Nvidia stock price drops despite strong quarterly profit and bullish guidance

California-based company's net profit in October quarter jumps 109% to more than $19.3bn

Shares of Nvidia fell in after-hours trading on Wednesday, despite reporting a 109 per cent surge in last-quarter net profit and issuing a bullish guidance for the current quarter.

This paradoxical reaction reflects the high expectations placed on the artificial intelligence-powered chip maker and the market's heightened sensitivity to any perceived risk, industry analysts said.

Nvidia's stock dropped 2.27 per cent in after-hours trading to almost $142.58 a share after closing 0.76 per cent down at market close on Wednesday.

“It is hard to say that good results will lead to a good market reaction,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank. “Over time, and at the current valuations, investors have become harder to satisfy and increasingly worried about what could go wrong.”

Some of the risks Nvidia is facing involve the rising competition and a slower future demand for AI from the Big Tech firms.

“Capital continues to flow into AI start-ups, especially in the US, many sectors, public or private, consider AI projects to improve their productivity levels,” Ms Ozkardeskaya said. “But demand outside the Big Tech will be more granular, and the new AI customers will certainly be looking for more affordable chips than Nvidia’s expensive, premium ones.”

The company’s net profit in the 2025 fiscal third quarter ending October 27 jumped to more than $19.3 billion, from $9.2 billion in the same period a year earlier, Nvidia said. It was up 16 per cent on a quarterly basis.

Earnings per share jumped to 78 cents from 37 cents in the same period last year, while revenue soared more than 94 per cent annually to more than $35 billion, exceeding LSEG expectations of more than $33.1 billion.

But the revenue growth marked a continued slowdown from the previous three quarters, during which sales increased by 122 per cent, 262 per cent and 265 per cent, respectively. It was the company’s second consecutive quarter with more than $30 billion in revenue.

The Nasdaq-listed company's share price is up more than 202 per cent in the year so far. Nvidia's market value reached $3.58 trillion at the close of trading on Wednesday, positioning it ahead of Apple ($3.46 trillion), Microsoft ($3.09 trillion), Alphabet ($2.16 trillion) and Amazon ($2.13 trillion).

“The age of AI is in full steam, propelling a global shift to Nvidia computing,” said Jensen Huang, founder and chief executive of the technology giant.

Bullish outlook

The California-based company is now forecasting fourth-quarter revenue of about $37.5 billion, plus or minus 2 per cent, compared to the $37.08 billion forecast by LSEG analysts.

This indicates year-over-year growth of about 70 per cent, down from the 265 per cent annual growth recorded during the same period last year.

The company remains optimistic about its sales outlook, driven by surging demand for its graphics processing units, which are integral to the rapid growth of the AI industry.

Nvidia driving S&P 500 gains in 2024

Nvidia is disrupting not only because of its technology but because of its “outsize” weight, industry analysts said. Five stocks account for about half of the gains recorded by the S&P 500 index this year and Nvidia alone is responsible for a quarter of the gains.

“This phenomenal weighting reflects the massive growth in demand for AI technologies, where Nvidia is at the forefront,” said John Plassard, senior investment specialist at wealth management and financial services firm Mirabaud.

“Nvidia is no longer just an AI company … it has become a pillar of the US indices, and the trajectory of its valuation directly influences the health of the S&P 500.”

Nvidia's strong presence in the market creates a situation where its performance can affect global investment patterns and the overall US stock market.

“Nvidia's dominant position in US stock market indices makes foreign investors sensitive to its performance, creating a leverage effect where Nvidia's fluctuations can significantly affect capital flows and the valuation of the US stock market,” Mr Plassard said.

Profits driven by chip business

Nvidia’s strong performance in the last quarter was primarily driven by its data centre business, which produces advanced AI chips like the A100 and H100. These GPUs are integral to developing and operating generative AI technologies, including models like ChatGPT.

In March, Nvidia launched the Blackwell architecture, introducing the B100 and B200 GPUs. These new chips are designed to boost AI processing capabilities, offering significant improvements over their predecessors. The B200, for instance, is promoted as the “world’s most powerful chip” for AI, delivering up to 20 petaflops (a measure used to quantify the performance of supercomputers) of computing power.

Data centre division’s third-quarter revenue stood at record $30.8 billion, up 17 per cent on a quarterly basis and 112 per cent from a year ago period. This unit contributed almost 88 per cent to the overall revenue. The company’s gaming unit added nearly $3.3 billion, up 15 per cent from the same quarter a year ago, in the August-October period.

Before its AI chips gained momentum, Nvidia primarily focused on gaming graphics cards. However, some of its graphics cards are now used for AI purposes. Nvidia’s professional visualisation and automotive units added $486 million (up 17 per cent) and $449 million (up 72 per cent), respectively, in the previous quarter.

The company said it would pay its next quarterly cash dividend of $0.01 a share on December 27 to all shareholders of record on December 5.

Why analysts are pinning high hopes on Blackwell

“Nvidia has an important card to play now, and it’s called Blackwell. Some expect the company to ship up to 100,000 of these chips in the current quarter … that would be a $7 million addition to sales revenue,” said Ms Ozkardeskaya.

Some of the prominent customers of Nvidia, such as Microsoft, Oracle and OpenAI, have started receiving the latest Blackwell chips.

The company’s chief financial officer, Colette Kress, said that 13,000 samples of the chips have been shipped to customers.

“Every customer is racing to be the first to market. Blackwell is now in the hands of all of our major partners, and they are working to bring up their data centres,” Ms Kress said during the investors’ call. “The demand for Blackwell is expected to exceed supply for several quarters in fiscal 2026.”

Mr Huang said Blackwell chip is in “full production”. Nvidia designs and makes AI hardware and software GPUs for various industries. GPUs can process various tasks simultaneously, making them useful for machine learning, video editing and gaming applications.