Did NVIDIA's Ultra-Conservative Guidance Set It Up For Huge Beat?

Commenting on NVIDIA Corporation's (NASDAQ: NVDA) third-quarter results, BMO Capital Markets said its fiscal third-quarter earnings and revenues were all well above the guidance.

Analyst Takeaways

Analyst Ambrish Srivastava noted that the growth came from data centers, gaming and autos.

• Data center revenues accounting for 12 percent of the total revenues rose 193 percent year-over-year.
• Artificial Intelligence, or AI, and supercomputing for Hyperscale customers, GRID as well as deployments of GPU by Microsoft Corporation (NASDAQ: MSFT) Azure and Alicloud for AI, analytics and HPC drove growth.
• Gaming accounting for 62 percent of the total revenues rose 63 percent year-over-year to $1.24 billion, thanks to ramp of Pascal-based products.
• Sees share gains in the 5-10 million hyperscale datacenter nodes.
• AI for enterprise and IoT to drive growth for its Tesla Motors Inc (NASDAQ: TSLA) business.

Guidance And Analyst Expectations

The firm noted that the fiscal fourth-quarter guidance that calls for 5 percent sequential revenue growth to $2.10 billion at the mid-point is well above the consensus and its estimate for 1 percent to flat growth.

Reflecting the higher revenues and higher operating expenditure, BMO Capital raised its 2017 and 2018 estimates materially, with fiscal year 2017 and 2018 pro forma earnings per share estimate at $2.60 and $3.10, respectively, up from $1.99 and $2.05.

BMO Capital Markets said it continues to rate NVIDIA a Market Perform but raised its price target to $75 from $59.

At the time of writing, NVIDIA was up 25.76 percent to $85.23 on roughly 3.5 times its average volume.

Image Credit: By Diptej Saner (Own work) [CC BY-SA 3.0], via Wikimedia Commons