NVIDIA CORP Q3 FY2025 earnings call

• Data Center: Another record, with NVIDIA Hopper demand exceptional, H200 sales in double-digit billions, cloud service providers contributing half of data center sales and growing significantly. Blackwell in full production with strong demand.
• Software/Service/Support: Annualizing at $1.5 billion, expected to exit the year annualizing at over $2 billion.
• Enterprise AI: NVIDIA AI Enterprise growing, with nearly 1,000 companies using NVIDIA NIM and full year revenue expected to increase over 2 times from last year.
• Industrial AI/Robotics: Accelerating with NVIDIA Omniverse, e.g., Foxconn using it to speed up factory bring-up and reduce kilowatt-hour usage.
• Sovereign AI: Gaining momentum, e.g., India's CSPs boosting NVIDIA GPU deployments, Japan's SoftBank building AI supercomputer.
• Networking: Strong demand, Spectrum-X Ethernet revenue up over 3 times year-on-year.
• Gaming: Strong Q3 but Q4 expected decline due to supply constraints, with new GeForce RTX AI PCs shipping.
• ProViz: NVIDIA RTX workstations preferred, AI emerging as a demand driver.
• Automotive: Record revenue driven by self-driving ramps of NVIDIA Orin.

Data Center: Revenue of $30.8 billion, up 17% sequentially and 112% year-on-year, accounting for 87.75% of total revenue. Consumer Internet: Revenue more than doubled year-on-year. Networking: Increased 20% year-on-year, with sequential revenue down but demand strong. Gaming: Revenue of $3.3 billion, up 14% sequentially and 15% year-on-year. ProViz: Revenue of $486 million, up 7% sequentially and 17% year-on-year. Automotive: Revenue was a record $449 million, up 30% sequentially and 72% year-on-year.

Total revenue expected to be $37.5 billion ±2%, incorporating Hopper demand and Blackwell ramp. Gaming revenue expected to decline sequentially in Q4 due to supply constraints. GAAP and non-GAAP gross margins expected to be 73% and 73.5% respectively ±50 basis points. Blackwell ramp expected to moderate gross margins to low-70s initially, with full ramp expected in mid-70s. GAAP and non-GAAP operating expenses expected to be approximately $4.8 billion and $3.4 billion respectively. GAAP and non-GAAP other income and expenses expected to be an income of approximately $400 million, excluding gains and losses from non-affiliated investments. GAAP and non-GAAP tax rates expected to be 16.5% ±1% excluding discrete items.

• Supply chain constraints affecting Blackwell ramp. - Export controls impacting China business, with China Data Center revenue remaining below pre-export control levels. - Component supply chain challenges for Blackwell, involving multiple custom chips and complex integration.

Q: Good afternoon. I guess just a question for you on the debate around whether scaling for large language models have stalled. Obviously, we're very early here but would love to hear your thoughts on this front. How are you helping your customers as they work through these issues? And then obviously, part of the context here as we're discussing clusters that have yet to benefit from Blackwell. So is this driving even greater demand for Blackwell?

A: A foundation model pre-training scaling is intact and continuing. We're seeing three ways of scaling: pre-training, post-training, and test time scaling. Demand for infrastructure is great, with next generation of foundation models starting at 100,000 Blackwells.

Q: Hi, good afternoon. Thank you so much for taking the question. Jensen, you executed the mass change earlier this year. There were some reports over the weekend about some heating issues. On the back of this, we've had investors ask about your ability to execute to the roadmap you presented at GTC this year with Ultra coming out next year and the transition to [Ruben] (ph) in 2026. Can you sort of speak to that? And some investors are questioning that. So if you can sort of speak to your ability to execute on time, that would be super helpful. And then a quick part B, on supply constraints, is it a multitude of componentry that's causing this? Or is it specifically [HBM] (ph)? Is it supply constraints? Are the supply constraints getting better? Are they worsening? Any sort of color on that would be super helpful as well.

A: Blackwell production is in full steam, with more Blackwells delivered than previously estimated. Supply chain team working to increase Blackwell. Demand exceeds supply. Execution on roadmap is going well. Blackwell involves seven custom chips, with component supply chain involving many partners. Supply constraints are a challenge but team is working to address them.

Q: Thanks a lot. I'm wondering if you can talk about the trajectory of how Blackwell is going to ramp this year. I know, Jensen, you did just talk about Blackwell being better than I think you had said several billions of dollars in January. It sounds like you're going to do more than that. But I think in recent months also, you said that Blackwell crosses over Hopper in the April quarter. So I guess I had two questions. First of all, is that still the right way to think about it that Blackwell will crossover Hopper in April? And then Colette, you kind of talked about Blackwell bringing down gross margin to the low-70s as it ramps. So I guess if April is the crossover, is that the worst of the pressure on gross margin? So you're going to be kind of in the low-70s as soon as April. I'm just wondering if you can sort of shape that for us.

A: Colette mentioned gross margins will be in the low-70s in the beginning of Blackwell ramp. Hopper demand will continue, with Blackwell shipping more each quarter. Crossover of Blackwell over Hopper in April is still a relevant view.

Q: Thanks for taking my question. Colette, just to clarify, do you think it's a fair assumption to think NVIDIA could recover to kind of mid-70s gross margin in the back half of calendar 2025? Just wanted to clarify that. And then, Jensen my main question historically, when we have seen hardware deployment cycles, they have inevitably included some digestion along the way. When do you think we get to that phase, or is it just too premature to discuss that because you're just the start of Blackwell? So how many quarters of shipments do you think is required to kind of satisfy this first wave? Can you continue to grow this into calendar 2026? Just how should we be prepared to see what we have seen historically, right, the periods of digestion along the way of a long-term kind of secular hardware deployment?

A: Colette said mid-70s gross margin in back half of 2025 is a reasonable goal. Jensen said no digestion until data centers are modernized for machine learning and generative AI, expecting growth over several years with no significant digestion initially.

Q: Hi, guys. Thanks for taking my questions. Colette, I had a clarification and a question for you. The clarification, just when you say low-70s gross margins, is 73.5 count as low-70s, or do you have something else in mind? And for my question, you're guiding total revenues and so I mean, total Data Center revenues in the next quarter must be up quote-unquote several billion dollars, but it sounds like Blackwell now should be up more than that. But you also said Hopper was still strong. So like is Hopper down sequentially next quarter? And if it is like why? Is it because of the supply constraints? Is China has been pretty strong is China is kind of rolling off a bit into Q4. So any color you can give us on sort of the Blackwell ramp and the Blackwell versus Hopper behavior into Q4 would be really helpful.

A: Colette said low-70s are below mid, possibly 72% - 72.5%. Jensen said Hopper will continue to be sold in Q4, with both Hopper and Blackwell ramping, and China business having some roll-off but both products present in Q4.

Q: Great. Thank you. I wonder if you could talk a little bit about what you're seeing in the inference market. You've talked about Strawberry and some of the ramifications of longer scaling inference projects. But you've also talked about the possibility that as some of these Hopper clusters age that you could use some of the Hopper latent chips for inference. So I guess, do you expect inference to outgrow training in the next kind of 12-month time frame, and just generally your thoughts there.

A: Jensen expressed excitement about inference growth, stating goal is for every company to do inference 24/7, with physical AI and Omniverse driving growth, but noting inference is hard due to accuracy, throughput, latency requirements.

Q: Yes, thanks for taking the question. I wanted to ask you as we kind of focus on the Blackwell cycle and think about the data center business. When I look at the results this last quarter, Colette, you mentioned that obviously, the networking business was down about 15% sequentially, but then your comments were that you were seeing very strong demand. You mentioned also that you had multiple cloud CSP design wins for these large-scale clusters. So I'm curious if you could unpack what's going on in the networking business and where maybe you've seen some constraints and just your confidence in the pace of Spectrum-X progressing to that multiple billions of dollars that you previously had talked about.

A: Colette said networking has strong year-over-year growth, slight sequential dip, with strong demand and Spectrum-X Ethernet growing, confident in its progress.

Q: Thank you for taking my question. I have two quick ones for Collette. Colette, on the last earnings call, you mentioned that sovereign demand is in low double-digit billions. Can you provide an update on that? And then can you explain the supply-constrained situation in gaming? Is that because you're shifting your supply towards data center?

A: Colette said sovereign AI demand remains strong with ongoing projects. Gaming supply constrained due to ramping of various products, tight for Q4 but expected to improve in new calendar year.

Q: Yes. Hi. Thanks a lot for the question. I wanted to ask Colette and Jensen with regard to sequential growth. So very strong sequential growth this quarter and you're guiding to about 7%. Do your comments on Blackwell imply that we reaccelerate from there as you get more supply? Just in the first half, it would seem that there would be some catch-ups. So I was wondering how prescriptive you could be there. And then, Jensen, just overall, with the change in administration that's going to take place here in the US and the China situation, have you gotten any sense, or any conversations about tariffs, or anything with regard to your China business? Any sense of what may or may not go on? It's probably too early, but wondering if you had any thoughts there. Thanks so much.

A: Colette said focusing on current quarter's Blackwell ramp, Jensen said guide one quarter at a time, and whatever new administration decides, NVIDIA will support and comply with regulations.

Q: Hey, thanks for taking my question. Jensen, you mentioned in your comments you have the pre-trainings, the actual language models and you have reinforcement learning that becomes more and more important in training and in inference as well. And then you have inference itself. And I was wondering if you have a sense like a high-level typical sense of out of an overall AI ecosystem like maybe one of your clients or one of the large models that are out there. Today, how much of the compute goes into each of these buckets? How much for the pre-training, how much for the reinforcement, and how much into inference today? Do you have any sense for how it's splitting and where the growth is the most important as well.

A: Jensen said today compute is vastly in pre-training foundation models, with post-training and inference scaling growing, expecting continued growth in all areas as AI ecosystem evolves