NVIDIA Corporation (NVDA), a leading global manufacturer of high-end graphics processing units (GPUs), topped analyst expectations in the first quarter of fiscal 2025. Its solid performance indicates the robust demand for its AI chips, and CEO Jensen Huang expects to see revenue from its next-generation superior AI chip, Blackwell, later this year.

For the first quarter that ended April 28, 2024, NVIDIA’s revenue rose 262% year-over-year to $26.04 billion. That surpassed analysts’ revenue estimate of $24.59 billion. The company posted a record revenue from its Data Center segment of $22.60 billion, an increase of 427% from the prior year’s quarter.

“Our data center growth was fueled by strong and accelerating demand for generative AI training and inference on the Hopper platform. Beyond cloud service providers, generative AI has expanded to consumer internet companies, and enterprise, sovereign AI, automotive and healthcare customers, creating multiple multibillion-dollar vertical markets,” said Huang.

“A big highlight this quarter was Meta’s announcement of Lama 3, their latest large language model which used 24,000 H100 GPUs,” NVIDIA finance chief Kress said on a call with analysts. She noted that large cloud providers account for approximately “mid-40%” of Nvidia’s data center revenue.

Also, the company reported non-GAAP EPS of $6.12, compared to the consensus estimate of $5.58. And it is up 461% from the year-ago value.

During the quarter, NVDA bought back around $7.7 billion worth of its shares and paid $98 million in dividends.

Besides, the chipmaker announced a ten-for-one forward stock split of NVIDIA’s issued common stock, making stock ownership more accessible to employees and investors.

According to its outlook for the second quarter of 2025, the company expects revenue to be $28 billion, plus or minus 2%. Its non-GAAP gross margin is expected to be 75.5%, plus or minus 50 basis points. NVDA’s non-GAAP operating expenses are anticipated to be nearly $2.8 billion.

Following its outstanding financial performance, NVDA’s stock topped $1,000 for the first time in extended trading on Wednesday. Moreover, the stock has surged 94.9% over the past six months and 204.6% over the past year to close the last trading session at $949.50.

Here’s what could influence NVDA’s performance in the upcoming months:

Raised Dividend Payout

NVDA increased its quarterly cash dividend by 150% from $0.04 per share to $0.10 per share of common stock. The raised dividend is equivalent to $0.01 per share on a post-split basis and will be paid on June 28 to all shareholders of record on June 11.

Robust Financials

NVDA’s revenue increased 262% year-over-year to $26.04 billion for the first quarter of 2025. Its non-GAAP gross profit rose 328.2% from the year-ago value to $20.56 billion. The company’s non-GAAP operating income was $18.06 billion, up 491.7% from the prior year’s quarter.

Furthermore, the company’s non-GAAP net income and EPS came in at $15.24 billion and $6.12, increases of 461.7% and 461.5% year-over-year, respectively. Its cash, cash equivalents and marketable securities stood at $31.44 billion as of April 28, 2024, compared to $25.98 billion as of January 28, 2024.

Favorable Analyst Estimates

Analysts expect NVDA’s revenue to increase 95.4% year-over-year to $26.39 billion for the second quarter ending July 2024. The consensus earnings per share estimate of $5.87 for the current year indicates a 117.4% year-over-year rise. Moreover, the company has surpassed consensus revenue and EPS estimates in each of the trailing four quarters.

In addition, the company’s revenue and EPS for the fiscal year ending December 2025 are expected to grow 81.1% and 96% year-over-year to $110.34 billion and $25.40, respectively. For the fiscal year 2026, Street expects its revenue and EPS to increase 29.4% and 26.6% from the prior year to $142.75 billion and $32.15, respectively.

Solid Profitability

NVDA’s trailing-12-month gross profit margin and EBITDA margin of 72.72% and 56.60% are significantly higher than the industry averages of 49.07% and 9.72%, respectively. Likewise, the stock’s trailing-12-month net income margin of 48.85% is 1,748.8% higher than the industry average of negative 2.64%.

Moreover, the stock’s trailing-12-month ROCE, ROTC, and ROTA of 91.46%, 46.75%, and 45.28% are favorably compared to the industry averages of 3.84%, 2.60%, and 1.56%, respectively.

Elevated Valuation

In terms of forward non-GAAP P/E, NVDA is currently trading at 37.55x, 55.3% higher than the industry average of 24.17x. Also, the stock’s forward EV/Sales and EV/EBITDA of 20.59x and 32.35x are considerably higher than the industry average of 2.88x and 15.04x, respectively.

Additionally, NVIDIA’s forward Price/Sales multiple of 20.72 is 623.8% higher than the industry average of 2.86. Its forward Price/Cash Flow of 40.23x is unfavorably compared to the 23.78x industry average.

POWR Ratings Reflect Uncertainty

NVDA’s mixed fundamentals are reflected in its POWR Ratings. The stock has an overall C rating, equating to Hold in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. NVDA has an A grade for Sentiment, consistent with optimistic analyst expectations. Also, the stock has an A grade for Quality, in sync with its higher-than-industry profitability.

However, NVDA has an F grade for Stability, justified by its 24-month beta of 1.88. The stock has a D grade for Valuation, consistent with its higher valuation than its peers.

Within the Semiconductor & Wireless Chip industry, NVDA is ranked #23 out of 92 stocks.

Beyond what I have stated above, we have also given NVDA grades for Growth and Momentum. Get all NVDA’s POWR Ratings here.

Bottom Line  

NVDA’s first-quarter earnings surpassed analyst estimates, with around a threefold revenue increase, sending its share price to an all-time high of over $1,000 after the market close yesterday. CEO Jensen Huang stated that demand for NVIDIA’s electric circuits, called GPUs, and data centers has been “incredible.”

The AI boom is primarily driven by applications such as ChatGPT and GPT-4, alongside a rapidly growing number of AI startups, which Huang estimated to be between 15,000 and 20,000. Statista projects the generative AI (GenAI) market to reach $36.06 billion in 2024, with the U.S. accounting for the largest market size of $11.66 billion.

Further, the GenAI market is expected to total $356.10 billion by 2030, growing at a CAGR of 46.5% from 2024 to 2030.

While NVDA’s share price has soared to new highs this year after a stellar 2023, it is trading at a premium compared to its peers. Also, the chipmaker faces increasing competition from rivals, such as Advanced Micro Devices Inc. (AMD), Amazon.com, Inc. (AMZN), and Alphabet Inc. (GOOGL), making strides in developing their AI-focused chips.

Given NVDA’s stretched valuation and heightened competition, waiting for a better entry point in this stock seems wise.

Stocks to Consider Instead of NVIDIA Corporation (NVDA)

Given its near-term uncertain prospects, the odds of NVDA outperforming in the weeks and months ahead are compromised. However, there are many industry peers with much more impressive POWR Ratings. So, consider these three B-rated (Buy) stocks from the Semiconductor & Wireless Chip industry instead:

Qualcomm Inc. (QCOM)

Cirrus Logic, Inc. (CRUS)

Photronics, Inc. (PLAB)

To explore more A and B-rated chip stocks, click here.

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NVDA shares were unchanged in premarket trading Thursday. Year-to-date, NVDA has gained 104.91%, versus a 12.65% rise in the benchmark S&P 500 index during the same period.

Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.

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