Nvidia's Revenue Outlook and Gross Margins: Susquehanna Analyst's Take

Nvidia's Revenue Potential

• 💡 The primary focus moving forward for Nvidia is its revenue potential, rather than gross margins.
• 🎯 Analysts are seeking more details on the $500 billion figure mentioned, exploring potential upside beyond current models.
• 📈 There's an expectation of continued beats and raises over the next two to three quarters, indicating strong forward momentum.

Gross Margins and Valuation

• ✅ Nvidia successfully hit its target of mid-70s gross margins, with potential to reach the high 70s.
• ⚠️ While healthy, gross margins are considered less critical than revenue growth for future valuation.

Revenue Drivers and Backlog

• 🚀 The $500 billion figure encompasses compute, Blackwell GPUs, and associated networking, with some components already included.
• 🧩 Increased component availability, such as memory and front-end TSMC capacity, could allow Nvidia to exceed the $500 billion backlog.

Financial Metrics and Depreciation

• 📉 Free cash flow came in lower than street expectations due to increased inventory build-up related to component dynamics.
• ⚡ A significant shift to accelerated depreciation for GPUs is more impactful than discussions about useful life, as most value is realized in the first two years.
• ⚠️ Overstated profitability is a concern due to current depreciation practices, affecting both Nvidia and cloud GPU vendors.

Key Analyst Questions

• ❓ The most critical question for analysts remains the specific details and potential upside surrounding the $500 billion revenue projection.