Earnings of 92 cents per share topped forecasts of 70 cents, while record sales of $2.23 billion exceeded Wall Street's expectation of $1.96 billion. Guidance for the coming quarter was strong, with Nvidia's guidance of $2.35 billion beating analyst expectations of $2.14 billion, according to FactSet.
Despite the top-and bottom-line performance, shares dropped 6.6% midday Friday to $153.77.
Even co-founder and CEO Jensen Huang's predictions of robot taxis powered by Nvidia chips could not overcome concerns about the performance of the company's new Volta data center GPUs. And investors may not quite trust the reliability of Nvidia's growth in cards geared towards cryptocurrency miners. While the promise of autonomous cars is great, it currently makes up just a small amount of Nvidia's top line.
Betsy Van Hees, Loop Capital Markets (Buy, price target $181)
"We think investors' concerns that data center growth has slowed and topped out are unwarranted as FQ2 was a transition quarter to Volta. With Volta ramped, we are modeling a return to double-digit growth in FQ3. We are also cautious on how much more legs the demand from crypto currency mining has and we are modeling that business to flatten out in FQ3 and decline -20% YoY in F2019."
Christopher Rolland, Susquehana Financial Group LLLP (Neutral, price target $140)
However, there were a few sticking points, including: upside provided by crypto-currency mining cards (investors attribute low value), DC revs that likely missed the 'whisper' (Data Center revs most highly valued), and weaker than expected gross margins given the nice V100 [data center GPU] ramp."
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Chris Caso, Raymond James (Outperform, price target $180)
"The area of concern is that datacenter grew only modestly, and will need to grow more strongly going forward to support expectations - and datacenter supports NVDA's elevated multiple. The company noted some impact from customers waiting for higher performance Volta boards, which should yield stronger growth in 2HF18 as customers complete qualifications. Sustainability of cryptocurrency revenue is also likely a concern ($150M Q/Q impact in F2Q), and we're conservatively removing that benefit from out quarter estimates."
Vijay Rakesh, Mizuho Securities USA LLC (Buy, price target $180)
"NVDA noted JulyQ was a transition quarter with the introduction of the new Volta with 10x performance over its prior Tesla/Pascal and was launched commercially only in late July. Nonetheless, NVDA noted 128 DGX systems now at Facebook, combined with traction from Foxconn, Quanta, Baidu and others. While we believe investors were looking for more out of the DC, we see NVDA and Deep learning at the beginning of a L-T secular DL/Inferencing trend with a $10-15B TAM by 2020-22E as noted by NVDA versus its ~$1.8B DC revenues today."
Kevin Cassidy, Stifel Nicolaus & Co. (Hold, price target $110)
"Some investors may be disappointed that much of the revenue beat came from the highly volatile cryptocurrency market and not from hyperscale data centers' adoption of GPUs. In our view, revenue related to hyperscale data center is notoriously lumpy and investors should not expect steady sequential growth in this business. In the longer term, we do expect GPU adoption in hyperscale data centers and ~15%-20% y/y growth. NVDA share valuation of ~40x forward non-GAAP earnings keeps us on the sidelines."
Mark Lipacis, Jefferies Group LLC (Buy, price target $180)
"Our sense is that investors are disappointed in the Datacenter QQ deceleration and view crypto upside as low quality. What we believe is not well understood is that in contrast to new gaming GPUs, which users buy and use instantaneously, new datacenter GPUs need to be tested and qualified before being scaled into datacenter-applications. Our field checks indicate that Volta's tensor cores extend its competitive lead in Neural Networks - and we believe DC resumes healthy QQ growth within the next several quarters."
Ambrish Srivastava, BMO Capital Markets (Underperform, price target $90)
"At a P/E of 49x and an EV/FCF multiple of 43x, the shares are not pricing in a roughly flat data center quarter, especially when the market seems to be willing to be paying those multiples for the so-thought unprecedented blue sky opportunity in AI/ ML in several end markets for NVIDIA. The unsustainable demand from cryptocurrency mining drove a large part of the upside in the reported quarter, and likely continues into the next."
Rick Schafer, Oppenheimer & Co. (Perform, price target NA)
"While NVDA extended its streak of beat/raise results to ten Qs, we believe investors could key near-term on slower than expected Q/Q datacenter momentum after it came in 30% ahead of consensus in F1Q. We continue to see AI as very early innings, with NVDA dominating the training accelerator market for the foreseeable. We continue to marvel at NVDA's 53% LTM revenue growth, but believe risk/reward remains balanced with shares trading at 40x our CY18E and facing increasingly difficult comps."
Romit Shah, Instinet LLC (Reduce, price target $110)
"While overall results were much better than anticipated, we continue to see subdued trends in core PC gaming (largest business), minimal GM leverage and decelerating revenue and EPS growth. Shares in our opinion remain overvalued at 41x CY18 EPS (assuming $155 post market price)."