Nvidia: There Was a Red Flag in Its Earnings Report, but Is the Stock Still a Buy?

Core Viewpoint - Nvidia continues to experience remarkable revenue growth driven by high demand for its GPUs, but there are concerns regarding its increasing accounts receivable and reliance on a few large customers [1][10]. Financial Performance - Nvidia reported a 63% increase in revenue for fiscal Q3, reaching $57 billion, surpassing the consensus estimate of $54.9 billion [3][4]. - Adjusted earnings per share (EPS) rose 67% to $1.30, exceeding analysts' expectations of $1.25 [3]. - Data center revenue grew 66% to $51.2 billion, with significant contributions from its networking portfolio, which surged 162% to $8.2 billion [4]. - Gaming revenue increased by 30% to $4.3 billion, professional visualization sales rose 56% to $730 million, and automotive revenue climbed 32% to $592 million [8]. Cash Flow and Financial Health - Nvidia generated operating cash flow of $23.8 billion and free cash flow of $22.1 billion in the quarter [9]. - The company ended the quarter with cash and marketable securities totaling $60.6 billion and $8.5 billion in debt, after repurchasing $12.5 billion in stock [9]. Future Outlook - Nvidia projects Q3 revenue to be around $65 billion, indicating a 65% growth, excluding any data center revenue from China [9]. - Management reported no signs of an AI bubble, with demand for cloud GPUs exceeding expectations [5]. Concerns and Risks - Accounts receivable increased by 89% year over year to $33.4 billion, raising concerns about potential channel stuffing or collection issues [10]. - The company's investments in customers like OpenAI and Anthropic may indicate a reliance on circular financing, which could be unsustainable in the long term [10][12].