Nvidia stock wavers as earnings beat has investors 'yawning'

Nvidia (NVDA) stock fell 2% in early trading Thursday after the company's fourth quarter earnings topped Wall Street's expectations but its outlook for first quarter gross margin came in lower than estimates.

Nvidia guided for a gross margin of roughly 71% for the first quarter, lower than its 73% gross margin in the fourth quarter.

J.P.Morgan analyst Harlan Sur noted that the gross margin guidance was "below consensus (72.1%) as the team continues to scale its [Blackwell] shipments higher and incurs expedite fees to get systems to customers as rapidly as possible."

The chipmaker's revenue of $39.3 billion and earnings per share of $0.89 topped Wall Street's estimates, according to Bloomberg consensus estimates. Nvidia anticipates its total first quarter revenue will hit $43 billion, plus or minus 2%, above the $42.3 billion expected by Wall Street analysts.

Despite the earnings beat, Truist Securities William Stein wrote in a note to investors late Wednesday that "investors are yawning."

Benchmark analyst Cody Acree told Yahoo Finance in an interview after Nvidia's earnings release that its first quarter guidance for gross margin was slightly concerning, noting that it was indicative of pricing pressure and more competition.

"I think that's just the future that Nvidia has to live in, but demand for their products appears to be strong, and that's really the key for Nvidia going forward," he said.

Nvidia's Blackwell AI GPUs [graphics processing units] contributed $11 billion to the company's Q4 revenue in what CFO Colette Kress said was "the fastest product ramp in our company’s history." Nvidia had previously expected Blackwell to contribute several billion dollars in sales in its fourth quarter.

Bernstein analyst Stacy Rasgon wrote in a note to investors Thursday: "Gross margins at 71% might be a minor nitpick, but we won’t argue that getting product out the door should be the primary consideration at the moment given demand seemingly remains off the charts..."

Nvidia's Blackwell revenue achievement comes after design flaws reportedly pushed production back a quarter, and a report from the Information in January said overheating issues and glitches with its massive GB200 server racks with the Blackwell chips was prompting customers to cut orders, spurring fears of further delays ahead of Nvidia's earnings report Wednesday.

But those fears were assuaged as the company said Blackwell is "fully ramped," and CEO Jensen Huang said "demand for Blackwell is extraordinary."