Key Morningstar Metrics for Nvidia
- Fair Value Estimate: $130
- Morningstar Rating: ★★★
- Morningstar Economic Moat Rating: Wide
- Morningstar Uncertainty Rating: Very High
What We Thought of Nvidia’s Earnings
We maintain our $130 fair value estimate for wide-moat Nvidia NVDA as the company reported another quarter of strong results, while providing investors with guidance that exceeded FactSet consensus estimates. Shares appear fairly valued to us as we think the market is pricing in both the tremendous potential for Nvidia’s artificial intelligence solutions and the risk of slower spending on such products beyond calendar 2025.
Revenue in the January quarter was $39.3 billion, up 12% sequentially, up 78% year over year, and ahead of guidance of $37.5 billion and FactSet consensus estimates of $38.1 billion. Data center revenue is still the once-in-a-generation growth driver for Nvidia, up 93% year over year. Revenue from new Blackwell products was $11 billion and exceeded management’s expectations. Adjusted gross margin came in at 73.5%, down 150 basis points sequentially but in line with guidance due to higher costs associated with new Blackwell products.
Nvidia expects April-quarter revenue to be $43 billion, which would be up 9% sequentially, up 65% year over year, and ahead of FactSet consensus estimates of $42.1 billion. Despite the selloff in late January associated with the emergence of DeepSeek, we still see no meaningful signs that data center demand is waning in the near-term, and we’ve been encouraged with the capital expenditure plans of cloud computing leaders for the upcoming year. We still suspect that Nvidia will sell virtually everything it can make in calendar 2025. The only blemish we saw within these results was the forecast for first-quarter adjusted gross margin to come in at 71%, implying another sequential decline due to the Blackwell ramp, although we’d be impressed if management can achieve its target to reach the mid-70% range later this year.
Nvidia Stock vs. Morningstar Fair Value Estimate
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On the demand front, Nvidia expects to sell several Blackwell GPU clusters that will use at least 100,000 chips (on par with xAI’s Colossus buildout) and will cost billions for each customer of such clusters. We believe management when they suggest that they have intimate knowledge of their customer’s data center plans. Nvidia also remained optimistic about AI development at these cloud customers, as startups appear to be focused on AI development, either with the build of AI agents (that is, agentic AI) or physical AI, which may manifest in robotics, drug discovery, autonomous driving, or other industrial applications. Combined with signals we see on the supply side regarding advanced chip packaging capacity (specifically Chip-on-Wafer-on-Substrate used in AI GPUs), we remain encouraged that Nvidia will continue to generate strong growth in the quarters and years ahead.
Management emphasized its focus on AI inference, which we think will represent the bulk of the AI chip opportunity in the years ahead, even though Nvidia is also dominant in AI training today. We were specifically impressed that many of its early Blackwell deployments were for inference, rather than training, which management signaled as a first for a new DC product.
Revenue from China (based on customer billing location) came in at 13% of Nvidia’s total in fiscal 2025, about half of Nvidia’s peak revenue percentage from the region. Nvidia believes that its China revenue will be suppressed as long as US restrictions are in place for shipments into the region. We still don’t view China as a durable, long-term driver of Nvidia’s revenue growth due to geopolitical risk, and our investment thesis doesn’t hinge on a recovery in shipments into this region.
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