Nvidia's Growing Faster Than You Think. This Table Proves It.

Like clockwork, Nvidia (NASDAQ: NVDA) delivered another round of explosive growth in its third-quarter earnings report, but investors seemed to be missing the most impressive part of the performance. The company didn't mention it in the earnings call or press release, consigning it instead to the "CFO Commentary" section of its earnings report.

By now, most investors know that the data center segment is driving Nvidia's growth. While Nvidia's business spans everything from gaming to autonomous vehicles to visualization tools like the Omniverse, its success in the data center business, driven by the explosive growth of AI, has stolen the narrative and now makes up the vast majority of Nvidia's revenue.

While overall revenue in the fiscal 2025 third quarter jumped 94% from a year ago to $35.1 billion, growth in the data center segment was even stronger, climbing 112% from a year ago to $30.8 billion.

However, Nvidia breaks down its data center revenue into two categories. It brings in revenue from "networking" and "compute." Compute refers to the components that run applications on a server, such as processors and memory chips. Networking includes components like switches and routers that provides the connectivity and the security needed for the applications to run.

AI training and inference is driven by the compute components so it makes sense that compute makes up the bulk of that revenue. Data center networking revenue in the third quarter grew just 20% year over year to $3.1 billion, while data center compute revenue was up 132% to $27.6 billion.

The data center compute figure looks like the best reflection of the underlying growth in Nvidia's business, even with the discrepancy between demand and supply as the company said several times on the earnings call that the business is supply constrained and it expects those constraints to continue for the next several quarters, especially on the Blackwell platform.

Data center compute revenue also grew 22% sequentially, above 17% overall sequential growth for the whole company. and 17% sequential growth in the data center. The chart below shows the performance in data center compute revenue over the last several quarters.

Source: Nvidia filings. (Note: compute revenue was not reported in fiscal 2024)

The data center compute platform is at the core of Nvidia's AI offering. It accelerates the most compute-intensive workloads, and it includes a wide range of products such as APIs, software development kits (SDKs), its DGX Cloud, which is an AI training-as-a-service platform, and GPUs, DPUs, and AI enterprise software. All of that makes it very difficult to compete with Nvidia and helps explain why the data center business is growing so fast.

Image source: Getty Images.

Revenue growth is heating up

The other telling data point in the table above is that while Nvidia's year-over-year revenue growth in the data center compute segment continued to decelerate, sequential revenue growth, which is arguably a better barometer of growth, accelerated from 17% to 22%, lifting a similar acceleration in overall revenue from 15% to 17%.

Sequential growth of 22% would translate to a 122% year-over-year growth rate if the business grew at that pace over four quarters. Given the launch of the new Blackwell platform and management's commentary about demand outstripping supply for the next several quarters, the company could maintain a growth rate similar to that over the next year.

What's next for Nvidia

Nvidia stock fell slightly on the earnings report. Investors seemed to think guidance was underwhelming as the company called for year-over-year revenue growth to slow to 70% in the fourth quarter, with the top line reaching $37.5 billion, plus or minus 2%.

However, Nvidia has a long history of topping its guidance, and it looks like a good bet to do so again in the fourth quarter, given the scorching growth from the data center compute business and locked-in demand for its Blackwell platform.

Don't be surprised to see Nvidia top that forecast again three months from now. The business is on fire. It continues to deliver stellar results, and there's little in the way to slow it down.

Should you invest $1,000 in Nvidia right now?

Before you buy stock in Nvidia, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Nvidia wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $829,378!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

See the 10 stocks »

*Stock Advisor returns as of November 25, 2024

Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.