Nvidia’s total margin guidance occurred several times during the fourth quarter revenue call. Nvidia is forecasting a “low ’70s” total margin for the current quarter, as it focuses on speeding up production of Blackwell chips.
Nvidia knocked it out of the park in its fourth quarter revenue report, but the total margin guidance during analyst calls on Wednesday was a sticking point for Wall Street.
After NVIDIA predicted GAAP and non-GAAP gross profits at 70.6% and 71.0% in the current quarter, giving 50 basis points or earning 50 basis points, analysts asked multiple times for metrics, a meticulous measure of profitability.
Nvidia CFO Colette Kress said the expectation to be “low in the 70s” is due to increased costs due to speeding up the production of Blackwell systems and chips to meet demand.
Once Blackwell has grown completely, Cress said there will be an opportunity to improve costs, and Nvidia predicted that gross profits will be “returned to the mid-’70s later this year.”
One analyst asked if it was correct for CFOs to consider the company’s explanations as the bottom of the total margin that they repeated.
In the final question in the Q&A segment, Citi analysts asked Cress to explain the company’s trust in gross profit growth, given the uncertainty regarding the impact of tariffs on the semiconductor industry.
Kress said the total margin for Nvidia is “very complicated in terms of materials” and that everything is in the Blackwell system. She said there is a “major opportunity” to explore factors that could contribute to improving gross profits.
Once Blackwell launched, Cress said the company could “start a lot of that job.”
“If not, we probably start as soon as possible,” Cress said, adding that if it can improve in the short term, the company will do so too.
Blackwell is the next-generation GPU architecture for AI chip Nvidia, and Kress said Nvidia is looking forward to “a key lamp for Blackwell in the first quarter.” The company announced Wednesday that Blackwell Chips had reached full-scale production, earning $11 billion in revenue in the fourth quarter.
“This is the fastest product ramp in our history, and its speed and scale are unprecedented,” Cress said over the phone.
Nvidia CEO Jensen Huang said in an analyst’s call that the company experienced its first “hiccups” in its early production, and that going from Hopper, the previous generation chipset, to Blackwell is a “challenging transition.”
Cress said tariffs will remain “a little unknown” until further guidance from the government is given, but the company plans to follow “export restrictions and duties like that.”
Tariffs have been a key concern leading up to Nvidia’s release of revenues as President Donald Trump’s administration is considering tightening chip export rules to limit the progress of China’s AI. Nvidia is not permitted to sell the most advanced AI chips to China, instead selling a less powerful version to Chinese customers.
Last month, Trump also threatened tariffs in Taiwan, where Nvidia’s chip manufacturing partner TSMC is based.
Nvidia shares experienced after-hours trading shortly after the release of revenues, down up to 2% before stabilizing, following comments from Nvidia’s CFO that demand for Blackwell “exceeded” expectations. The company’s shares fell more than 4% on Thursday.
