Nvidia stock rises modestly as Wall Street applauds Blackwell AI sales but notes gross margin miss

Nvidia (NVDA) stock fell more than 3% midday Thursday after the company’s fourth quarter earnings topped Wall Street’s expectations but its outlook for first quarter gross margin came in lower than estimates.

Nvidia guided for a gross margin of roughly 71% for the first quarter, lower than its 73% gross margin in the fourth quarter.

JPMorgan analyst Harlan Sur noted that the gross margin guidance was “below consensus (72.1%) as the team continues to scale its [Blackwell] shipments higher and incurs expedite fees to get systems to customers as rapidly as possible.”

The chipmaker’s revenue of $39.3 billion and earnings per share of $0.89 topped Wall Street’s estimates, according to Bloomberg consensus data. Nvidia anticipates its total first quarter revenue will hit $43 billion, plus or minus 2%, above the $42.3 billion expected by Wall Street analysts.

Despite the earnings beat, Truist Securities analyst William Stein wrote in a note late Wednesday that “investors are yawning.”

Benchmark analyst Cody Acree told Yahoo Finance in an interview after Nvidia’s earnings release that its first quarter guidance for gross margin was slightly concerning, noting that it was indicative of pricing pressure and more competition.

Read more: How does Nvidia make money?

“I think that’s just the future that Nvidia has to live in, but demand for their products appears to be strong, and that’s really the key for Nvidia going forward,” he said.

Nvidia’s Blackwell AI GPUs (graphics processing units) contributed $11 billion to the company’s Q4 revenue in what CFO Colette Kress said was “the fastest product ramp in our company’s history.” Nvidia had previously expected Blackwell to contribute several billion dollars in sales in its fourth quarter.

Bernstein analyst Stacy Rasgon wrote in a note to investors Thursday, “Gross margins at 71% might be a minor nitpick, but we won’t argue that getting product out the door should be the primary consideration at the moment given demand seemingly remains off the charts…”

Nvidia’s Blackwell revenue achievement comes after design flaws reportedly pushed production back a quarter and a report from the Information in January said overheating issues and glitches with its massive GB200 server racks with the Blackwell chips were prompting customers to cut orders, spurring fears of further delays ahead of Nvidia’s earnings report Wednesday.

But those fears were assuaged as the company said Blackwell is “fully ramped,” and CEO Jensen Huang said “demand for Blackwell is extraordinary.”

Stifel analyst Ruben Roy wrote in a note to investors late Wednesday, “[W]e believe the pace of the Blackwell ramp is notable given expectations for strong growth in F1Q following the strength seen in F4Q within the context of technical issues early in the production cycle.” Roy reiterated his Buy rating on Nvidia stock and maintained his $180 price target.

Truist Securities’ Stein added that Nvidia’s production accomplishment “de-risks the future ramps” of upcoming AI chips “by overcoming a transformation hurdle early.”

Raymond James analyst Srini Pajjuri added that “Blackwell was particularly strong” in his own note to investors late Wednesday, and Citi analyst Atif Malik said the $11 billion Blackwell sales exceeded his expectations. Pajjuri and Malik maintained their Buy ratings on the stock.

“We think NVDA’s Blackwell will continue to see demand running well above supply,” said Malik in a note early Thursday.

Pajjuri added that “China declined as a % of [Nvidia’s] sales (14%), which should help allay concerns regarding export restrictions.” Nvidia stock took a hit in January on a Bloomberg report that the Trump administration is looking to tighten controls on its chips for China.

Laura Bratton is a reporter for Yahoo Finance. Follow her on Bluesky @laurabratton.bsky.social. Email her at laura.bratton@yahooinc.com.

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