Morningstar Research senior equity analyst Brian Colello has kept his “four star” rating on Nvidia after the semiconductor firm reported a record revenue of US$57 billion ($74.31 billion) for the 3QFY2025 ended Oct 26, 22% higher q-o-q and 62% up y-o-y.
Generally accepted accounting principles (GAAP) and non-GAAP gross margins for the quarter stood at 73.4% and 73.6% respectively.
3QFY2025 GAAP and non-GAAP earnings per share (EPS) on a diluted basis were both $1.30.
“Nvidia again delivered excellent revenue growth as artificial intelligence (AI) demand still exceeds supply,” the analyst writes in his Nov 21 report. He adds that the company’s results contrast with fears of a near-term AI bubble, although such risks may be longer-term in nature.
During the quarter, Nvidia’s data centre revenue rose by 25% q-o-q and 66% y-o-y to a record US$51.2 billion. “Nvidia’s supply commitments are up 63% year over year, and the firm is preparing for even stronger growth with its latest Blackwell Ultra products,” notes Colello.
He adds that the firm has reiterated its expectations of seeing US$500 billion in product revenue for Blackwell and Rubin by the end of 2026, which implies US$300 billion plus of data centre revenue for the year.
“Nvidia still foresees US$3 trillion - US$4 trillion of annual AI infrastructure spending by 2030,” he adds.
Given that Nvidia’s 3QFY2025 revenue surpassed its initial guidance of US$54 billion, and its 4QFY2025 revenue forecast of US$65 billion going ahead of the FactSet consensus estimate of US$62 billion, Colello has raised his revenue estimates in the "near term and beyond”.
For FY2026 and FY2027, the analyst now expects Nvidia to report revenues of US$213.64 billion and US$337.39 billion respectively.
With the higher revenue estimate, the analyst has also increased his fair value estimate to US$240 from US$225.
“We keep our ‘Very High Morningstar Uncertainty rating’, given the fast-moving deals being made in AI,” he writes. “Shares rose about 6% after hours.”
At its current share price levels, the analyst still sees Nvidia’s shares as being “undervalued” and any talk of a recent AI bubble as a “buying opportunity”.
To Colello, 2026 is shaping up to be another “stellar AI year”, although concerns about AI funding and energy buildouts are valid in the medium to long term.
“We tend to agree with CEO Jensen Huang’s opening quote about an AI bubble: ‘There's been a lot of talk about an AI bubble. From our vantage point, we see something very different.’ We don’t see many signs to suggest that 2026 will be a weak year for Nvidia in any way,” he says. “We believe Nvidia might have the best view of the AI landscape since it sits at the centre of the ecosystem, yet it is providing investors with astounding forecasts and has more than delivered on its prior forecasts to date.”
Shares in Nvidia closed US$1.76 lower or 0.97% down at US$178.88 on Nov 21, but 29.33% higher year to date.
