Nvidia did it again. Is the AI stock a buy after another round of record profits?

Nvidia just crushed earnings again. Are investors surprised?

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Coming into Nvidia's (NASDAQ: NVDA) fiscal 2025 first-quarter earnings report, expectations were sky-high.  

Nvidia stock has been the flag-bearer for the generative artificial intelligence (AI) revolution. The company makes the technological components -- graphics processing units (GPUs) and related superchips -- that form the backbone of AI infrastructure, allowing companies like OpenAI to run models like ChatGPT.

With the explosion in AI demand, Nvidia's revenue has skyrocketed, more than tripling over the last few quarters. And that pattern continued in fiscal 2025's first quarter.

According to the report released Wednesday afternoon, revenue jumped 262% year over year to $26 billion, topping estimates at $24.7 billion and growing 18% sequentially. Revenue in the data center, where the AI revolution is happening, soared 427% year over year to $22.6 billion.

Margins expanded again, a testament to Nvidia's pricing power in the data center market, as it has an estimated 98% share of the data center GPU market. On a generally accepted accounting principles (GAAP) basis, gross margin jumped from 64.6% to 78.4%, driving operating income up 690% to $16.9 billion, giving the company an operating margin of 64.9%. On an adjusted basis, earnings per share jumped from $1.09 to $6.12, beating the consensus analyst estimate of $5.59.

Nvidia enters a new stage

The first-quarter earnings report also marks something of a milestone for Nvidia, as the company's year-over-year comparisons will get harder from here. In other words, the initial explosion in demand driven by the launch of ChatGPT and other AI applications will start to fade.

However, the business still looks well-positioned for continued growth. The company is forecasting revenue of $28 billion in fiscal 2025's second quarter, suggesting 107% year-over-year growth and 7.5% sequential growth. It also expects gross margin to moderate slightly over the rest of the year, calling for a full-year gross margin in the mid-70% range. Second-quarter guidance indicates GAAP operating income will be essentially flat on a sequential basis, though the company has a pattern of topping its own guidance.

Despite its moderating growth, CEO Jensen Huang and Nvidia's management team shared several anecdotes on the earnings call that show that demand for Nvidia's products is still heating up. For example, management said that inference drove 40% of data center revenue over the last quarter, implying that training represented the majority of data center revenue as training and inference are the two primary functions needed to run AI models.

Demand for inference is expected to be much larger than training as generative AI matures, so that data point indicates that the development of these models is still in a very early stage. The company also noted large purchases from customers like Tesla and Meta Platforms, which implies growing demand for inference from Nvidia later.

Additionally, Huang said that demand for its Hopper platform is still strong and growing, even though it announced the next iteration, Blackwell, at its GTC conference in March. Huang elaborated:

We ... expect demand to outstrip supply for some time as we now transition to H200, as we transition to Blackwell. Everybody is anxious to get their infrastructure online. And the reason for that is because [customers are] saving money and making money, and they would like to do that as soon as possible.

The fact that customers aren't waiting for the newer model to drop shows how high demand is for Nvidia's products, and that should continue to provide a tailwind over the coming quarters.

Is Nvidia stock a buy?

Some billionaire investors, like Stanley Druckenmiller and David Tepper, have begun selling off their stakes in Nvidia following the chip stock's dramatic surge over the last year or so. However, there's still room for the stock to move higher as the business keeps delivering incredible results.

Investors shouldn't expect the triple-digit revenue growth in the business to continue, and the stock's blowout gains are also likely in the past as its market cap approaches $3 trillion. However, the business looks even stronger than it did three months ago, and there's no sign of any competitive pressure despite recent product launches from Advanced Micro Devices and Intel.

Huang sees the company building "AI factories" and driving the "next industrial revolution." Those are bold statements, but the numbers back them up, and if the opportunity is that big, Nvidia will have a lot of growth in front of it.

Investors sent Nvidia stock up 7% in pre-market trading on Thursday, a sign that the company has more upside potential. If the company can keep executing like this, the stock will continue to be a winner. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Motley Fool contributor Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and recommends Advanced Micro Devices, Meta Platforms, Nvidia, and Tesla. The Motley Fool recommends Intel and recommends the following options: long January 2025 $45 calls on Intel and short May 2024 $47 calls on Intel. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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