NVIDIA Crushes All Estimates in Q4 Earnings, Says AI Frenzy Is Not Over

NVIDIA Corp. NVDA — the undisputed global leader of generative artificial intelligence (AI)-powered graphical processing units (GPUs) — reported strong fourth-quarter fiscal 2026 earnings results. Adjusted earnings per share came in at $1.62, surpassing the Zacks Consensus Estimate of $1.52 and the year-ago figure of $0.89. 

Revenues came in at $68.127 billion, outpacing the Zacks Consensus Estimate of $65.421 billion and improving from the year-ago revenues of $39.3 billion. Year over year, fiscal fourth-quarter revenues increased 73.3%, marking the eleventh consecutive quarter in which the revenue growth rate exceeded 50% from the prior year.

Data Center Revenues Thrive

Revenues from Data Center (91% of revenues) jumped 75% year over year and 21.7% from the previous quarter to $62.3 billion. This robust rise was mainly driven by higher shipments of the Blackwell GPU computing platforms. 

Of the total data center revenues, around $51.3 billion came from compute (GPU) revenues, up 58% year over year and nearly $11 billion came from networking revenues, up 263% year over year. 

Impressive Guidance 

For the first quarter of fiscal 2027, NVIDIA anticipates revenues of $78 billion (+/-2%), above the Zacks Consensus Estimate of $69.25 billion. The non-GAAP gross margin is projected to be 75% (+/-50 bps). Non-GAAP operating expenses are estimated at $7.5 billion. This guidance does not include any sales from China.

AI Boom to Stay

NVDA has been benefiting from enormous spending by AI hyperscalers. CFO Colette Kress said, "For the fourth quarter, hyperscaler revenue increased and remained our largest customer category at slightly over 50% of Data Center revenue, while growth was led by the rest of our Data Center customers as revenue diversified." 

Four major clients of NVDA, namely, Microsoft Corp. MSFT, Alphabet Inc. GOOGL, Meta Platforms Inc. META and Amazon.com Inc. AMZN have decided to invest a massive $650 billion in 2026 as capital expenditure for AI-infrastructure development. This marks a significant 71.1% year-over-year increase in capital spending on the AI ecosystem.

CEO Jensen Huang said “I think the markets got it wrong,” that AI will destroy the enterprise software industry. Instead, he firmly believes that AI agents will use these software instead of replacing them. 

Huang added, “All of these tools that we use today, exist for a fundamentally good reason. These agentic AI will be intelligent software that uses these tools on our behalf and help us be more productive.”

Future Catalysts

In January, NVDA unveiled its new AI superchip — Vera Rubin — during the annual CES technology conference in Las Vegas. This innovative rack-scale system will deliver 10 times more performance per watt than its predecessor, Grace Blackwell. 

NVIDIA will start the shipment of Vera Rubin in the second half of 2026.  It has decided to announce its roadmap for Rubin Ultra, likely to be introduced in late 2027, and Feynman AI chips to be launched in 2028. NVDA is supported by an extremely bullish demand scenario. The company expects between $3 trillion and $4 trillion in AI infrastructure spending by the end of the decade. 

Visionary Diversification

NVIDIA is increasingly focusing on powering advanced driver-assistance systems, autonomous vehicles, and robotics. Apart from the robust business of data centers and gaming, the automobile industry, especially the self-driving and new energy vehicles, is turning out to be the next catalyst. 

In the fourth quarter of fiscal 2026, automotive revenues rose 6% year over year to $604 million. Management is highly optimistic as this business could become a multitrillion-dollar opportunity in the future. 

NVIDIA’s Gaming business generated $3.7 billion in sales in the last reported quarter, up 47% year over year. Professional visualization business revenues came in at $1.32, up 159% year over year.

Strong Fundamentals for NVDA Stock

NVIDIA has a return on equity (ROE) of 99.24% compared with the S&P 500’s ROE of 17.15% and the industry’s ROE of a mere 2.32%. NVDA has a forward P/E (price/earnings) of 26.05X compared with the industry’s P/E of 32.62X and the S&P 500’s P/E of 19.44X. The stock has a long-term (3-5 years) EPS growth rate of 47%, significantly above the S&P 500 Index’s 16.3% growth rate. 

NVDA has an expected revenue and earnings growth rate of 47.5% and 58.5%, respectively, for the current year (ending January 2027). The Zacks Consensus Estimate for the current year’s earnings has improved 0.7% over the last seven days.

Impressive Short-Term Upside for NVDA Shares

Year to date, NVIDIA has provided a 4.9% return. The short-term average price target of brokerage firms for the stock represents an increase of 30.7% from the last closing price of $195.56. The brokerage target price is currently in the range of $140-$352. This indicates a maximum upside of 80% and a downside of 28.4%.

Investment Thesis for NVDA Shares

NVIDIA currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. 

NVIDIA represents a rare opportunity to invest in a company with proven execution and substantial unrealized potential in the AI revolution. Astonishing growth potential of the global AI infrastructure market and NVDA’s strong guidance and business visibility despite revenue loss in China are noteworthy. As a result, the average target price of brokerage firms is expected to witness solid near-term upside.

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This article originally published on Zacks Investment Research (zacks.com).

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