Nvidia's (NVDA -2.09%) strong artificial intelligence (AI)-related growth has driven the shares up 179% so far in 2024, at the time of this writing. The stock trades at a high price-to-earnings ratio of 55, so investors understandably have high expectations for growth heading into the new year.
However, Nvidia's new Blackwell generative AI architecture platform, which is expected to trigger the next wave of demand for the company's Blackwell graphics processing unit (GPU) chips, may not fully ramp up until the middle of next year. Still, Nvidia's quarter reveals there is enough momentum with existing products to justify its valuation.
Every segment posted double-digit growth
Nvidia's revenue grew 94% year over year in fiscal 2025's third quarter, driven by the data center business. But it also posted strong double-digit growth from gaming, professional visualization, and automotive, with automotive revenue surging 72% year over year thanks in part to increased demand for Nvidia's self-driving computing platforms.
| Segment | Q3 Fiscal 2024 | Q3 Fiscal 2025 | YOY Change |
|---|---|---|---|
| Data center | $14.5 billion | $30.8 billion | 112% |
| Gaming | $2.9 billion | $3.3 billion | 15% |
| Professional visualization | $416 million | $486 million | 17% |
| Automotive | $261 million | $449 million | 72% |
| Other | $73 million | $97 million | 33% |
| Total | $18.1 billion | $35.1 billion | 94% |
Data source: Nvidia. YOY = year over year. Nvidia's fiscal year ends in January.
The next-generation Blackwell chips are in full production, but most importantly, Nvidia said demand for its current-generation Hopper graphics processing units (GPUs) remains "exceptional." Cloud service providers made up around half of data center sales last quarter, with cloud companies deploying Nvidia's H200 chips to meet growing demand for AI workloads. "Hopper demand will continue through next year, surely the first several quarters of the next year," CEO Jensen Huang said.
Nvidia is benefiting as companies upgrade to the latest GPU technology to maintain a competitive edge. Cloud service providers like Amazon and Alphabet's Google need to have enough computing capacity to meet the demand for AI services, and because Nvidia continues to be the runaway leader in GPUs, it is able to price its products to earn incredible margins. Nvidia's trailing-12-month net income now totals $63 billion!
Although other non-data center segments contribute a smaller amount to Nvidia's revenue, it's great to see these businesses posting strong growth as investors wait for Blackwell. Some investors might forget that gaming was Nvidia's largest business just two years ago. It posted a 15% year-over-year revenue increase last quarter, driven by strong back-to-school sales for GeForce RTX-powered computers, and the company is preparing to meet demand for the holidays.
The stock still offers value
Revenue has exceeded Nvidia's guidance by a few billion each quarter this year. Assuming that trend holds, Nvidia could report between $39 billion and $40 billion in revenue next quarter, based on company guidance calling for $37.5 billion. Analysts currently expect the company to report $38 billion, representing a 72% year-over-year increase.
Management expects to ship more Blackwell chips over the next few quarters, as production ramps up. This seems to suggest Blackwell may not fully hit its stride in terms of revenue contribution until the middle of the year. The consensus estimate has Nvidia's revenue growing 49% in fiscal 2026 (which ends in January).
Overall, demand trends look solid. The demand for Hopper products and gaming should fuel another strong quarter to finish the year and provide a bridge of momentum as Blackwell shipments increase. The stock trades at 33 times next year's earnings estimate, which seems like a steal for this top AI chip supplier.
