ZhaoYin International: NVIDIA's Q3 data center revenue hits a new high, expected to maintain strong demand for Blackwell next year

According to the Zhontong Finance APP, CMB International released a research report stating that NVIDIA (NVDA.US) third-quarter performance for fiscal year 2025 met the company's guidance and market consensus expectations. Data center revenue once again reached a historical high, with 90% of data center revenue coming from computing-related income (USD 27.6 billion, a quarter-on-quarter increase of 22.3%), and the remainder from network-related income (USD 3.1 billion, a quarter-on-quarter decrease of 14.7%). Considering the strong demand for the Hopper series and the increased production of the Blackwell series, the computing business is the main driver of the company's sustained growth. Although network-related business declined quarter-on-quarter this quarter, management expects growth in the fourth quarter. NVIDIA delivered 13,000 GPU samples in the third quarter, and fourth-quarter deliveries are expected to exceed previous expectations (the second-quarter guidance was in the billions of dollars). CMB International's main points are as follows: NVIDIA (NVDA.US) announced its third-quarter results for fiscal year 2025 on November 21, with quarterly revenue of USD 35.1 billion, a year-on-year increase of 93.6% and a quarter-on-quarter increase of 16.8% (the first and second quarters had quarter-on-quarter growth rates of 17.8% and 15.3%, respectively). Quarterly revenue exceeded the guidance of USD 32.5 billion by 7.9% and was 5.5% higher than the market consensus expectation (USD 33.3 billion). The non-GAAP gross margin for the third quarter of fiscal year 2025 was 75.0% (a decrease of 0.6 percentage points from the previous quarter), in line with the company's guidance and market consensus expectations. The non-GAAP earnings per share were USD 0.81, a year-on-year increase of 101.0% and a quarter-on-quarter increase of 18.4%, exceeding market consensus expectations by 8.9%. The revenue guidance for the fourth quarter of fiscal year 2025 is USD 37.5 billion, indicating a quarter-on-quarter growth of 6.9%, slightly higher than the market consensus expectation of USD 37.1 billion. NVIDIA expects a non-GAAP gross margin of 73.5% for the next quarter, consistent with market expectations. NVIDIA's performance this quarter generally met market expectations, and the stock price did not experience significant fluctuations in after-hours trading. By main business segment, data center revenue once again reached a historical high of USD 30.8 billion (accounting for 88% of third-quarter sales), a year-on-year increase of 112.0% and a quarter-on-quarter increase of 17.1%. Revenue from gaming/professional visualization/automotive businesses increased quarter-on-quarter by 13.9%/7.0%/29.8%. Of the data center revenue, 90% came from computing-related income (USD 27.6 billion, a quarter-on-quarter increase of 22.3%), while the remainder came from network-related income (USD 3.1 billion, a quarter-on-quarter decrease of 14.7%). CMB International believes that considering the strong demand for the Hopper series and the increased production of the Blackwell series, the computing business is the main driver of the company's sustained growth. Although network-related business declined quarter-on-quarter this quarter, management expects growth in the fourth quarter. The demand outlook remains optimistic. The demand for the Hopper series is strong, with sales revenue for the H200 in the third quarter reaching billions of dollars. Management stated that demand for Hopper will continue to grow in the second half of this year and next year. In addition, the Blackwell series "has been fully put into production after successfully completing large-scale corrections." NVIDIA delivered 13,000 GPU samples in the third quarter, and fourth-quarter deliveries are expected to exceed previous expectations (the second-quarter guidance was in the billions of dollars) About half of the company's data center revenue in the third quarter was contributed by cloud vendors (a year-on-year increase of over 2 times), amounting to approximately $15 billion. Google, Microsoft, and Amazon's total capital expenditure in that quarter was about $50 billion, meaning that around 30% of the capital expenditure flowed to NVIDIA. In the early stages of the Blackwell series ramp-up, gross margins are expected to be temporarily under pressure. Management expects the gross margin during this phase to fall within the range of 71.0%-72.5%. Subsequently, as production stabilizes and scales up, gross margins are expected to improve to around 75% (depending on the company's product mix at that time). Beneficiaries of the AI industry chain: Management emphasized the complexity of the Blackwell product line, which involves multiple key partners in the global supply chain, such as TSMC, Amphenol, Vertiv, SK Hynix, Micron, Anker, Jingyuan Electronics, Foxconn, Quanta, Wiwynn, Spil, Dell, HP, AMD, and Lenovo. They remain optimistic about the AI supply chain, especially the key beneficiaries with significant contributions to AI revenue