Nvidia’s beat and raise should wow even its most hardened critics, and the stock soars
Nvidia on Wednesday evening delivered better-than-expected quarterly results, with a guide that should impress even those with the highest of expectations. Revenue in the company’s fiscal 2026 third quarter grew 62% year over year to $57.01 billion, outpacing the $54.92 billion the Street was looking for, according to estimates compiled by data provider LSEG. Adjusted earnings per share for the three months ending Oct. 26 increased 67% to $1.30, also exceeding the consensus estimate of $1.25, per LSEG data. NVDA YTD mountain Nvidia YTD Talk about a strong showing. In addition to solid beats on the top and bottom lines, management guided current quarter sales to a level not only above consensus estimates but also above the so-called whisper number that was floating around. For those unfamiliar with the term, the estimates that most market watchers and participants, like the Club, cite come from sources like LSEG, FactSet, or Bloomberg – all market data platforms. These estimates are compiled from sell-side analysts, who work at the banks and firms that sell research. The whisper number, however, is what the buy-side – those who run money, like hedge funds, asset management firms, pension funds, and so on – is believed to be looking for. It sometimes happens that a stock can beat the consensus estimate and miss the whisper number, resulting in a stock move lower. Beating the whisper number, however, is an important feat as it means the company is doing even better than the ones running money and risking it on the company, expected – a very bullish sign. Nvidia shares jumped 5% in after-hours trading to $196, a step in the right direction back toward their record-high close of $207 on Oct. 29 and back toward a $5 trillion market cap. We’re reiterating our hold-equivalent 2 rating but bumping up our Nvidia price target to $230 per share from $225. Bottom line Management not only has visibility on just about 100% of the revenue the Street is modeling for next year, but appears to have indicated on the call that the $500 billion number CEO Jensen Huang called out in October is already growing. Helping to drive the growth, Huang explained that the world is currently undergoing three computing transitions simultaneously. First, Huang said there has been a shift from CPU-based general computing to GPU-based accelerated computing. (CPUs are central processing units, long seen as the brains and workhouses of traditional computers. GPUs are graphics processing units, which have become the heart and soul of AI workloads because they can complete many calculations at the same time. That parallel processing is a key advantage over CPUs.) Second, he said that AI is at a “tipping point,” transforming existing applications and enabling new ones. “For existing applications, generative AI is replacing classical machine learning in search ranking, recommender systems, ad targeting, click through prediction, to content moderation. The very foundations of hyperscale infrastructure.” Third, he said, is so-called agentic AI systems “capable of reasoning, planning, and using tools.” (Agentic AI is a type of system that can complete tasks without human supervision — for example, instead of just looking up a flight, it could book it for the user.) Why we own it Nvidia’s high-performance graphics processing units (GPUs) are the key driver behind the AI revolution, powering the accelerated data centers being rapidly built around the world. But Nvidia is more than just a hardware story. Through its Nvidia AI Enterprise service, Nvidia is building out its software business. Competitors : Advanced Micro Devices and Intel Most recent buy : Aug 31, 2022 Initiation : March 2019 At the center of it all is Nvidia. Huang said, “As you consider infrastructure investments, consider these three fundamental dynamics. Each will contribute to infrastructure growth in the coming years. Nvidia’s chosen because our singular architecture enables all three transitions, and thus so, for any form and modality of AI across all industries, across every phase of AI, across all of the diverse computing needs in the cloud, and also from cloud to enterprise to robots – one architecture.” Commentary Coming into the earnings print, we highlighted five questions posed by Ben Reitzes of Melius Research that we hoped Huang would address. The CEO and other company executives answered four of them. The first question from Reitzes was whether the capital expenditure growth could continue through the end of the decade. While time will tell, we said that it was largely going to depend on end market demand, which itself depends on the ability of Nvidia’s customers to monetize the spend. As far as demand goes, Huang got straight to the point on the earnings release, stating “Blackwell sales are off the charts, and cloud GPUs are sold out,” adding that “compute demand keeps accelerating and compounding across training and inference — each growing exponentially.” (Blackwell is the current chip platform from Nvidia) Another question Reitzes raised was: What will Nvidia do with all its free cash flow? Buybacks are clearly still in play, with the company exiting the quarter with $62.2 billion remaining of its share repurchase authorization, even as the company has already returned $37 billion to shareholders this year, through its fiscal third quarter via dividends and buybacks. On the call, Huang said that in addition to buybacks, which will continue, the cash is going to be used to fund further growth and make strategic investments. Nvidia has been on a tear, making “strategic investment” after “strategic investment” – from committing to a $100 billion multiyear investment and partnership with ChatGPT creator OpenAI to taking stakes in rival Claude creator Anthropic, Intel, and neocloud provider CoreWeave. A third question from Reitzes dealt with the need for clarity on the $500 billion of orders for Blackwell and the next generation Rubin that Huang mentioned last month at the company’s GTC conference. On the call, CFO Colette Kress said, “We currently have visibility to a half trillion dollars in Blackwell and Rubin revenue, from the start of this year through the end of calendar year 2026.” Now, Nvidia’s fiscal year is a bit off; it’s almost a year ahead and ends in January. But if we assume that Nvidia does $212.8 billion in its current 2026 fiscal year – about what has thus far been reported, plus the $65 billion from the guidance for the current quarter – that leaves just over $287 billion to be realized in most of its fiscal year 2027, which again extends about one month past the end of calendar year 2026. We know it’s confusing, but suffice it to say, Nvidia already has visibility on nearly 100% of the sales Wall Street is looking for, with time still to go to generate even more orders as enterprise, consumer, and perhaps most exciting, sovereign adoption ramps up. In fact, based on commentary on the call, it seems there have already been announcements for new orders not included in that $500 billion figure, with Kress saying that the deal announced with the Kingdom of Saudi Arabia for 400,000 to 600,000 more GPUs over the three years is new, as is the recently announced deal with Anthropic. “So, there’s definitely an opportunity for us to have more on top of the $500 billion that we announced,” Kress stated. As for Reitzes’ question on margins, they’re clearly going to hold in for the near-term, with management guiding the current quarter to a level above expectations. “Looking ahead to fiscal year 2027, input costs are on the rise, but we are working to hold gross margins in the mid-70s,” Kress said. That’s precisely what the Steet was looking for. The one Reitzes question that Huang did not expand on was about remarks the CEO made earlier this month to the Financial Times, saying “China is going to win the AI race.” At the time, Huang softened that language in a statement, saying “China is nanoseconds behind America in AI,” adding it is vital the U.S. wins by “racing ahead.” While this particular line of inquiry was not mentioned on the call, Huang did say, “While we were disappointed in the current state that prevents us from shipping more competitive data center compute products to China, we are committed to continued engagement with the U.S. and China governments and will continue to advocate for America’s ability to compete around the world.” Nvidia has said for a while now that its forward guidance includes zero sales from China. Segment results Data center , the biggest of Nvidia’s five operating segments, saw revenue increase 66% year over year to a better-than-expected $51.22 billion in fiscal 2026 Q3, and a stunning 25% sequentially. Within the data center unit, compute revenue rose 56% to $43 billion, and networking revenue gained 162% to $8.2 billion. Gaming saw revenue jump 30% to $4.27 billion, but it did miss estimates of $4.41 billion. Professional Visualization revenue jumped 56% and was driven by the company’s recently released DGX Spark, a Grace Blackwell-based AI supercomputer small enough to fit on your desk, and Blackwell sales growth. On the call, Kress said, “Pro visualization has evolved into computers for engineers and developers, whether for graphics or for AI.” Automotive revenue was up 32% year over year as the industry continues to adopt Nvidia’s autonomous solutions. That number was, however, short of expectations. The OEM & Other segment saw revenue up 79%. This unit at Nvidia covers partnerships with original equipment manufacturers, licensing, and other things not accounted for in the other segments. Guidance Looking ahead to the current fiscal 2026 fourth quarter, management’s outlook was largely better than expected. Revenue of $65 billion, plus or minus 2%, was ahead of not only the $61.66 billion LSEG consensus estimate, but also the $64 billion whisper number that was being floated around Wall Street ahead of the release. Adjusted gross margins are expected to be 75%, plus or minus 50 basis points, better than the 74.1% estimate compiled by FactSet. Expectations for adjusted operating expenses in the fiscal fourth quarter of $5 billion are about in line with expectations. (Jim Cramer’s Charitable Trust is long NVDA. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. 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