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Welcome back to a new episode. Today we'll take a closer look at Nvidia. They simply stunned with their financial results. Jensen just gave us some impressive predictions not only for this year but also for next year, which has the market pretty excited. So, in today's episode, we'll take a closer look at these key figures.
More importantly, we'll discuss the stocks of companies that could benefit from what this AI giant just said. So let's dive deeper into today's issue. Before we continue, if you want to get recommendations for stocks that are ahead of the market from our analysts, check out the pinned comment and description.
Using this link will give you a promotional offer as a thank you for watching us. Thank you, and now let's get back to today's episode. So, Nvidia just reported earnings. Neil and I just listened to the conference call and we have a lot of information. Neil, I'll give you the floor because we have a lot to discuss , and I think we should get started.
There really is something to discuss . We'll try to be brief, but this is probably one of the best earnings reports and especially conference calls from Nvidia since this AI revolution began. They beat earnings expectations for this quarter. We can look at these indicators. This is something incredible.
Overshoot in all directions. Margin, forecasts and all that. We'll talk about this because the margin is affected by memory. They mentioned it, but the fact that a company with a market cap of over $5 trillion is growing revenue by more than 100% year-over-year without having the same price- to-free cash flow multiple as some big tech companies—this is a stock that trades at a low forward P/E , just above 20.
The price-to- free cash flow ratio is also approaching 20x. This is again something we haven't seen before, which probably explains the market's skepticism about these numbers and this kind of growth, but this is the fourth quarter in a row that we've seen revenue acceleration, and the projections are just incredible.
Firstly, it's just a crazy 106% year-on-year growth . And, um, before we move on to the next one, I really want to emphasize that, in my personal opinion, one of the biggest threats to the market is that the market just can't imagine, "Can this last?" Yes? 106%...I don't expect it to continue at these levels, but when you're trading at a forward P/E ratio, as you mentioned, just above 20, even a 20 % year-over-year increase would n't seem crazy.
So, I think we have a fair margin of safety before we even get close to that rate of revenue growth. And since we will now see forecasts not only for the next quarter, but also for the upcoming fiscal year, the visibility of this is simply incredible. Yes, Nile? Yes, that was probably one of our main questions.
We actually made a video before the Nvidia report a couple of days ago. We wanted to see if all the commitments, all the guarantees—the numbers were getting bigger and bigger. But are they getting bigger because of the visibility of future income, or is it speculation? And it is quite clear from their answers that this is far from speculation.
They essentially said, " Look, regarding the recent big deal they announced, energy-wise, with OpenAI and another company." They said they could deploy up to 1.5 million GPUs and that could bring them $150 billion to $200 billion. And when you get numbers like that, I mean, of course , why wouldn't they invest that amount of money?
That makes sense. Yes, and more importantly, it was 150-200 for each GPU generation. And I think, for those who aren't familiar, Nvidia has made a kind of multi-year commitment to capacity. It seems like it was for 20 years. And they say, " Hey, if you're upgrading every 6 years or so , that's about three or four cycles or generations that you can get from Nvidia." So, 150-200 multiplied by 3 or 4, and you're just creating insurance in case they don't pay.
But if they pay, if everything goes well, you just get all that income and fill the bank. So, it's really scary to see commitments like that, and I know we'll have a slideshow about that later. Um, but many of these questions and doubts, in my opinion, were answered during this earnings report. And this is one of those things that we talked about in the previous report, that's it, right, Neo?
So, if you're going to give us a commitment to your production capacity, let's say 279 billion. For investors unfamiliar with it, Nvidia provides memory, contracts TSMC, optics, and advanced packaging to guarantee itself the production of all the chips it needs. And I think the time frame covers the period from now to 2032 and beyond.
Neo, if I'm not mistaken, it seems that the largest volume falls on 2027 - about 120 billion. So it's a significant burden, of course, because that's where they have the most predictability, and then it decreases. I think in 2028 it's still about 100 billion and then the decline starts, but all of that is based on current market visibility.
But that's exactly what the market is afraid of, right? I think before I hand over the floor to you, it's worth mentioning that when these numbers appeared in the press release, the stocks fell because the market started thinking: where is this money going to come from? Where will they come from? As we will see later in the report, they responded to this, and that is when we saw a reversal in the price dynamics.
Yes, and when you look at those numbers again, you might panic and ask, "How are they going to finance all of this ?" But you have to remember, as you said, that the lion's share of this amount will fall on fiscal years 2027 and 2028 for Nvidia; that is, the 2026, 2027, 2028, and 2029 calendar years are the main milestones for them.
And they also talked about their investments in frontier laboratories. These are not huge investments that will be made every year for the foreseeable future. And once this business goes through this cycle of large-scale investments, free cash flow will continue to grow. They are on track to generate hundreds of billions of dollars in free cash flow in the near future.
So, from their point of view, concluding such agreements is a completely logical step. Yes, Neil, I'm not sure if we should move to the fiscal year 2028 forecast, which corresponds to the calendar year 2027. Well , this is the third quarter. Let's start with the third quarter. So, so, third quarter of fiscal year 2027, revenue of $108 billion .
Right, I don't know if you have the math here, Neil. year. Will it be somewhere a little more than 90%? Almost, yes. About 90%, and again, if you add plus or minus 2% here, or assume they stick to their own forecast, that would again be over 90% year-over-year growth . So, a slight slowdown compared to the current quarter, but the dollar amount is getting bigger and bigger.
Of course, the main news is the second line. Yes? This is a story about gross profit. Yes, yes, yes. This is the gross profit. It has been consistently decreasing due to memory costs, and it seems they even mentioned it for the 2027 calendar year. I'll start by saying " calendar year". For the 2027 calendar year, they expect slightly less growth, right?
It will drop to 71.5% for two reasons. This is the increase in Vera Rubin production and the increase in the cost of memory. But after that, the figure is expected to reach approximately 72.5%. I think this is quite interesting, because this was the argument of the bears against Nvidia: they say it is impossible to keep margins at 75%.
But to me, Neil, the decline from 75% to 72.5% with memory cost increases—we've heard from Micron that in some quarters memory costs have been up 60% sequentially, and sometimes more—even with that, the margin drop is only down to 72-72.5%. I don't consider this to be any serious " bearish" factor. Is this the worst that can happen when memory prices rise and a new product launches?
Any thoughts, Neil, before we talk about revenue growth rates? No, that was really the main argument against Nvidia. This was also an argument against memory manufacturers. Your margins are very high now because you have pricing power, but what happens when that power disappears? How profitable can you actually be?
And that's why we see the multiplier not increasing much for memory manufacturers like Micron, SK Hynix, or even others. The same can be said about Nvidia. But on the other hand, if the worst that happens is a drop to 70 or so percent, well, okay. I'll accept it anytime you're growing 100-90% of your revenue every quarter right now.
And when they told us the preliminary revenue growth for next year, it is now 70%, which is significantly higher than the market expected. And that's not even the final figure. This is a number that could reach 100% if they had unlimited demand growth. If they can grow more, they will grow more, which means it's entirely possible to see Nvidia grow next year, next fiscal year, by almost 100% more.
Yeah, yeah, and I think Jensen eventually mentioned that one of the reasons they didn't provide a lot of prior earnings data or revenue growth potential was because the supply chain was constantly changing, right? It changed so much that they couldn't give us a number, but what they would give us today would be different.
So I think they feel confident now , because 70% for fiscal year 2028—that's certainly a good baseline. And for those watching, analysts expect revenue for this quarter, for this year, to be around $400 billion . It seems like it's around 399. I personally believe Nvidia will do more, but if we take that base of 400 billion—and these are the numbers before these reports, which they've already exceeded—they've already exceeded analyst expectations.
But if you take that $400 billion and add 70% year-over-year growth, that's almost $650 billion in revenue next year, Neo. So now when you start to see this and say, "Hey, you have $650 billion in revenue and about $100 billion in liabilities." This is almost the same as your margin, so there's nothing to worry about.
It's like...you make these commitments because you see this perspective. And when we got that number, I think people started counting quickly, and we saw the stock price really change after that. Yes, I mean, even by my own estimation, I was far from it . I was expecting growth closer to 85-86% this year and then a slowdown next year, like on Wall Street, but yeah, now they're going to find an additional $100 billion, and that's not the only project announced, right?
We have seen AWS scale to 2 million GPUs . And if we do the math, I think it's for the next 2 years. So, I think, until the second quarter of fiscal year 2029, that's 2 years. And if we apply the same calculations as their OpenAI deal commitments, 1.5 million GPUs could generate $150 billion to $200 billion in revenue.
2 million GPUs is an additional $200 billion over the next 2 years from just one customer. So, when you start adding all these numbers together, it again becomes clear why they make such investments, because they see future income. It seems like even at the beginning of the call, I'm not sure we have this in the presentations, but they mentioned that in calendar year 2026, the capital spending of the " Big Five" is expected to be around $800 billion .
And next year they expect $1.3 trillion from the “Big Five” alone. So, again, we were given revenue visibility, we were given insight into potential capital expenditures from just five of their large customers. And one thing we know for sure now , Neil, right? Hyperscalers only account for about 50% of data center revenue, a little more.
Um, but it's not 80% like it used to be from these hyperscalers. You still have other cloud players and the corporate sector that is starting to wake up. And although we didn't discuss it in this episode, many software companies also reported earnings today. Um, and they started showing a lot of proactive results thanks to AI.
So now you see the corporate market also waking up to this story with artificial intelligence. So we saw a lot of positive things. Okay, Neil, I think we now have a good overview of the revenue, we've got clarity on the forecasts and clarity on the potential capital expenditures of the hyperscalers.
We even gained insight into pricing for certain solutions. I'll pass the word on to you. Name two stocks that you think could benefit from what we just heard during the earnings report. I mean, we know they discussed an open versus a closed model. And as I said in the previous video, I think Nebius is the big winner here.
And I'll just reiterate that Nebius will benefit from this . Yes, they work very closely with Nvidia. Nvidia is an investor in Nebius. Nvidia and Nebius actually announced that Nebius is the first cloud neo provider to launch the new Grok system with the Blackwell architecture, which again is very good news for Nebius.
The second thing I would move on to right away is probably the players in the memory market. And Micron, I'll choose Micron for obvious reasons. Nvidia's gross margin is shrinking as memory prices rise, meaning Micron, SK Hynix, and Samsung will all benefit from this as well. So, those are those two players, but of course there are many others.
There are many other players who can indirectly benefit from this , right? If the AI story really works, we see software companies showing great results. We see Salesforce suddenly announcing a deep partnership with Anthropic and releasing a new product called Agentforce. So, everything is moving in the right direction .
I think there will be many winners, but if I had to choose two, it would be them. I'm sure I already know who you'll choose. I'm actually not going to choose a neo-cloud player this time. I'll choose, it'll be interesting, a random choice—AMD. I choose AMD because we heard from Jensen that the market is limited in supply.
They can only grow by 70% due to current market conditions. If it weren't for that, they could have grown a lot bigger, I think he said. I don't think he gave an exact number, but he said " much more." If we are now in a market where AI tokens are truly valuable, which I truly believe, AI labs will not wait.
They will try to find anyone they can get a chip from, and I think AMD with their Instinct stand will be able to benefit greatly from this. So, this is my first choice. My second choice—I was going to go for neo- cloud, but I want to change my approach a bit. This will be Marvell. Eh, I, I, I, I choose Marvell.
Marvell has a really great partnership with Amazon. And Amazon is developing Trainium. They do a lot of NVLink solutions with Trainium and Nvidia, and Marvell plays a major role there. And with that announcement, I think they also announced that Amazon and Nvidia are teaming up on another part of memory , which is key to the NVLink ecosystem.
So I believe Marvell will actually also be a player that can benefit from this. So, AMD and Marvell, which are usually two competitors of Nvidia, in my opinion, can benefit from the current trend. And Marvell reports on Thursday after the market closes, so this could be very interesting. This is interesting because a year ago Marvell was under pressure.
There was talk that Amazon would drop them and so on. But it seems that things are much better for them. Jensen believes Marvell could actually be worth a trillion dollars, so it's interesting to watch a potential competitor become almost a best friend. Other than that, I think it was another great, just great quarter for Nvidia, which is, you could say, powering this whole AI ecosystem.
They did touch on that argument about cyclical financing. I think they handled it wonderfully. So, people may be unhappy with the answer, but for them, again, I come back to the same thing. It makes sense to them. Jose, I think this is a good summary of an excellent earnings report. Don't forget to subscribe to the channel so you don't miss any future earnings reviews, recaps, or any other videos. Like, subscribe, and see you in the next video. See you later.
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