Nvidia (NVDA) is likely to post strong fiscal fourth-quarter results, despite certain concerns that have lingered since its last quarterly report, UBS Securities said in a note e-mailed Tuesday.
The chip-making giant is scheduled to report fourth-quarter results Feb. 26. In November, its third-quarter earnings more than doubled year over year as demand for generative artificial intelligence propelled revenue above Wall Street’s estimates.
“(Nvidia) has essentially tread water since last earnings, in part due to supply chain noise and concerns around the ramp of Blackwell server racks,” UBS analysts Timothy Arcuri and Grant Joslin said.
UBS projects Nvidia’s fourth-quarter adjusted earnings at $0.95 a share on revenue of $42.15 billion. The Street is looking for $0.84 and $37.97 billion, respectively, according to UBS. The brokerage sees revenue from the Blackwell gen AI system at about $9 billion, up from its prior outlook of $5 billion, with the potential to reach up to $14 billion amid signs of “sufficient” supply chain capacity.
Blackwell chipset and compute board yields have likely inflected higher, while mix in both the fourth and first quarters is shifting “very rapidly” away from Hopper and to Blackwell, Arcuri and Joslin wrote. Hopper is a graphics processing unit architecture.
“Issues in ramping Blackwell have moved beyond the chip/testing/compute tray level, with the supply chain working through the complexity of getting the GB200 racks to performance spec, with the connectors from Amphenol (APH) remaining an issue yet to be resolved (we think), though our supply chain and customer discussions suggest yields are improving and alternate suppliers are ramping as well,” the analysts said.
Nvidia recognizes revenue when original design and equipment manufacturers take title of compute boards, according to the note. “We believe that in many cases, end customers like the big hyperscalers are using a buy-and-sell model to leverage ODMs or their suppliers’ working capital, and in some instances may be providing bridge financing for this inventory,” the analysts wrote.
UBS kept its price target on the Nvidia stock unchanged at $185, with a buy rating. The company’s shares were up 2.7% in Tuesday afternoon trade.
Hon Hai, also known as Foxconn, has indicated that volume shipments of GB200 rack systems would begin in the second half of January, earlier than originally projected, though UBS said the bulk of shipments “really look to be coming in March.” Server rack supplier Quanta indicated volume production of GB200 racks would begin in late February or March, according to the note.
“We now see Hopper down (roughly) 7% (quarter on quarter), but this is offset by a sharper-than-expected ramp in Blackwell volumes,” the analysts said.
For the ongoing quarter, the brokerage expects consolidated revenue of $47 billion. However, the firm said it’s cutting roughly $5 billion out of Hopper revenue, with a corresponding increase in Blackwell to $25 billion from $20 billion.