4 Key Takeaways From Nvidia’s Earnings Call

After Nvidia’s (NVDA) fourth-quarter results for the 2024 fiscal year handily beat analysts’ expectations, company executives, speaking on an earnings call, discussed artificial intelligence (AI) contributing to record-high data center revenue, its AI enterprise software opportunities, the company’s expansive AI ecosystem and declining revenue in China.

About 40% of Record Data Center Revenue From AI

“We estimate in the past year approximately 40% of data center revenue was for AI inference,” Colette Kress, Nvidia’s Chief Financial Officer (CFO) reported.

Nvidia Chief Executive Officer (CEO) Jensen Huang later said that the 40% estimate is “probably understated” due to the use of deep learning and generative AI (GenAI) interfaces for online recommender systems.

Nvidia’s data center revenue reached a new record high in the fourth quarter at $18.4 billion, contributing to data center revenue more than tripling over the 2024 fiscal year to $47.5 billion.

Nvidia AI Enterprise Software Could Be Its Next Opportunity to Leverage AI

Nvidia reported “great progress” with its software and services offerings, which reached an annualized revenue run rate of $1 billion.

The software segment represented a small portion of Nvidia’s earnings, but Huang said that he believes that “every enterprise in the world, every software enterprise company that [is] deploying software, in all the clouds and private clouds and on-prem will run on Nvidia AI enterprise.”

The fundamental reason that Nvidia will be successful in software” is because the company manages the “complicated stack of software that’s involved in accelerated computing” for its enterprise cloud service provider (CSP) customers, Huang said, adding that AI only amplifies the demand for these services.

He explained that Nvidia AI enterprise is like “an operating system for artificial intelligence” that the company will charge customers per graphics processing unit (GPU) running the system.

Huang noted that it “is going to likely be a very significant business over time” and that Nvidia “is just getting started” with its software business.

Nvidia’s AI Ecosystem is Wide Reaching and Partners Could Share Gains

Huang said that the company has “an excellent ecosystem” with original equipment manufacturers (OEMs), original design manufacturers (ODMs), CSPs, and “very importantly, end markets.”

Kress named OEM partners including Dell (DELL), HP (HPE), and Super Micro (SMCI) alongside CSPs like Amazon (AMZN) AWS, Microsoft (MSFT) Azure, and Alphabet’s (GOOGL) Google Cloud, among others.

Nvidia has an expansive ecosystem, and Huang noted that the company is “looking for opportunities to connect partners and users” across its network “all the time.”

While Nvidia has established itself as a leading benefactor of the AI boom, companies within its ecosystem could also see gains.

Chip Export Restrictions Affected China Revenue But Didn’t Have a Huge Overall Impact

“Growth was strong across all regions except for China, where our data center revenue declined significantly following the US government export control regulations imposed in October,” Kress said.

Declines related to the U.S. restrictions on chip exports to China have been of concern for investors, though analysts have indicated that these concerns could be overblown.

The company said that though it has not received the licenses from the U.S. government to ship restricted products to China, Nvidia “started shipping alternatives that don’t require a license for the China market.”

Nvidia noted that China represented a “single-digit percentage” of data center revenue for the fourth quarter of the 2024 fiscal year and that similar numbers are expected for the current quarter.

“At the core, the U.S. government wants to limit the latest capabilities of Nvidia’s accelerated computing and AI to the Chinese market, and the U.S. government would like to see us be as successful in China as possible,” Huang said. He added that the company is going to “do [its] best to compete in the marketplace” under these circumstances.