Needham’s Gill: Nvidia’s gross margin has climbed into a ‘rare territory’

Nvidia Corp (NASDAQ: NVDA) reported another record quarter and gave upbeat guidance for the future on Wednesday, sending shares up more than 5.0% in extended trading.

Raji Gill discusses earnings on CNBC’s ‘Closing Bell’

Nvidia said its gross margin improved to 67% in the recent quarter to beat expectations that thoroughly impressed Needham’s Raji Gill. On CNBC’s “Closing Bell”, he said:

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For semiconductor companies, gross margin in the 60s is rare territory. The main reason why Nvidia is generating such high margins is that they sell a lot of software. Going forward, there’s an even bigger opportunity for them to sell software in the metaverse space.

Ahead of the earnings press release, Gill said, “it’ll take a lot to lift this stock”. After the report, he confirmed, “a lot” was exactly what Nvidia delivered. He added:

All business segments are growing, and this is even before we start to see the metaverse impact or even the autonomous driving revolution that will be happening in the next several years.

Here’s what Nvidia’s Q3 earnings report tells us

Nvidia’s net income printed at $2.46 billion in the third quarter (97 cents per share) versus the year-ago figure of $1.34 billion (53 cents per share). On an adjusted basis, it earned $1.17 per share.

The technology giant posted $7.1 billion in revenue, representing a YoY growth of 50%. According to FactSet, experts had forecast $1.11 of adjusted EPS on $6.82 billion in revenue. Gaming and data-centre sales jumped 42% and 55%, respectively, to hit a new high – both above estimates.

For the current quarter, Nvidia forecasts up to $7.55 billion in revenue. Analysts, on the other hand, are calling for $6.89 billion instead. Earlier this week, Wedbush Securities downgraded Nvidia to “neutral”.