Should You Buy Nvidia Stock After Its Blowout Q4 Results?

Investors no longer have to speculate about how Nvidia (NASDAQ: NVDA) performed in the fourth quarter of 2024. Now we know. And the news was once again positive.

Nvidia reported its Q4 results after the market closed on Wednesday. It should come as no shock that the GPU maker handily beat Wall Street estimates. But should you buy Nvidia stock after its blowout Q4 results?

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How good was Nvidia's Q4 performance?

Nvidia reported Q4 revenue of $39.33 billion, up 78% year over year and 12% higher than revenue generated in the previous quarter. This result topped the company's previous guidance of $37.5 billion. It also exceeded the average estimate of $38.05 billion among analysts surveyed by LSEG.

The company posted Q4 adjusted earnings of $0.89 per share, a year-over-year increase of 71% and a 10% jump from the third quarter of 2024. The consensus analysts' estimate was for adjusted earnings of $0.84 per share.

Nvidia's big story was its data center business. Data center revenue soared 93% year over year and 16% sequentially to a record $35.6 billion. This made up nearly 91% of the company's total revenue.

There were a couple of clouds in Nvidia's silver linings, though. One negative with the Q4 results is that the company's growth is slowing somewhat. Nvidia's revenue skyrocketed 94% year over year in Q3 and 122% in Q2. The company's gross margins also slipped 3% year over year in Q4 to 73%.

Looking ahead

With all of this good news, why did Nvidia's share price slide a little after its Q4 update? Investors focus more on the future than on the past. Nvidia's outlook, while positive, wasn't overly impressive.

The company's guidance was for revenue in the first quarter of its fiscal 2026 of $43 billion, plus or minus 2%. This figure is below the average estimate of $43.37 billion among the analysts surveyed by LSEG. It also reflects further deterioration in Nvidia's growth rate.

Nvidia projects an adjusted gross margin in Q1 of 71%, plus or minus 50 basis points. This continues the downward trend of the company's gross margin in recent quarters.

Investors would normally be ecstatic about a company delivering 65% revenue growth and gross margins of over 70%. However, when a stock trades at almost 31 times forward earnings as Nvidia does, expectations are understandably higher than for many other companies.

Should you buy Nvidia stock now?

I don't think too much fuss should be made about Nvidia's slowing growth and lower margins. No one should expect the company's growth rate to remain at the dizzying levels seen after generative AI first took off. Nvidia's margins should bounce back into the mid-70s once its launch of the new Blackwell chips is at full speed.

Nvidia CEO Jensen Huang noted in the Q4 earnings call that the amount of computing power required for AI inference is already 100 times greater than needed for early large language models (LLMs). He added, "This is just the beginning." Huang thinks future AI models could need computing power that's thousands of times and perhaps even millions of times more than today's models.

I suspect Huang will be proven right. I also expect Nvidia will remain at the forefront of the AI chip market. If these assumptions are correct, growth investors should buy Nvidia stock now. The company could have plenty of blowout quarters ahead.

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Keith Speights 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.