Good morning. Nvidia released its long-awaited earnings report after the close of trading on Wednesday, and the word CFO Colette Kress emphasized during the earnings call was “enterprise.”
Nvidia is a leading maker of graphics processing unit (GPU) chips, which are now essential tools in accelerating AI. Revenue for the quarter ended July 28 was $30 billion, up 15% from the previous quarter and 122% from the same period a year ago. Net income was $16.6 billion, up from $6.2 billion in the same period a year ago. Nvidia said the performance was driven by sales of its Nvidia Hopper GPUs. The chipmaker had a gross margin of 75.1% and adjusted earnings per share of 68 cents, up from 27 cents in the year-ago period.
Although Nvidia beat Wall Street expectations, its shares fell nearly 7% in after-hours trading after the earnings report.
“NVIDIA's overall performance shows that investors recognize the importance of AI, especially in areas where infrastructure and hardware are essential,” said Natalie Phan, founder and managing partner at venture capital asset management firm Apeira. “But the market as a whole may still be underestimating the full extent of AI's potential beyond these foundational technologies.”
During the earnings call, Kress, Nvidia's EVP and CFO, said much of the demand for Nvidia is coming from “tens of thousands” of companies and startups developing generative AI applications for consumer, education, advertising, enterprise, healthcare and robotics.
“The enterprise AI wave has begun,” Kress said. He noted that enterprise drove sequential revenue growth in the quarter. “We are working with most of the Fortune 100 companies that are working on AI initiatives across industries and geographies.” Applications driving growth for NVIDIA include AI-powered chatbots and generative AI copilots “to build new business applications that can be monetized and improve employee productivity,” he said.
Research shows that big companies are taking notice of AI. More than half (64.6%) of Fortune 500 companies mentioned AI in their most recent annual reports, according to a new report from Arize AI, “The Rise of Generative AI in SEC Filings.” And more than one in five companies mentioned generative AI specifically. The software and technology industry and financial services companies mentioned generative AI the most, according to the report.
However, of the companies that mention generative AI, more than two-thirds (69.4%) do so in the context of the risk of data leakage, ranging from risks from using emerging technologies, to not being able to keep up with competitors using AI, to security risks to the business.
The tech giant's earnings report was a make-or-break moment, according to some analysts. In a report from my Fortune colleague Christian Hetzner, I explain why Nvidia's earnings became so important: The company's shares have been hitting new highs across the S&P 500 and Nasdaq indexes in recent weeks; its total value exceeds $3 trillion; and Nvidia dominates in the manufacturing of GPUs. “Nvidia is a pioneer in the AI industry precisely because it far outpaces its competitors, controlling roughly 90% of the global market for AI training and inference chips,” Hetzner wrote.
While Nvidia's rise may just be at the beginning, many companies across industries “are well poised to benefit from advances in AI,” Fan said.
“At this point, demand for AI GPUs far outstrips NVIDIA's supply,” Wedbush Securities analysts wrote in a note to investors this morning, “and we believe the Street should take these results as a very bullish indicator for the tech industry as a whole and react with shock and awe rather than shrug.”
Wednesday also saw a big day for Berkshire Hathaway, which my colleague Greg McKenna shared in his report on “The Big Deal” below.
Cheryl Estrada
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The following section of CFO Daily was edited by Greg McKenna.
Leaderboard
Gary Chase has been named CFO of satellite communications company Viasat (Nasdaq: VSAT), effective Sept. 16. He succeeds Sean Duffy, who will remain with the company as chief accounting officer. Chase comes from Delta Air Lines, where he spent more than 12 years. He most recently served as senior vice president of operational finance and was a member of the airline's chief executive committee. Prior to joining Delta, Chase was a managing director and equity analyst at Barclays and Lehman Brothers.
James D. Allison has been appointed CFO of human resources services company Insperity (NYSE: NSP), effective November 15. Allison succeeds Douglas S. Sharp, who is retiring after 21 years with the company. Allison, who currently serves as chief revenue officer and EVP, comprehensive benefits solutions, joined the company in 1997.
Big Deal
Berkshire Hathaway reached a market capitalization of $1 trillion on Wednesday, nearly 65 years after Warren Buffett bought a struggling New England textile manufacturer and eventually built it into one of the world's largest conglomerates.
Berkshire Hathaway is the seventh U.S. company to join the trillion-dollar club — the rest are all tech giants — so Buffett's company stands out with its old-school stock holdings, including subsidiaries in Geico Insurance, Dairy Queen and BNSF Railway.
Buffett, who turns 94 on Friday, has generated astounding returns with his long-term, value-driven approach: Berkshire's stock price rose 3,787,464% from 1965 to the end of 2022, far outpacing the S&P 500's 24,708% gain.
Going deeper
“Is Your Organizational Transformation Off Track?” is a new report from Harvard Business Review. The study, by EY and Oxford University's Said Business School, surveyed 846 senior transformation leaders and 840 employees. Of those, 96% said that all transformation efforts face significant challenges that can derail the program. The authors found that successfully navigating tipping points makes a transformation 1.9 times more likely to exceed its targeted key performance indicators.
Stories I've heard
“Not only can we do more with fewer people, but we can also do more with fewer people. Internally, we are aiming for around 2,000 (employees). We don't intend to set a specific deadline.”
— Sebastian Simiatkowski, CEO of Swedish pay-later giant Klarna, told the Financial Times about plans to eventually cut its workforce in half through AI-driven job cuts.
