Nvidia $NVDA Just Reported Earnings & The Stock Is FALLING...

0:00 So, Nvidia just came out with their latest earnings report and the stock is down around $3.14% after hours under $176 per share. So, the market clearly didn't like Nvidia's earnings report. We're going to be talking about the actual results. We're going to be talking about what they said on the earnings call and we're going to be talking about the future outlook that Nvidia gave. We also did do a live stream. So, if you want to watch the live stream, we did a live coverage of it. You can go to the live tab on my YouTube channel and check out that live stream. It was over 2 hours long. So, a lot of content over there. Before we get into Nvidia's uh earnings coverage, we're also going to cover the company's fundamentals, historical multiples, and sensitivity analysis post

0:45 earnings report. So, if you'd like to see all that, stick around. And before we get into all that, let's roll the intro. I have been a rich man and I have been a poor man and I choose rich every time. >> I make investing content and my channel is Dividend Dude. You should leave a like and subscribe if you're going to enjoy the video. A disclaimer, this is not financial advice. I am just a dividend growth investor trying to share my takes on dividend growth stocks and various other stocks. This is not financial or investment advice and always do your own due diligence before investing. Okay, so we have the raw numbers right here. their latest quarter being fiscal year 2026 quarter 2 performance. And you can see that the revenue they reported a total revenue of 46.7 billion which marked a 6% increase from the previous quarter and a whopping

1:31 56% increase year-over-year. Data center revenue was 41.1 billion which was up 5% from Q1 and 56% from the previous year. The Blackwell data center revenue grew 17% sequentially. Now, an important thing that's not mentioned in this report is that this 41.1 billion was the for the first time in over two years below expectations of 41.3 billion. So, that's probably the most prominent reason that the stock sold off. It's probably a couple other minor ones, but that's important to note. Gaming revenue reached 4.3 billion, up 14% from quarter 1 and 49% year-over-year. GAP and non-GAAP gross margins were 72% and 72.7% respectively. Earnings per share GAP and

2:17 non-GAAP were $18 and $15. Both these sales and earnings marks beat on the top and bottom line. Earnings per share expected was $11. By the way, so the earnings call highlights, you can see that the CEO insights, Jensen Hong, emphasized the extraordinary demand for the Blackwell AI platform, describing it as the AI platform the world has been waiting for. They announced several partnerships related to Blackwell across data centers, gaming, professional v visualization, and also automotive/rootics. Now something very important for the stock is the future outlook which we can see they gave future outlook for quarter 3 of fiscal year 2026 where they expect revenue to be around $54 billion with a margin of error of plus or minus 2%.

3:03 Gross margins are expected to be 73.5 and 7 or 73.5 and 73.3% respectively and gap and non-GAAP operating expenses projected to be approximately 5.9 and 4.2 billion. long-term outlook, they anticipate exiting the fiscal year with non-GAAP gross margins in the mid70% range. So, those are kind of the main highlights. You can see their strategic outlook down here as well, where they're positioning themselves for significant growth in AI infrastructure, projecting a 3 to4 trillion opportunity over the next 5 years. to get more into the weeds a bit. It's they're projecting basically the hyperscalers, Microsoft, Google, Meta, Amazon to be spending more and more on capex as well as other businesses that will largely a lot of that will go to

3:48 Nvidia. The company's ramping up its Blackwell platform and preparing for the launch of its next generation Reuben platform which will be its third generation NVLink rack scale AI supercomput. Overall, Nvidia's strong financial results and strategic initiatives in AI and gaming gaming sectors suggest a positive outlook for the company. The focus on AI infrastructure and partnerships indicates a robust growth trajectory in the coming years. So, now let's get into their fundamentals which the latest quarter has already posted. You can see the financial results for the most recent quarter here where we see earnings per share spiked and hit a new all-time high in the most recent quarter, hitting a $15 of earnings per share, far and away an all-time high.

4:33 Analysts still project earnings per share growth of 50% in 2026, but they expect deceleration in the coming years, and they expect annual revenue growth of similar trends. And as you can see, the stock price is basically at all-time highs and has seen substantial price appreciation over the past 5 years. Trilling per month price to earnings ratio still sitting very lofty at 58 times. Although this is not factoring in that little earnings drop that we see in the after hours. The company actually does pay a dividend. So we can um cover their dividend here actually. And they actually hiked that dividend substantially recently from uh less than a penny to a penny. So they do pay out a dividend dividend yield of 0.02%. Um in terms of revenue in the most

5:19 recent quarter we saw revenue per share of $1.80 far and away all-time highs. And we're seeing this exponential increase continue for Nvidia. In terms of margins, we saw pretty strong margins, although a little bit lower. But on the annual chart, we could see constant expansion in margins. In terms of net income, we saw a pretty strong quarter in terms of net income. And in terms of free cash flow, we saw far and away all-time highs in free cash flow of a $1.7 of free cash flow in the most recent quarter. Net debt for the business, the business continues to stack cash now 42.4 billion more cash than debt. And if we take a look at their share count, we can see the company starting to accelerate buybacks further. We can also take a look at the company's return on invested capital which has constantly expanded and so the business

6:06 is doing well in terms of their segments. Obviously their biggest segment being that data center segment which is why the stock is so bid up right now. Now let's take a look at the company's historical multiple. But before we do that I do want to talk a little bit about Nvidia in general. It is important to note that this is traditionally a cyclical uh type of business and the nobody knows when the AI kind of cycle music is going to stop and so that's kind of the big risk with Nvidia here and I think the slight miss on data center revenue which partially could be because they weren't allowed to sell to China for a little bit but that being a miss is kind of what's getting investors in my opinion worried um about the business and about when that music stops about maybe seeing it sooner than

6:52 they expected or something like that. Um, I think that's the reason because of that slight $200 million data center revenue miss. I think that's the reason the stock's down 3 to 4% in the after hours. If I had to put my thumb on it, I would be putting it on that. I think it's that's the reason that it's done. Um, and we could look at some of these historical multiples for Nvidia. And we could look at some of Nvidia's historical multiples, which I recently covered in my other Nvidia video, but like about in line in terms of the price to earnings, in terms of the even if we look at it on a sales multiple level, about in line, maybe a little bit more expensive, but that's because the margins have expanded. So, it makes sense. In terms of EVA, same thing about in line to actually lower here at 35 times in the last 3 years. And even on a free cash flow yield basis, the

7:38 company's a little bit higher than the trend in the past three years, as you could see. And we could also look at price to earnings to growth, which is a great metric to value this business. And it's only at 1.3 times. 1.3 times price to earnings to growth. Peter Lynch famously said under one times is undervalued. Over two times is expensive or overvalued. And one to two times is fairly valued. It's on the lower end of that one to two times range, signifying it could be undervalued here. Um, I do want to do a not a sensitivity analysis, which I said at the start of the video. I do want to do a reverse discounted cash flow right now to see how much free cash flow growth is baked into Nvidia's current stock price. So, in the after hours, it's around $176 per share. And to justify that share price, you need

8:25 36.8% free cash flow growth annually. And that's steep. like that is just the steep amount that you need to justify that um the current share price that's a lot of free cash flow growth. Um now to be honest this year they are expected to surpass that amount and the average growth rate over the past 10 years has been substantially uh past that amount but the company's already the biggest company in the world. I think that it to be honest I I do think that the valuation here is a little bit lofty. I think it's a little bit frothy because I don't think these growth rates are sustainable and I think if you go back to my old videos here on YouTube, I've been saying that for a while. So, I've been wrong on Nvidia.

9:11 Um, you know, and there is exposure that I have in it through SCHG, which is the growth index fund that Schwab has, but I could be continue to be wrong, right? But like I I I've been saying, I think the law of large numbers here gets them. I think the hyperskalers are going to be a little bit more conservative with their capital in the future. And I don't know if 36.8% over the next decade is achievable. I mean, that's steep. That that's very steep to justify today's current stock price. Um, and it's a cyclical uh business. I honestly think the company's a little bit expensive here. That's my interpretation of it. You know, it could be I could be wrong. It could be undervalued and it could continue to perform really well. It could be the first company to 5 trillion, 10 trillion, and it could just keep compounding. Now, I think that's

9:57 highly unlikely, but you know, I could be wrong. Um, it could do that. So, we will see. Only time will tell, but 36.8% free cash growth is the number you need to hit to justify today's stock price. If you did enjoy, please make sure to smash that like button and subscribe, and I'll see you guys in the next one. Peace.