Nvidia FQ4 26 – Clockwork

The steady rhythm continues.

• Another excellent quarter from Nvidia demonstrates that the AI rollout remains on track, but the muted after-hours response suggests that further share price performance is likely to be found further down the quality stack.
• FQ4 2026 revenues / Adj-EPS were $68.1bn / $1.62, nicely ahead of estimates of $66.1bn / $1.54.
• Once again, the data centre was responsible for the surprise, where revenues were $62.3bn compared to estimates of $60.5bn.
• The main story here remains revenue growth, which was up 20% QoQ and a mighty 73% YoY.
• This, of course, will slow down due to the law of large numbers, but it is clear to see that the hyperscalers are serious about the massive spending they have forecast and that Nvidia and its peers will be the main beneficiaries.
• Guidance was also positive, but this comes as no surprise to me, as Nvidia has more demand than it can handle, meaning that its revenues are a product of how much capacity it has booked at TSMC, giving it excellent visibility.
• This is what has led to a delicate game played very nicely by Colette Kress (CFO Nvidia), where Nvidia has a very good idea of what the next quarter will be and guides just enough to keep estimates rising, but not so much that it can’t beat them when it reports.
• I think that this is what underpins guidance where FQ1 27 revenues are expected to be $76.4bn – $79.6bn ($78bn) with non-GAAP gross margins of 74.5% – 75.5% (75%), which I am pretty confident will be just beaten in May when Nvidia next reports.
• Nvidia continues to do an excellent job for its shareholders, with the vast majority of the bounty flowing to the bottom line and a share buyback program that actually does what it says.
• During fiscal 2026, Nvidia claims to have returned $41.1bn to shareholders, which one can see in the cash flow statement, where $40bn was spent buying back shares and $1bn on dividends.
• Crucially, the share count is also declining, with diluted shares having dropped by 290m during the year, meaning that Nvidia is cancelling the shares it buys rather than just giving them back out to employees, which is what most companies do.
• This report sets Nvidia up nicely for another year of strong growth and fantastic profitability, but given the reaction of the share price, this is now well within the realm of expectations.
• Here, the shares initially jumped 4% but then settled back to end the after-hours session almost unchanged, which is a sign that the market is starting to think about the long-term.
• This is clear from the 12-month forward PER, which has fallen from mid-40s to 24.8x fiscal 2027, which is pretty reasonable, when one looks at the growth trajectory for the next year or so.
• I think that this gives a lot of downside support to the shares, as when the slowdown or correction inevitably comes, the lower forward multiple will limit the size of any downward correction.
• However, it also means that further upside in valuations resulting from the AI boom needs to come from elsewhere, and here I think that memory, inference at the edge and nuclear power all still have upside to offer.
• Here, I hold Samsung Electronics (although I suspect that both Micron and SK Hynix will continue to rise), Qualcomm and a range of names involved in the production of uranium.
• I don’t hold Nvidia, but I think that, as a direct investment in the AI boom, it remains the place to go.
• Nvidia now also has the added benefit of decreasing downside risk as its forward multiple continues to look more reasonable.
• Nvidia is signalling the correction in AI spending is not coming in 2026, which is something with which I generally agree, so for now, it looks like the game is still on.