More important than strong earnings reports, Goldman Sachs: Nvidia's management addressed three "critical questions"

According to Nvidia's latest financial report, the company's third-quarter revenue reached $57 billion, far exceeding Wall Street's expectation of $55.4 billion. At the same time, the company's forecast for fourth-quarter revenue is $65 billion, also higher than the market's estimate of $62.4 billion. Boosted by its outstanding performance, Nvidia's stock rose more than 5% in after-hours trading. Regarding this financial report, Goldman Sachs' latest research maintains a "Buy" rating for Nvidia and raises its twelve-month target price from $240 to $250. Goldman analysts pointed out that compared to strong financial data, management's responses to three key issues in the earnings call are more strategically significant. These three issues cover the outlook for data center income, progress of the next-generation Rubin chip, and the lifecycle of GPU products. Management's clear answers provide investors with important evidence for the company's long-term growth certainty. The report further notes that although investors had already factored in performance expectations for this quarter, the clarity of management's statements is expected to support the stock's continued upward momentum. The financial report shows that Nvidia expects gross margin to rebound to 75% in the fourth quarter, reaching the target level previously set by management. Despite pressure from rising costs of HBM memory and other components, the company still believes that through product pricing optimization and cost control measures, gross margin can be maintained at around 70% in 2026. Based on an improved outlook for revenue and gross margin, Goldman Sachs raised its average earnings per share (EPS) estimates for Nvidia over the coming years by 12%. In addition, Goldman for the first time provided EPS forecasts for fiscal years 2028 to 2030, which are $15.60, $18.65, and $22.10 respectively. The research report noted that Nvidia enjoys a sustainable model advantage in AI training applications compared to its peers, suggesting significant potential for future performance growth. Three Key Issues Receive Clear Answers Goldman analysts pointed out that Nvidia's management provided clear responses to the three core issues most concerning to investors during this earnings call: First, the company reiterated its expectation that demand for data center products will exceed $500 billion for fiscal years 2025/26, and noted that with continued influx of new customer orders, this scale may continue to grow. Second, the next-generation Rubin chip will be launched as planned in mid-2026, and is expected to contribute significant revenue in the second half of the same year. The clear timetable effectively eased previous market concerns about the execution progress of the product roadmap. Third, regarding doubts about the lifecycle of GPU products, management provided strong evidence: the Ampere architecture GPUs (A100) launched six years ago are still running at high loads. This indicates that AI-related GPU products not only possess outstanding durability, but also generally exceed customers' original depreciation expectations in terms of actual service life. Data Center Business Drives Robust Growth Nvidia's data center computing business achieved revenue of $51.2 billion in the third quarter, a year-on-year increase of 56%. In terms of product structure, the new generation Blackwell Ultra (GB300) accounted for two-thirds of the total shipments of the Blackwell series, while GB200 contributed the remainder. Notably, last-generation Hopper architecture products still generated $2 billion in revenue this quarter, showing strong lifecycle resilience. The data center networking business was especially robust, growing 162% year-on-year to $8.2 billion. This growth was mainly driven by strong demand for NVLink, Spectrum-X, and Infiniband solutions. Major customers like Meta, Microsoft, Oracle, and xAI contributed significant increases in this field. Looking forward, Nvidia maintains its long-term view on the AI infrastructure market and expects global annual spending to reach $3-4 trillion by 2030. The company has clearly stated its commitment to occupying an important share in this vast market. Management also reiterated that for Blackwell and Rubin, the confirmed total customer demand in computing and networking is expected to exceed $500 billion. Risk Reminder and Disclaimer The market involves risks; investors should exercise prudence. This article does not constitute personal investment advice, nor does it consider the specific investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions herein are suitable for their particular situation. Investments made accordingly are at your own risk.