Nvidia’s second-quarter results show how strongly demand for generative AI is reshaping the company’s business. Revenue and net income rose sharply from a year earlier, while sales from data centers far outpaced the gaming business that once led Nvidia’s revenue.
Data centers take the lead
Nvidia reported $13.51 billion in revenue for the second quarter, more than double the $6.7 billion it recorded in the same period last year. That result also exceeded the $11.22 billion forecast by analysts polled by Yahoo Finance.
The company’s data center business generated $10.32 billion in revenue. That was up 171% from a year ago and up 141% from the previous quarter. By comparison, gaming revenue was $2.49 billion, a 22% increase from the year-earlier period.
The difference in scale points to a change in what is driving Nvidia’s growth. Gaming is still expanding, but data center sales have become the much larger business as organizations build infrastructure for AI applications.
AI hardware sits at the center of the shift
Nvidia supplies chips used to build and run AI applications. Its A100 and H100 chips are among the hardware supporting that work, including applications such as OpenAI’s ChatGPT.
Demand for these applications has grown over the last year, and the infrastructure supporting them is changing along with it. Nvidia founder and CEO Jensen Huang said cloud service providers had announced plans to adopt H100 hardware in their data centers. He also pointed to partnerships with enterprise IT system and software providers aimed at bringing Nvidia AI to different industries.
Huang described the trend as a transition from general-purpose computing to accelerated computing and generative AI. In his view, AI is giving companies another reason to reconsider how their computing systems are built and used.
Profit rises alongside revenue
Nvidia reported GAAP net income of $6.18 billion, compared with $656 million in the same year-ago period. Net income also rose from the $2.04 billion reported in the first quarter.
Earnings per diluted share reached $2.48, up 854% from the same period last year. Analysts polled by Yahoo Finance had expected $2.09. Taken together, the revenue and earnings figures show that the surge in demand is translating into a substantial improvement in Nvidia’s reported financial results.
The company’s current position follows earlier decisions to invest in AI-related technology. Huang said that in 2018 Nvidia made an existential business decision to embrace AI-powered image processing through ray tracing and intelligent upscaling, known as RTX and DLSS. The source article describes that decision as a bet that has paid off.
Nvidia expects further growth
Nvidia forecast third-quarter revenue of $16 billion, plus or minus 2%. That outlook suggests the company expects demand to continue beyond the quarter just reported.
On the earnings call, Huang said the world has about a trillion dollars’ worth of data centers installed in the cloud, and that this infrastructure is in the process of transitioning to accelerated computing and generative AI. His description frames the opportunity as two platform shifts happening at once: a move toward accelerated computing and the rise of generative AI applications.
The results make Nvidia a prominent beneficiary of that transition. They also show how much the company’s revenue mix has changed: data center sales now dwarf gaming revenue, while the company is positioning its hardware and partnerships around the growing use of AI.