NVIDIA & Salesforce Surpass Earnings Expectations

On Wednesday, 28 August, tech giants NVIDIA (NVDA) and Salesforce (CRM) unveiled their latest earnings reports, offering a snapshot of the technology sector's health which emphasised AI and cloud computing trends. 

Here’s a summary of the key takeaways from these major reports:

NVIDIA’s Earnings Review 

NVIDIA Beats Forecasts

Perhaps unsurprisingly, NVIDIA, which has gained a whopping 160.8% since the beginning of the year, reported an earnings beat on Wednesday, 28 August.

Here’s a summary of the earnings report: 

• The company reported adjusted earnings per share (EPS) of $0.68, surpassing the analysts’ expectation of $0.64. 

• Quarterly earnings surged by 168% compared to the same period last year. 

• Revenue reached $30 billion, exceeding the forecast of $28.8 billion. 

• The company’s guidance for Q3 came in at $32.5 billion, higher than the analysts’ estimate of $31.9 billion.

NVIDIA also revealed a $50 billion share buyback. While past performance is not indicative of future results, traders and investors may want to note that share buybacks often boost EPS. This is due to the reduced number of shares outstanding, which can drive further increases in the stock's market price. Consequently, it will be interesting to observe the impact of NVIDIA's buyback program.

NVIDIA’s Strongest Segments

NVIDIA is widely recognised as one of AI’s major beneficiaries. The design and software of AI chips dominate 80% to 95% of the market. In addition, “almost half of its revenue” is tied to big tech companies (like Alphabet, Meta, and more).

The earnings report underscored that AI demand is still at high levels. Additionally, it was revealed that NVIDIA’s data centre business was a key revenue driver, with its contribution as well as revenues overall exceeding expectations. Analysts had forecast revenue of $25 billion for the quarter, but the actual figure was $26.3 billion, marking an impressive 154% increase from the $10.3 billion reported in the same quarter last year. 

Additionally, the company’s gaming segment saw substantial revenue growth, increasing by 16% year-over-year to $2.8 billion.

Interestingly, despite the positive results, NVIDIA’s shares slid on Wednesday.

NVIDIA Sheds $200 Billion in Market Value Despite the Earnings Beat 

NVIDIA shares slid by 7% on Wednesday, resulting in a loss of about $200 billion in market value. Despite the company’s sales forecast for the current quarter of $32.5 billion surpassing expectations, the beat was only slight. This, as a result, may have been “the catalyst” for the “rare decline” in share value following the earnings update.

Others note that while the company reported the above estimates, the market expectations could have been “so high” that the numbers may not have been “good enough for people to be happy.”

What’s Next For NVIDIA?

While the future trajectory of this AI leader remains uncertain and could be influenced by various factors, such as rising competition from companies like AMD, shifting demand, economic uncertainties, central bank policies, and US-China tech restrictions, CEO Jensen Huang remains optimistic. 

In a recent statement, Huang expressed confidence in the upcoming Blackwell chip, stating that its production ramp, set to begin in Q4 and extend into fiscal 2026, is expected to be “incredible.” He also said that “in the fourth quarter, we expect to generate several billion dollars in revenue from Blackwell.”

Huang also said that “the reason why [NVIDIA’s] velocity is so high is simultaneously because the complexity of the model is growing.” He added that the company wants to lower costs and increase “the scale of AI models so that it will reach a level of extraordinary usefulness and realise the next industrial revolution.”

In addition, NVIDIA reported that it expects an increase in the shipments of its Hopper chips in H2 2024. 

Nonetheless, only time will tell what lies ahead for this AI darling.

Salesforce’s Earnings Review 

On Wednesday, 28 August, Salesforce, a cloud computing powerhouse, reported strong earnings performance. 

Here's a quick overview: 

• Adjusted EPS reached $2.56, surpassing the anticipated $2.36. 

• Revenue hit $9.33 billion, exceeding the expected $9.23 billion. 

• The company achieved 8% YoY growth in quarterly revenue. 

• Net income totalled $1.43 billion, or $1.47 per share, up from $1.27 billion, or $1.28 per share, in the same quarter last year.

• Q3 adjusted earnings guidance came in at $2.42 to $2.44 per share, with revenue expected to range from $9.31 billion to $9.36 billion. Analysts had projected $2.43 per share and $9.41 billion in revenue.

Looking ahead to fiscal 2025, Salesforce anticipates adjusted earnings of $10.03 to $10.11 per share and revenue between $37.7 billion and $38 billion, reflecting an 8% to 9% growth. Last quarter, the forecast was $9.86 to $9.94 per share and similar revenue figures. (Source: CNBC)

How Did Salesforce’s Shares React?

Unlike NVIDIA, Salesforce’s shares rose by 4% in extended trading following the earnings beat, which may have been a welcome gain to some, especially since the company has lost 2% so far in 2024. 

What’s Next for Salesforce?

Salesforce is currently preparing for a leadership transition as Amy Weaver steps down as CFO but is expected to stay as an advisor until a successor is appointed. 

The company will evaluate both internal and external candidates for the role. Meanwhile, Salesforce continues to ride the AI wave by planning a fall test for its Einstein Copilot for Merchants and showcasing its Agentforce AI capabilities. It is also taking aim at Microsoft’s AI offerings. 

It’s important to monitor Salesforce closely for any updates or developments that could influence its direction and growth.

Conclusion

In summary, NVIDIA and Salesforce’s earnings reports on 28 August showed contrasting results. 

NVIDIA’s strong performance in AI and data centres may have been overshadowed by a surprising drop in its stock price, reflecting high investor expectations. 

Conversely, Salesforce's positive earnings beat led to a stock increase, highlighting its continued strength in cloud computing and AI. 

As both companies move forward, their strategic decisions and market reactions will be key to their future success.