Nvidia’s recent quarterly earnings surpassed analysts’ expectations, indicating that demand for artificial intelligence remains robust. However, the company’s revenue growth is decelerating, reflecting a ‘base effect’ from previous quarters of explosive expansion.
Nvidia reported its fourth-quarter earnings for the 2025 fiscal year, exceeding market forecasts and offering a positive outlook for the current quarter. Despite these positive figures, the performance wasn’t quite as strong as in previous periods. This slowdown in revenue growth is attributed, at least in part, to the annual comparisons with its own exceptional performance in the past. Initially, Nvidia’s share price saw a nearly 3% increase, but subsequently declined by over 1% in after-hours trading, illustrating the complex market interpretation of these results.
The company has been a primary beneficiary of the artificial intelligence boom since 2023, fueled by escalating demand for its Graphic Processing Units (GPUs). Over the past two years, its share price has skyrocketed by 1,000%, with a market valuation exceeding $3 trillion, positioning it as the world’s second-largest company, just behind Apple. However, the deceleration in revenue growth suggests that the AI boom may have already reached its peak, at least for the time being.
These earnings were released during a period of shifting investor sentiment, as investors move away from US tech stocks due to increased risk-averse behavior. Concurrently, the emergence of Chinese DeepSeek’s AI model, offering a more cost-effective alternative, is diverting capital from Wall Street to Chinese tech firms. Investors are closely monitoring whether major tech companies are continuing their substantial investments in AI infrastructure, which would translate into increased data center sales for Nvidia. Consequently, Nvidia’s earnings report plays a critical role in shaping overall market sentiment, particularly after Microsoft indicated plans to reduce capital expenditure.
“Nvidia is the bellwether for AI demand, and this result will once again alleviate the naysayers,” noted Josh Gilbert, a market analyst at eToro Australia.
Blackwell Deliveries Ramp Up
A key focus of the report was Nvidia’s Blackwell, the most advanced computing chips designed for generative AI programming. During the reporting quarter, the company delivered $11 billion worth of these products, representing “the fastest product ramp in our company’s history,” according to the company’s statement. Nvidia cited large cloud service providers as the driving force behind Blackwell sales, as they accounted for 50% of its data center revenue.
CEO Jessen Huang commented on the Blackwell demand saying, “Demand for Blackwell is amazing as reasoning AI adds another scaling law — increasing compute for training makes models smarter and increasing compute for long thinking makes the answer smarter.”
Slowing Growth
Nvidia’s revenue from its core data center segment reached a new record of $35.6 billion in the fourth quarter, marking a 93% increase year-over-year. However, this represents the first time growth has slowed to below 100% since the second quarter of fiscal year 2024. For the full year, revenue in this division also surged to a record high of $115.2 billion, a 142% increase compared to the prior year.
The company’s overall revenue grew by 78% to a record $39.3 billion, which was the slowest pace since the AI boom of early 2023. Earnings per share hit $0.89, surpassing the estimated $0.84. Despite these positive outcomes, the gross margin declined to 73.5%, down from 75% in the previous quarter and 76.7% a year earlier.
The company’s second-largest segment, encompassing gaming and AI PCs, experienced an 11% year-over-year revenue decline to $2.5 billion. However, this decline had a relatively minor impact on Nvidia’s overall performance, as this sector accounts for only about 6% of total revenue.
For the current quarter, Nvidia projects total sales of $43 billion, with a margin of error of plus or minus 2%, which would represent a 65% increase year-over-year. Despite exceeding analysts’ expectations, this guidance suggests a further slowdown in the company’s growth trajectory. Moreover, it anticipates a further decrease in gross margin, forecast to be between 70.6% and 71%, with a variability of plus or minus 50 basis points, indicating increased investment in the development of new products.
