Nvidia Crushed Earnings, So Why Did the Stock Fall?

Perfect Report Card, Imperfect Market Reaction

Nvidia just delivered what many would call a flawless earnings report. Q4 revenue hit $68.13 billion, crushing estimates by nearly $2 billion. Adjusted earnings per share jumped 82% to $1.62, easily beating the $1.53 consensus.

Yet the stock fell. Shares dropped about 50 cents to $195.35 in extended trading, despite briefly touching $200 right after the numbers hit.

This lukewarm reaction tells us something important: we're no longer in the early days of the AI boom when Nvidia earnings could single-handedly move markets.

The New Normal: When Great Isn't Great Enough

The muted response isn't entirely surprising. Those massive post-earnings rallies that became routine during AI's initial explosion? They're history. Investors now expect Nvidia to beat estimates—it's priced in.

What matters more is the trajectory. Nvidia guided Q1 revenue to $78 billion, a whopping $5.4 billion above Street estimates. That's impressive, but investors are increasingly focused on whether growth rates can be sustained at these astronomical levels.

CFO Colette Kress tried to reassure markets, saying the company expects "sequential revenue growth throughout 2026" and has "inventory and supply commitments in place" extending into 2027. Translation: the AI party isn't stopping anytime soon.

Winners and Losers in the AI Gold Rush

The Winners

• Hyperscalers: Microsoft, Amazon, and Google account for over 50% of Nvidia's data center revenue
• Cloud providers: Even six-year-old Ampere chips are "sold out in the cloud," according to Kress
• AI startups: With compute being the new oil, those with access to Nvidia chips hold significant competitive advantages

The Losers

• Memory suppliers: Soaring memory costs are creating supply constraints even for Nvidia
• Competitors: Nvidia's moat keeps widening, making it harder for rivals to gain meaningful market share
• Skeptics: Those betting against AI sustainability keep getting proven wrong

The Depreciation Debate: A Telling Detail

One fascinating tidbit from the earnings call: Kress mentioned that even six-year-oldAmpere generation chips are still in high demand. This addresses a key concern that's been bubbling under the surface.

Last fall, some of Nvidia's biggest customers faced criticism for lengthening depreciation schedules on AI hardware—a move critics called "financial engineering." But if older chips are still generating revenue, those extended depreciation timelines look more justified.

This detail matters because it signals confidence. Cloud providers can invest knowing their hardware will remain valuable for years, not months. It also explains why we haven't seen customers "sit out" upgrade cycles despite Nvidia releasing new chips annually.