London, UK – Nvidia shares faced a decline in U.S. premarket trading on Thursday following the release of the company’s fiscal second-quarter results. Despite surpassing revenue expectations, a slight dip in gross margin and high investor expectations overshadowed the positive news. The stock initially dropped by 4.6% but later recovered to a 1.46% decline by 10:47 London time.
With over $30 billion in revenue reported for the July quarter, marking a 122% increase year-on-year, Nvidia has experienced four consecutive quarters of triple-digit revenue growth. However, as the company continues to rapidly expand, comparisons from previous years become more challenging.
The company issued a revenue guidance of $32.5 billion for the fiscal third quarter, suggesting an 80% year-on-year growth but a slower rate compared to the previous quarter. Analysts anticipate the company’s gross margins to fall within the “mid-70% range” for the entire year, slightly lower than the 76.4% margin expected by analysts.
Despite the positive revenue report, analysts believe that Nvidia would have needed to exceed all expectations significantly to see a rise in stock prices following the earnings release. The recent drop in Nvidia’s share price follows a significant rally, with shares surging more than 150% in the current year and over 750% since the start of 2023, driven by the growing demand for artificial intelligence technologies.
The decline in Nvidia’s stock also impacted other semiconductor companies globally, with major players like Samsung and Taiwan Semiconductor Manufacturing Company experiencing lower stock prices. During the earnings call, Nvidia addressed concerns about potential delays in its next-generation Blackwell AI chip and announced a $50 billion stock buyback program.
Overall, the stock market response to Nvidia’s earnings report highlights the challenges of meeting high investor expectations in a rapidly evolving technological landscape. Investors will closely monitor Nvidia’s performance in the coming months to assess the company’s ability to sustain its growth momentum amidst increasing competition and shifting market dynamics.