Good morning. Nvidia released its highly anticipated earnings report on Wednesday after the bell. And “enterprise” was a word that CFO Colette Kress emphasized during the earnings call.
Nvidia is the dominant maker of graphics processing units (GPUs) chips, which are now a critical tool for accelerating AI. Its revenue for the quarter ended July 28 was $30 billion, up 15% from the previous quarter and up 122% from a year ago. Net income was $16.6 billion up from $6.2 billion the same time last year. The results were driven by sales of Nvidia’s Hopper GPU, the company said. The chipmaker delivered gross profit margins of 75.1% and adjusted earnings per share of 68 cents, up from 27 cents a year ago.
Although Nvidia topped Wall Street’s expectations, NVDA shares slipped almost 7% in after-hours trading following the earnings announcement.
“Nvidia’s overall performance signals that investors recognize the significance of AI, particularly in sectors where infrastructure and hardware are essential,” Natalie Hwang, founding managing partner of Apeira, a venture capital asset manager, told me. “However, the broader market may still underappreciate the full scope of AI’s potential beyond these foundational technologies.”
A lot of the demand for Nvidia is coming from “tens of thousands” of companies and startups building generative AI applications for consumers, education, advertising, enterprise, healthcare and robotics, Kress, who is an EVP as well as Nvidia’s CFO, said on the earnings call.
“The Enterprise AI wave has started,” Kress said. Enterprises drove sequential revenue growth in the quarter, she said. “We are working with most of the Fortune 100 companies on AI initiatives across industries and geographies.” Applications that are fueling Nvidia’s growth, include AI-powered chatbots and generative AI co-pilots to “build new, monetizable business applications and enhance employee productivity,” she said.
Large enterprises are focusing on AI, according to research. The Rise of Generative AI in SEC Filings, a new report by Arize AI finds that over half (64.6%) of Fortune 500 companies mention AI in their most recent annual report. And more than one in five enterprises specifically reference generative AI. Software and tech industries and financial services companies mention generative AI the most, according to the report.
However, more than two-thirds (69.4%) of companies mentioning generative AI do so in the context of risk of disclosures. That can range from risk through the use of emerging technology, or the risk of failing to keep pace with competitors who are using AI, or security risk to the business.
According to some analysts, the tech giant’s earnings report was a make-or-break moment. My Fortune colleague Christiaan Hetzner’s report explains why Nvidia’s earnings have taken on such outsize importance. Its stock price has been fueling record highs in the broader S&P 500 and Nasdaq indexes in recent weeks. The company’s total value tops $3 trillion. And Nvidia has a dominant position in producing GPUs. “Nvidia is the bellwether in the broader AI trade precisely because it is leagues ahead of the competition, controlling roughly 90% of the global market in AI training and inference chips,” he writes.
Although Nvidia’s rise may only mark the beginning, many companies across industries are “poised to benefit from AI advancements,” Hwang told me.
“AI GPU demand is way outstripping supply for Nvidia at this juncture,” Wedbush Securities analysts wrote in a note to investors this morning. “And the Street should come away from these results as a very bullish indicator for the broader tech sector, with more shock and awe, rather than a shrug of the shoulders, in our view.”
Also on Wednesday, Berkshire Hathaway had a big day. My colleague Greg McKenna shares his report about it in “Big Deal” below.
Sheryl Estrada
sheryl.estrada@fortune.com
The following sections of CFO Daily were curated by Greg McKenna
Leaderboard
Gary Chase was appointed CFO of Viasat (Nasdaq: VSAT), a satellite communications company, effective Sept. 16. He will succeed Shawn Duffy, who will remain at the company as chief accounting officer. Chase arrives from Delta, where he spent more than 12 years. He most recently served as SVP of operational finance and was a member of the airline’s top leadership committee. Before Delta, Chase served as a managing director and equity analyst at Barclays and Lehman Brothers.
James D. Allison was appointed CFO of human resources provider Insperity (NYSE: NSP), effective Nov. 15. He will succeed Douglas S. Sharp, who is retiring after 21 years in the role. Allison, who currently serves as chief profitability officer and EVP of comprehensive benefit solutions, first joined the company in 1997.
Big Deal
Berkshire Hathaway reached a $1 trillion market capitalization on Wednesday, almost 65 years after Warren Buffett bought a struggling New England textile manufacturer and eventually transformed it into one of the world’s biggest conglomerates.
Berkshire is the seventh U.S. company to join the “Trillion Dollar Club.” The rest of its American members are all tech giants. Buffett’s company, therefore, is distinct for its old-school holdings, counting Geico Insurance, Dairy Queen, and BNSF Railway among its subsidiaries.
Buffett, who turns 94 on Friday, has used his long-term, value-oriented approach to produce incredible returns. From 1965 to the end of 2022, Berkshire’s stock rose 3,787,464%, far outpacing the S&P 500’s 24,708% gain.
Going deeper
Is Your Organizational Transformation Veering Off Course? is a new report from the Harvard Business Review. A study from EY and the University of Oxford’s Saïd Business School polled 846 senior leaders and 840 workforce members involved in transformations, 96% of whom said such initiatives all face significant challenges that can derail the program. The authors found that successfully navigating a turning point makes a transformation 1.9 times more likely to overperform its target key performance indicators.
Overheard
“Not only can we do more with less, but we can do much more with less. Internally, we speak directionally about 2,000 [employees]. We don’t want to put a specific deadline on that.”
— Sebastian Siemiatkowski, CEO of Swedish buy-now-pay-later giant Klarna, told the Financial Times about the company’s plans to eventually halve its workforce with AI-driven cuts.
