Q2 Earnings Announcement
Sales and Net Profit Both Exceed Expectations
CEO Hwang "Achieves Record-Breaking Performance"
NVIDIA, a leader in artificial intelligence (AI) semiconductors, posted earnings that exceeded expectations, but warned that additional U.S. semiconductor export controls against China could pose a long-term threat to the company's growth.
On the 23rd (local time), NVIDIA announced after market close that its Q2 revenue reached $13.51 billion (approximately 18 trillion KRW), a 101% increase compared to the same period last year. This figure significantly surpassed market expectations of $11.22 billion. Earnings per share also surged 429% year-over-year to $2.70, exceeding the market estimate of $2.09.
NVIDIA's strong performance was driven by soaring sales of the latest AI chips amid the global generative AI boom. Demand for AI chips (H100 and A100) surged, with the data center segment's revenue increasing 171% year-over-year to $10.32 billion. The gaming business segment also posted record revenue of $2.49 billion, up 22% from the same quarter last year. Jensen Huang, NVIDIA's CEO, stated in the earnings release, "Despite a challenging macro environment, we achieved record results in data center and gaming."
Reflecting the rapidly growing demand, NVIDIA set its Q3 revenue guidance at $16 billion, far exceeding Wall Street's estimate of $12.61 billion. NVIDIA plans to further increase supply to meet second-half demand. The company is reportedly planning to quadruple production of its latest H100 chips next year to 1.5 to 2 million units, up from 500,000 units this year. NVIDIA also announced approval of a $25 billion share repurchase program.
The strong earnings and share buyback news sent NVIDIA's stock soaring. Shares of NVIDIA, listed on the Nasdaq, jumped as much as 9.6% in after-hours trading, reaching an all-time high of $510. The stock closed the regular session up 3.17% on expectations for the earnings report. The closing price of $471.16 represents a roughly 222% increase since the beginning of the year, making it the best-performing stock in the S&P 500 index this year.
NVIDIA warned that additional U.S. semiconductor export controls against China, pushed by the Biden administration, could harm the company's long-term growth.
Colette Kress, NVIDIA's Chief Financial Officer (CFO), said during the post-earnings conference call, "Our Q2 sales to China accounted for 20-25%, similar to past levels," but added, "In the long term, additional U.S. export restrictions on China will permanently cost us the opportunity to compete and lead in one of the world's largest markets."
This statement came amid growing market concerns that semiconductor export controls against China could be a major negative factor for NVIDIA's performance. In October last year, the U.S. government announced export control measures banning the sale of advanced U.S.-made semiconductor equipment to Chinese semiconductor manufacturers and restricting exports of semiconductor chips used in AI and supercomputers. At that time, NVIDIA stated that these controls could result in up to $400 million in quarterly revenue losses.
Since then, NVIDIA has developed and produced the A800 chip for export to China, which has somewhat lower performance than the existing A100 chip but is not subject to export restrictions. However, the Biden administration is reportedly preparing additional regulations to ban sales of this chip. Chinese big tech companies have begun stockpiling semiconductors to secure supply before export controls fully take effect. According to foreign media reports, Chinese tech giants such as Tencent, Alibaba, and ByteDance have placed orders worth $5 billion for 100,000 A800 chips and have already signed contracts with NVIDIA to purchase $4 billion worth of A800 chips next year.
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