Mizuho has maintained its Outperform rating on NVIDIA Corporation (NASDAQ: NASDAQ:NVDA) and increased its price target to $140 from $132 on NVIDIA's strong quarterly performance and promising future prospects in the AI accelerator market, which is expected to grow at a compound annual growth rate (CAGR) of over 60% from 2023 to 2027.
NVIDIA's top line for the October quarter was approximately $32.5 billion, matching consensus estimates and driven by significant growth in its Data Center (DC) revenue, which makes up 87% of its total revenue. The DC revenue for the July quarter reached $26.3 billion, a 16% quarter-over-quarter increase, surpassing consensus expectations of $25.1 billion.
The growth is attributed to NVIDIA's robust product offerings, including the upcoming shipment of the new Blackwell GPU, which is anticipated to generate "several billions of dollars" in the January quarter.
The July quarter also saw a remarkable 48% quarter-over-quarter increase in purchase commitments, indicating a strong second half of the year, with further ramps of Hopper products. NVIDIA's networking segment experienced a 16% quarter-over-quarter increase, with Ethernet revenue doubling. Additionally, the October quarter data center revenue is expected to rise by about 9% quarter-over-quarter to $28.5 billion, exceeding the consensus of $27.8 billion.
Mizuho also noted the expanding total addressable market (TAM) for AI servers, which is projected to surpass $400 billion per year, driven by new demand from sovereign AI initiatives. NVIDIA has identified sovereign AI revenue in the "low double-digit billions" range for the fiscal year 2025, a significant increase from zero in fiscal 2024. Despite a quarter-over-quarter increase, China revenues have not yet returned to their pre-export restriction highs.
Looking ahead to fiscal 2025/2026, Mizuho anticipates another year of strong performance as NVIDIA plans to ship its GB200 superchip NVL36/72 racks, which are expected to maintain high gross margins of 75% with an average selling price (ASP) of approximately $2-3 million, compared to potentially lower margins for full-rack servers.
With an optimistic view on NVIDIA's long-term data center demand, which could reach approximately $500 billion per year, Mizuho has raised its fiscal 2026 January estimates from $168 billion in revenue and $3.79 in earnings per share (EPS) to $170 billion in revenue and $3.85 in EPS, marking a 37% and 38% year-over-year increase, respectively. In conjunction with this analysis, NVIDIA has announced a new buyback program of approximately $50 billion.
In other recent news, NVIDIA Corporation has been the focus of several analyst firms following its recent earnings report. Citi maintained its Buy rating on NVIDIA shares, setting a target of $150, following the company's reported earnings which exceeded expectations. NVIDIA's July-Quarter sales reached $30 billion, aligning with the higher end of the anticipated range, and the October-Quarter guidance was set at $32.5 billion.
Goldman Sachs (NYSE:GS) also maintained its Conviction Buy rating on NVIDIA, citing the company's Data Center revenue potential as a key driver for the optimistic stance. The firm increased its price target to $135. UBS, on the other hand, reaffirmed its Buy rating and a price target of $150 for NVIDIA, highlighting a significant rise in the company's purchase commitments and supply obligations.
Cantor Fitzgerald also maintained an Overweight rating and a $175.00 price target for the stock, highlighting NVIDIA's solid performance despite worries over the delay of the Blackwell product. Jefferies maintained a Buy rating with a $150 target, emphasizing strong demand for NVIDIA's Hopper products.
InvestingPro Insights
As NVIDIA continues to impress with its quarterly performance and its strategic positioning in the rapidly growing AI accelerator market, real-time data from InvestingPro reinforces the company's robust financial health. NVIDIA's market capitalization stands at a staggering $3090.0 billion, reflecting its significant presence in the industry. The company's revenue growth over the last twelve months has been extraordinary, with an increase of 208.27%, highlighting its successful expansion and adoption of its products. Moreover, NVIDIA's gross profit margin is a healthy 75.29%, which aligns with Mizuho's expectations of maintaining high gross margins for its upcoming GB200 superchip NVL36/72 racks.
Two notable InvestingPro Tips for NVIDIA include its perfect Piotroski Score of 9, which suggests a strong financial position, and the fact that analysts anticipate sales growth in the current year, reaffirming the positive outlook presented by Mizuho. Additionally, for investors seeking more in-depth analysis, there are 19 additional InvestingPro Tips available, offering a comprehensive view of NVIDIA's financial metrics and market performance.
For those considering an investment in NVIDIA, the company's promising future in AI and its solid financials present an attractive opportunity. Prospective investors can explore further insights and tips by visiting NVIDIA's InvestingPro page at https://www.investing.com/pro/NVDA.
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