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Nvidia Shares Hit Record High After Data Center Sales Drive Q4 Earnings Beat

Nvidia said cloud and AI spending from its biggest customers helped drive a 33% surge in data center sales, which supported stronger-than-expected fourth quarter earnings.

Nvidia Corp.  (NVDA) - Get NVIDIA Corporation Report shares traded at an all-time high Friday after an impressive surge in data center revenues helped the chipmaker post stronger-than-expected fourth quarter profits. 

Nvidia said non-GAAP earnings for the three months ending in December were pegged at $1.89 per share, more than double last year's tally of 80 cents per share and well ahead of the Street consensus forecast of $1.67. Group revenues impressed, as well, rising 40% from the same period last year to an estimate-beating $3.11 billion, as data center sales, which make up a third of the overall toal surged 33%.

Nvidia did note, however, that the still-unknown impact of the spreading coronavirus in China would clip current quarter revenues by around $100 million, but put the three-month total at around $3 billion, plus or minus 2%, with gross margins essentially flat from the previous quarter 65.4%.

"It's really still quite early in terms of trying to figure out what the impact from the overall coronavirus may be, so we're not necessarily precise in terms of our estimate," CFO Colette Kress told investors on a conference call late Thursday. "Our estimates are split between an impact possibly on gaming and data center pretty much equally. The $100 million also reflects what may be supply challenges or maybe overall demand. But we're still looking at those to get a better understanding where we think that might be."

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"In terms of our business and our business makeup, yes, our overall China business for gaming is an important piece. We have about 30% of our overall China gaming as a percentage of our overall gaming business," she added. "For data center, it moves quite a bit. They are a very important market for us, but it moves from quarter-to-quarter just based on the overall end customer mix as well as the system builders that they may choose. So, it's a little harder to determine."

Nvidia share were marked 8.9% higher in early trading Friday to change hands at $294.86 each, after hitting an all-time high of $294.97 in a move that would extend their six month gain to around 96%. 

"That was a really big beat vs. expectations, as well as a big rebound from the depressed levels from last year" said BMO Capital Markets analyst Ambrish Srivastava, who carries a $285 price target on the stock with a market perform rating. 

"Nvidia delivered a solid quarter and guidance. Data center group is leading margins higher as well," he added. Nvidia did account for some impact from the virus in its guidance but the impact appears minimal at this point."