Nvidia forecasts first-quarter revenue above estimates, new chip weighs on margins

By Max A. Cherney and Arsheeya Bajwa

(Reuters) -Nvidia forecast first-quarter revenue above Wall Street estimates on Wednesday, signaling strong demand for its market-leading artificial intelligence chips and said demand for its new Blackwell semiconductors was "amazing."

The company's outlook for gross margin in the current quarter was slightly lower than expected, though, as the company's Blackwell chip rampup weighs on Nvidia's profit. Nvidia forecast first-quarter gross margins will sink to 71%, below the 72.2% forecast by Wall Street, according to data compiled by LSEG.

Its shares dropped roughly 1% in choppy extended trading, after closing up 3.7% in regular trading. Nvidia is the biggest beneficiary of a rally in AI-linked stocks, with its shares up more than 400% over the last two years.

“Demand for Blackwell is amazing," CEO Jensen Huang said in a statement. "We’ve successfully ramped up the massive-scale production of Blackwell AI supercomputers, achieving billions of dollars in sales in its first quarter."

The company expects revenue of $43 billion, plus or minus 2% for the first quarter, compared with analysts' average estimate of $41.78 billion according to LSEG.

Demand has grown for Nvidia's advanced chips that can speedily process the large amounts of data used by generative AI applications, as companies race each other to emerge as leaders of the new technology. Generative AI is a type of artificial intelligence that can learn from data and improve over time.

"Nvidia reported a strong revenue beat, but the gross margin guidance is disappointing, two factors that may balance out in the stock tomorrow," D.A. Davidson analyst Gil Luria said.

Nvidia's forecast also helps allay doubts around a slowdown in spending on its hardware that emerged last month, following Chinese AI startup DeepSeek's claims that it had developed AI models rivaling Western counterparts at a fraction of their cost.

This could add fuel to the sputtering AI rally after the Magnificent Seven stocks' tumultuous retreat from their late-2024 peaks as Wall Street's optimism waned under the shadow of DeepSeek's innovations.

Nvidia reported adjusted per-share profit of 89 cents, compared with estimates of 84 cents a share. Revenue for the fourth quarter grew 78% to $39.3 billion, beating estimates of $38.04 billion.

Sales in the data-center segment, which accounts for most of Nvidia's revenue, grew 93% to $35.6 billion in the quarter ended January 26, above estimates of $33.59 billion. The segment had recorded growth of 112% in the prior quarter.

(Reporting by Max A. Cherney and Stephen Nellis in San Francisco, Arsheeya Bajwa in Bengaluru; Editing by Shounak Dasgupta and Rod Nickel)