Shares of Nvidia (NVDA - Get Report) are surging 13.6% to $116.94 in early morning trading on Wednesday, the day after the chipmaker reported an earnings and revenue beat for the 2018 fiscal first quarter.
After Tuesday's close, the company reported earnings of 85 cents per share, topping consensus estimates for 67 cents per share. Revenue rose 48% year-over-year to $1.94 billion, also beating expectations for $1.91 billion.
Nvidia also issued positive guidance for the second quarter, forecasting revenue between the range of $1.89 billion and $1.95 billion.
The blowout quarter came as a surprise to a number of analysts and investors who were worried shares of the company wouldn't be able to keep their momentum going after gaining nearly 300% in 2016 alone. In an interview on Monday morning, TheStreet's Jim Cramer said to be cautious when investing in Nvidia. "I think Nvidia is a great company but the stock is elevated versus its comparisons," he explained.
In particular, Nvidia's GPU business has been giving the company a boost. "Our Datacenter GPU computing business nearly tripled from last year, as more of the world's computer scientists engage deep learning," Nvidia CEO Jensen Huang said in the earnings release. "One industry after another is awakening to the power of GPU deep learning and AI, the most important technology force of our time."
Here's what Wall Street is saying about Nvidia's quarterly results:
Jefferies, Mark Lipacis (Buy, $140 price target)
"NVDA beat and raised, but importantly, its data center business nearly tripled YoY for the 3rd consecutive quarter, reinforcing our thesis that the center of gravity of computing appears to be drifting toward a parallel model, and that with its GPU and Software (CUDA+APIs), NVDA appears to be the primary beneficiary of this secular shift."
Pacific Crest Securities (Underweight, price target raised to $99 from $90)
"While our investment thesis has been challenged in the near term, we remain Underweight NVDA due to signs of desktop GPU market saturation, lower margins from incremental Nintendo Switch revenue and the stock's premium valuation. . . Despite the significant sales upside in the high-margin data center segment, gross margin of 59.4% was only in-line with our estimate and declined 60 bps q/q due to lower Intel royalties and product margins in the Nintendo Switch."
Canaccord Genuity (Buy, $125 price target)
"NVIDIA reported a strong Q1/F'18 above our/consensus expectations in revenue and non-GAAP EPS highlighted by solid datacenter GPU revenue acceleration (nearly tripling Y/Y) driven by artificial intelligence, datacenter acceleration and HPC computing, and record automotive revenue. Growth was broad based across the business segments and while gaming GPU sales were up an impressive 49% Y/Y, gaming came in slightly below our/consensus estimates. On the call, strength across the business was discussed, particularly in datacenter driven by cloud service providers such as IBM, Google, and Amazon, as well as further traction in HPC and AI and continued strength in automotive customer engagements. . . Overall, our positive thesis continues to play out with strong gaming GPU growth expected to continue in F'18 and beyond while acknowledging Y/Y growth compares will toughen in coming quarters and we believe new trends including deep learning, virtual/augmented reality, and autonomous driving will catalyze new market growth longer term."