Nvidia is trading lower Thursday even after reporting stronger-than-expected quarterly earnings.
The Santa Clara, Calif., AI-chip giant (NVDA) posted fiscal-Q4 revenue of $39.3 billion, a 78% surge from the year-earlier period. But growth slowed from the 265% the company posted a year earlier.
Fourth-quarter revenue from its key data-center segment, which provides chips and processors that power AI computing for megacap clients like Microsoft (MSFT) and Amazon (AMZN) , was a record $35.6 billion, up 93% from a year earlier. But again, the growth was slower than the 409% surge seen a year earlier.
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Nvidia expects current-quarter revenue around $43 billion, a year-to-year increase of about 65%.
“The demand for Blackwell is extraordinary. AI is evolving beyond perception and generative AI into reasoning,” Nvidia CEO Jensen Huang said.
But keeping up with that demand is starting to pressure the company’s profit margins.
Nvidia has struggled to regain growth momentum. After a surge of 171% in 2024, the stock is down 1% in the six months through Feb. 27.
Gross-profit margin is Nvidia’s problem
Nvidia reported a non-GAAP 73.5% gross margin for the quarter, 3.2 points narrowed from a year earlier. The company attributed the narrower figure to newer data-center products that were more complicated and costly.
“Initially, we are focused on expediting the manufacturing of Blackwell systems to meet strong customer demand as they race to build out Blackwell infrastructure,” Nvidia’s chief financial officer, Colette Kress, said during the earnings call.
“When fully ramped, we have many opportunities to improve the cost, and gross margin will improve and return to the mid-70s late this fiscal year.”
UBS analyst Timothy Arcuri commented that “the biggest nit might be gross margin, which was guided a little below expectations.”
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“However, we think this is entirely due to a big shift in mix in the April quarter, where Blackwell should be >60% of revenue and the company recommitted to being back in the mid-70s by year-end,” the analyst added. He reiterated a buy rating and $185 price target on Nvidia stock.
Morgan Stanley analyst Joseph Moore also said that the earnings result “wasn’t perfect, mostly due to continued gross margin pressures.”
“But we think that reflects challenges with GB200 which were well documented – and which from our checks are well on their way to improving,” Moore said.
He raised Nvidia’s price target to $162 a share from $152, adding that the earnings represent a “transitional quarter” in a “remarkable growth phase.”
Nvidia has struggled to regain growth momentum. After a surge of 171% in 2024, the stock is down 1% over the six months through Feb. 27.
Nvidia’s valuation remains ‘compelling’: B of A
Bank of America reiterated a buy rating on Nvidia, raising its price target to $200 from $190 “as the company remains in a dominant position of leading the AI market towards compute-intensive inference, agentic applications, and physical AI/robotics.”
The investment firm remains confident in strong product ramps through fiscal 2026 and Nvidia’s “compelling” valuation.
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“We understand the desire to diversify portfolios away from AI/cloud, but we believe this underappreciates the solid (and global) pace of AI investments and NVDA’s compelling valuation.,” the firm said.
B of A said that visibility in non-AI markets like industrial, automotive, PCs, and phones remains muted. Yet some companies in these sectors (like Texas Instruments (TXN) and Microchip Technology (MCHP) ) have higher valuations than Nvidia’s, “which does not seem reasonable.”
As of Feb. 27, Nvidia trades at a forward price-to-earnings multiple of 30.67, while Texas Instruments and Microchip’s numbers are 35.09 and 40.49, respectively.
More analysts revisit Nvidia stock price targets
JP Morgan reiterated an overweight rating on Nvidia with a $170 price target following its earnings results, thefly.com reported.
Nvidia is “further distancing itself with its aggressive cadence of new product launches and more product segmentation over time,” JP Morgan said, adding that its demand continues to outstrip supply.
Citi maintained a buy rating on Nvidia with a $163 price target.
Blackwell “seems to be on track,” the analyst said.
Citi noted that inference demand is rising with post-reasoning models like DeepSeek, as long reasoning requires 100 times more computing power per task than one-shot inference.
However, Citi warned that potential China restrictions, tariffs, and gross margins will likely keep Nvidia’s stock range-bound in the near term.
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