Nvidia (NASDAQ: NVDA) is a tech company that I’m excited about as we head further through the decade. It’s a stock I’ve held for a number of years, and have written about its Omniverse developments here, too. The company released its third-quarter results this week, and they were explosive.
I’m going to analyse the results here to see if the shares remain a buy for my portfolio.
Nvidia’s results
Nvidia released its Q3 results after the US market closed on Wednesday. The share price rose 7% in after-hours trading, so investors liked what they saw.
Revenue rose to a record $7.1bn, or a 50% growth rate from a year earlier. The company’s data centre revenue accelerated 55% to a record $2.94bn, and gaming revenue increased by 42%, also at a record of $3.22bn.
Adjusted earnings per share came in at $1.17, which was 60% over the same period last year.
The results also beat analysts’ expectations. Revenue came in 4.3% above consensus estimates, and earnings were 5.5% higher than analysts had predicted.
Looking ahead, Nvidia is now estimating Q4 revenue of $7.4bn, which is above the average analyst estimate of $6.86bn.
So overall, as a current Nvidia shareholder, I’m pleased with the growth here. I’ve noted before that the valuation is rich, so growth really needs to continue to warrant the current share price. It’s a risk to consider before I;d buy any more shares of Nvidia.
Acquisition of Arm
Outside of the valuation risk and requirement for strong growth from here, Nvidia’s potential acquisition of Arm may be a headwind in the months ahead.
It’s now over a year into the process of trying to acquire Arm, the British chip designer primarily focusing on CPUs. This would broaden Nvidia’s expertise as the company invented and now designs leading graphics processing units (GPUs).
In the UK, the government has launched a second phase investigation into the potential acquisition. And Nvidia confirmed on Wednesday that the US regulator has raised concerns over the deal.
Even though CEO Jensen Huang remains confident about the deal, saying it will enhance competition, I’m not so sure. It’s likely taking a lot of time to address these regulatory challenges, and it’s unusual in itself for there to be unified global concern over an acquisition.
Is Nvidia a buy?
I remain optimistic about Nvidia’s prospects heading into 2022 and beyond. There are numerous growth catalysts, from Omniverse to artificial intelligence, and the booming gaming sector.
In the short term, the potential acquisition of Arm may be a distraction for management. It’s being scrutinised heavily by global competition authorities, so it might not even happen. If it does, though, I think Nvidia could be an even stronger company.
I will remain a shareholder, and will look to buy more shares on any general market weakness.
Dan Appleby owns shares of Nvidia. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
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