Nvidia Stock Dips as Earnings Beat Fails to Impress Investors

Nvidia's (NVDA) stock price dipped slightly in after-hours trading on Wednesday, despite reporting better-than-expected earnings for the fourth quarter of fiscal 2025. The company's revenue and earnings per share (EPS) both exceeded Wall Street's expectations, but the market's reaction was relatively muted. This article explores the reasons behind the subdued response and the outlook for Nvidia's stock.



Nvidia reported revenue of $39.3 billion for the quarter, up 12% from the previous quarter and 78% from a year ago. GAAP earnings per share (EPS) were $0.89, up 14% from the previous quarter and 82% from a year ago. Non-GAAP EPS was also $0.89, up 10% from the previous quarter and 71% from a year ago. Despite these strong results, Nvidia's stock price was almost flat in after-hours trading, following a 3.7% gain during the regular session.



Several factors contributed to the relatively muted market response to Nvidia's earnings beat:

1. Market Saturation and Slowing Growth: Nvidia's growth rate has been slowing down as its sales and profits rise. While the company's quarterly results exceeded Wall Street's expectations, the growth rate was not as high as in previous quarters. This slower growth rate may have contributed to the muted market response.
2. Investor Caution Following DeepSeek's Announcement: The market's reaction to Nvidia's earnings may have been tempered by the recent announcement from Chinese startup DeepSeek. DeepSeek claimed to have developed a large language model that can compete with big U.S. rivals using a fraction of the A.I. chips and at a lower cost. This announcement raised concerns about the future of A.I. chip demand and may have made investors more cautious about Nvidia's prospects.
3. High Expectations: nvidia has been the poster child of Wall Street's AI craze, and investors may have had extremely high expectations for the company's earnings. Despite the earnings beat, the results may not have lived up to these sky-high expectations, leading to a muted market response.
4. Market Fatigue: Nvidia's stock has been on a rollercoaster ride over the past year, with significant gains and losses. Investors may be experiencing market fatigue, leading to a more subdued reaction to the earnings results.

Nvidia's guidance for the current quarter is as follows:

* Revenue is expected to be $43.0 billion, plus or minus 2%.
* GAAP and non-GAAP gross margins are expected to be 70.6% and 71.0%, respectively, plus or minus 50 basis points.
* GAAP and non-GAAP operating expenses are expected to be approximately $5.2 billion and $3.6 billion, respectively.
* GAAP and non-GAAP other income and expense are expected to be an income of approximately $400 million, excluding gains and losses from non-marketable and publicly-held equity securities.
* GAAP and non-GAAP tax rates are expected to be 17.0%, plus or minus 1%, excluding any discrete items.

Wall Street's expectations for the current quarter were as follows:

* Revenue: $42.0 billion
* Gross margin: 70.5%
* Operating expenses: $5.0 billion
* Tax rate: 17.0%

Nvidia's guidance for the current quarter is higher than Wall Street's expectations in terms of revenue ($43.0 billion vs. $42.0 billion) and operating expenses ($5.2 billion vs. $5.0 billion). The gross margin and tax rate guidance are in line with Wall Street's expectations.

This implies that Nvidia has a positive outlook for the current quarter, with expected revenue growth and increased operating expenses. The company is confident in its ability to maintain its gross margin and tax rate guidance, despite the increased expenses. This suggests that Nvidia is expecting strong demand for its products and services, as well as continued growth in its business.

In conclusion, Nvidia's stock dipped slightly in after-hours trading despite reporting better-than-expected earnings, as investors seemed unimpressed by the results. The relatively muted market response can be attributed to factors such as market saturation, investor caution following DeepSeek's announcement, high expectations, and market fatigue. Nvidia's guidance for the current quarter suggests a positive outlook, with expected revenue growth and increased operating expenses. However, investors may be waiting for more concrete evidence of the company's ability to maintain its growth momentum before driving the stock price higher.