Good morning. Nvidia released its highly anticipated earnings report on Wednesday after the bell. And “enterprise” was a word that CFO Colette Kress emphasized during the earnings call.
Nvidia is the dominant maker of graphics processing units (GPUs) chips, which are now a critical tool for accelerating AI. Its revenue for the quarter ended July 28 was $30 billion, up 15% from the previous quarter and up 122% from a year ago. Net income was $16.6 billion up from $6.2 billion the same time last year. The results were driven by sales of Nvidia’s Hopper GPU, the company said. The chipmaker delivered gross profit margins of 75.1% and adjusted earnings per share of 68 cents, up from 27 cents a year ago.
Although Nvidia topped Wall Street's expectations, NVDA shares slipped almost 7% in after-hours trading following the earnings announcement.
"Nvidia's overall performance signals that investors recognize the significance of AI, particularly in sectors where infrastructure and hardware are essential,” Natalie Hwang, founding managing partner of Apeira, a venture capital asset manager, told me. “However, the broader market may still underappreciate the full scope of AI's potential beyond these foundational technologies.”
A lot of the demand for Nvidia is coming from “tens of thousands” of companies and startups building generative AI applications for consumers, education, advertising, enterprise, healthcare and robotics, Kress, who is an EVP as well as Nvidia's CFO, said on the earnings call.
“The Enterprise AI wave has started,” Kress said. Enterprises drove sequential revenue growth in the quarter, she said. “We are working with most of the Fortune 100 companies on AI initiatives across industries and geographies.” Applications that are fueling Nvidia’s growth, include AI-powered chatbots and generative AI co-pilots to “build new, monetizable business applications and enhance employee productivity,” she said.
Large enterprises are focusing on AI, according to research. The Rise of Generative AI in SEC Filings, a new report by Arize AI finds that over half (64.6%) of Fortune 500 companies mention AI in their most recent annual report. And more than one in five enterprises specifically reference generative AI. Software and tech industries and financial services companies mention generative AI the most, according to the report.
However, more than two-thirds (69.4%) of companies mentioning generative AI do so in the context of risk of disclosures. That can range from risk through the use of emerging technology, or the risk of failing to keep pace with competitors who are using AI, or security risk to the business.
According to some analysts, the tech giant’s earnings report was a make-or-break moment. My Fortune colleague Christiaan Hetzner’s report explains why Nvidia's earnings have taken on such outsize importance. Its stock price has been fueling record highs in the broader S&P 500 and Nasdaq indexes in recent weeks. The company’s total value tops $3 trillion. And Nvidia has a dominant position in producing GPUs. “Nvidia is the bellwether in the broader AI trade precisely because it is leagues ahead of the competition, controlling roughly 90% of the global market in AI training and inference chips,” he writes.
Although Nvidia’s rise may only mark the beginning, many companies across industries are “poised to benefit from AI advancements,” Hwang told me.
"AI GPU demand is way outstripping supply for Nvidia at this juncture," Wedbush Securities analysts wrote in a note to investors this morning. "And the Street should come away from these results as a very bullish indicator for the broader tech sector, with more shock and awe, rather than a shrug of the shoulders, in our view."
Also on Wednesday, Berkshire Hathaway had a big day. My colleague Greg McKenna shares his report about it in "Big Deal" below.
Sheryl Estrada
sheryl.estrada@fortune.com
The following sections of CFO Daily were curated by Greg McKenna
