru and Stephen Nellis in San FranciscoAdditional reporting by Noel Randewich in San FranciscoEditing by Arun Koyyur and Matthew Lewis)
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