Nvidia's Earnings Roared Higher to Record Levels. So, Why Isn't the Stock Soaring?
Nvidia (NASDAQ: NVDA) investors have grown used to positive surprises. The top artificial intelligence (AI) chip designer has surpassed analysts' earnings estimates and delivered double- or triple-digit growth quarter after quarter in recent times. This is thanks to Nvidia's strength in this booming chip market and the company's move to go all-in on AI, offering customers a full selection of related products and services.
And this tech powerhouse didn't disappoint in its fourth-quarter and fiscal 2025 full-year report last week, reporting better-than-expected revenue and net income that surged to record levels. On top of this, Blackwell -- Nvidia's new game-changing architecture -- blasted onto the scene in the company's fastest product ramp ever. Nvidia offered various details about its market position and what's ahead for AI, signaling that growth is far from over.
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After this kind of report, you might expect Nvidia's stock to surge. But in fact, it didn't. The stock slipped more than 9% on Thursday in the trading session following the report, then went on to advance a little less than 4% on Friday. So, after such a positive earnings report, why isn't the stock taking off? Let's find out.
Image source: Getty Images.
The leader in the AI chip market
First, a summary of the Nvidia story so far. As mentioned, the company is the leader in the AI chip market, with its graphics processing units (GPUs) being the most sought-after for critical tasks such as training and inferencing large language models (LLMs). This has resulted in ongoing high demand for its chips and other products, helping quarterly revenue soar beyond a full year of revenue as recently as two years ago.
Nvidia is an early player in the space, so it has a first-to-market advantage. However, it's the company's commitment to innovation that has kept its leadership going. The tech giant pledges to update its GPUs annually, an enormous task that the company is executing well.
Blackwell launched during the fourth quarter, generating $11 billion in revenue right out of the gate. CEO Jensen Huang says demand remains "extraordinary" as the world's biggest tech companies pile into this new customizable product. It offers them a selection of chips, networking options, and more.
Nvidia said during its earnings call that large cloud service providers -- this brings to mind companies like Amazon or Microsoft, for example -- make up half its data center revenue. These are players with solid financials and big budgets, meaning they have what it takes to keep investing in premium chips and related products, a positive sign for Nvidia.
Blackwell Ultra and Rubin coming up...
The company aims to release Blackwell Ultra later this year, followed by the Rubin architecture. All this makes it hard for rivals to catch up and ensures Nvidia's leadership. On top of this, the company is ready to excel in the next stages of AI growth, such as the development of reasoning inference (the longer "thinking" process that can supercharge the performance of LLMs) and agentic AI (the application of the technology to real-world problems).
Finally, set against the backdrop of a high-growth industry, with forecasts for today's $200 billion AI market to grow beyond $1 trillion, there's further support for the idea of Nvidia's long-term strength.
In the recent quarter, Nvidia reported a 78% increase in revenue to a record $39 billion, and full-year revenue rose 114% to a record $130 billion. The company also predicted double-digit revenue growth for the first quarter, with expectations of $43 billion in revenue.
The story behind the stock performance
Now, let's return to our question: Why isn't Nvidia's stock soaring after this strong quarterly performance and bright outlook? It's important to remember that the shares have climbed more than 1,700% over the past five years, so investors may choose times like this to lock in some profits. Nvidia stock hasn't advanced in a straight line in recent years and has dipped over certain periods, even though earnings and other news have been positive.
In fact, earnings reports haven't necessarily led to immediate performance in the recent past: Nvidia stock actually fell in the month following the past two reports, though these reports were rock solid.
So, what does this mean for investors? Nvidia has demonstrated strong earnings and stock price performance over time, and all clues right now are pointing to more of the same moving forward. This means that now, on the dip, with Nvidia trading for only 27 times forward earnings estimates, is a fantastic time to get in on the stock.
If Nvidia's stock doesn't surge immediately after an earnings report, that's OK. What's important is the content of the report, and the latest ones show that the tech giant has what it takes to continue advancing over time.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Adria Cimino has positions in Amazon. The Motley Fool has positions in and recommends Amazon, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
