Nvidia, the dominant force in AI chip manufacturing, recently unveiled its fiscal third-quarter 2026 financial results, far exceeding market forecasts and triggering a significant surge in its stock price during extended trading hours. The company also provided an optimistic revenue outlook for the upcoming quarter, with CEO Jensen Huang emphasizing the extraordinary demand for its Blackwell AI platform, describing sales as "off the charts." This positive report comes at a crucial time, as concerns about a potential AI market bubble have recently pressured tech stocks, including Nvidia, leading to a broader market decline from previous record highs.
Nvidia's financial report highlights several impressive segmental performances. The data center division, its largest revenue generator, recorded an outstanding $51.2 billion in sales, accounting for a substantial portion of the company's total $57 billion revenue. This represents a remarkable 66% increase from the previous year and a 25% sequential rise from the second quarter. The gaming sector also saw a healthy 30% year-over-year growth, reaching $4.27 billion, with channel inventories stabilizing for the holiday season. Additionally, professional visualization revenue grew by 56% year-over-year to $760 million, and automotive revenue increased by 32% to $592 million compared to the prior year.
Despite the strong performance, market observers remain cautious about the sustainability of the AI boom. James Demmert, Chief Investment Officer at Main Street Research, pointed out that while the AI cycle is still in its early stages, the emergence of competing AI chip products from tech giants like Google and Amazon could pose a risk to Nvidia's dominance in the future. However, Demmert still advised investors to consider purchasing Nvidia shares, especially following its recent price dip. His sentiment aligns with that of Chris Zaccarelli, CIO of Northlight Asset Management, who believes that Nvidia's strong results could reinvigorate the bull market, asserting that the significant investments by major tech companies in AI infrastructure are indeed tangible.
CEO Jensen Huang's remarks underscore the rapid expansion of the AI ecosystem, with increasing numbers of foundational model developers, AI startups, and widespread adoption across various industries and countries. His comments aim to reassure investors about the robust growth of the industry, particularly given previous concerns about AI spending affecting tech stock valuations. Nvidia's fiscal fourth-quarter revenue projection of $65 billion, with a 2% margin of error, surpasses analyst expectations of $62.38 billion, further cementing investor confidence. The company also anticipates GAAP and non-GAAP gross margins of around 74.8% and 75%, respectively, for the fourth quarter, indicating strong profitability.
In the third fiscal quarter, Nvidia achieved adjusted earnings of $1.30 per share, surpassing the analyst consensus of $1.26. Total revenue reached a record $57 billion, exceeding the projected $55.4 billion. This impressive performance is largely driven by surging data center sales, reflecting the continued heavy investments in AI infrastructure by major clients such as Meta, Amazon, Microsoft, and Alphabet. These tech giants have all reiterated their commitment to substantial capital expenditures in AI, signaling ongoing demand for Nvidia's cutting-edge chips. The market's high expectations for Nvidia's earnings reflect its critical role as an AI bellwether, with its performance often influencing broader market trends and investor sentiment towards the AI rally.
The company's profitability measures also showed improvement, with GAAP fiscal third-quarter gross margins increasing to 73.4% from 72.4% in the second quarter, although slightly lower than the 74.6% recorded a year earlier. Non-GAAP gross margins followed a similar trajectory, rising quarter-over-quarter but declining year-over-year. The interconnected nature of the AI industry, characterized by complex partnerships and significant investment deals, has raised questions among some investors about the true scale and demand within the sector. Ben Reitzes, head of Tech Research at Melius Research, emphasized the need for CEO Jensen Huang to provide more clarity on these "circular deal" strategies during post-earnings discussions, particularly regarding return on investment and the rationale behind continued substantial investments in AI.
