Nvidia’s results beat expectations but disappointed investors

Chip developer Nvidia released its latest results yesterday, marking the eighth consecutive quarter in which it underpromised and overdelivered on both profit and revenue.

Earnings were 8% above expectations – better than the previous quarter’s 6.25%, but below the double-digit upside surprises between May 2023 and February 2024.

A “decent” rise, according to Dan Coatsworth, investment analyst at AJ Bell, and yet share prices fell 2.5% in pre-market trading as investors expressed disappointment at the fall in margins and future sales forecasts.

“The negative market reaction to Nvidia’s results suggests that investors are now focused on the details rather than the big picture,” Coatsworth said.

“At first glance, Nvidia has once again generated growth that most companies will never achieve in their lifetime. What worried investors this time was a decline in gross margins compared to the previous quarter, with forecasts for a further decline in the coming quarter and a weaker-than-expected forecast for sales.”

This shouldn’t be a reason to panic as margins are still above 70%, something many companies could only dream of, the analyst said, and Nvidia is confident they will recover as production of its latest Blackwell chips, the announced in March is ramping up.

But Coatsworth could face two headwinds in 2025: antitrust action and President-elect Donald Trump’s possible restrictions on technology exports.

“The more successful Nvidia becomes, the greater the potential for an antitrust crackdown. There have been indications that Nvidia may make it harder for its customers to switch to other providers and offer preferential pricing to customers who only use its products,” he said.

Trump could also cause problems by taking a more aggressive stance on China’s access to U.S. technology.

“Once Trump returns to the White House, he could easily tighten restrictions on the sale of American technology to China, which could negatively impact Nvidia’s revenue. “It’s a real risk and something to keep a close eye on once the president-elect settles back into the Oval Office,” Coatsworth noted.