27 February 2025
If you are covering Nvidia or Salesforce's latest results, please see the following comment from Ben Barringer, technology analyst at Quilter Cheviot:
Nvidia:
"Nvidia’s results were largely in line with consensus, and the stock held flat after hours. Its Blackwell numbers came in better than expected, the guide was good, but its gross margins were slightly weaker.
"The company’s revenues were up 78% which marks a good $1bn beat, although this is only half of the $2bn beat investors have grown accustomed to. Nvidia’s gross margin was weaker as Blackwell grew faster than had been anticipated, with its revenues coming in at around $11bn when consensus had been for $8-9bn. Nvidia’s networking solutions had been weak last quarter and was similarly flat this quarter, though this is expected to improve.
"Management’s guide came in $1bn higher than expected which is a positive, but further weakness in the gross margin is expected due to the delivery of the new Blackwell product. Margins are expected to return to 75% later in the year, but are currently only guiding for 71% for the next quarter.
"Cloud service provider demand remains strong, and so too does demand for Inference. Nvidia acknowledged the competition from ASIC, a custom chip, but it does not view it as too significant of a threat due to the flexibility that its GPUs already offer. Nvidia also confirmed it is now supplying Stargate, which will be an interesting area to watch.
"Nvidia addressed DeepSeek’s recent success and considers it an excellent innovation that is helping to push the industry forward. China now sits at 14% of Nvidia’s revenues, which is a drop compared to the 30% prior to the restrictions, and it is set to discuss China more closely at its GTC event in March. The new products are also expected to be a key focus at this event, including Blackwell Ultra which is expected in the second half of this year, as well as Rubin which is due in 2026 and should offer another 50% greater performance.
"In terms of weaknesses, Nvidia did not address Blackwell’s supply, so it can be assumed that there are no longer issues there. Similarly, the transition from Blackwell to Rubin is expected to be considerably smoother than has been the case from Hopper to Blackwell.
"Ultimately, the stock was flat and while the results were not stellar, they also didn’t disappoint. The stock is not particularly expensive at 23x, close to its low, so it is currently growing into its multiple."
Salesforce:
"Salesforce posted a slightly underwhelming set of results, with only 9% revenue growth which marks a 1% miss. Its margins were improved at 33% - considerably better than the 19% seen in recent years, but there is still room for improvement. Salesforce’s backlog was also up 11% which is encouraging.
"The key positive for the company was its new project, Agentforce. This essentially offers AI agent capabilities to call centres and the like, but using chat bots that really work. The demand has been higher than expected, rising from 200 new customers last quarter to around 3,000 this quarter. Salesforce is seeing many companies transitioning to utilising more of this technology and the blend of people and agents is increasing, with one customer’s $20 million contract being split by $13 million for people-based technology and $7 million which was AI agent based.
"Management’s full year guidance was 7-8% when consensus had expected 9%, making this a little disappointing. The margin is also expected to improve, but only by 1%.
"The stock was down by around 6% after hours, but while these results were somewhat disappointing, there is a strong chance that Salesforce is being overly cautious in its messaging given the current macroeconomic circumstances. It was not a knockout quarter, but it was by no means a complete disaster either."
