On Thursday, Goldman Sachs maintained its Conviction Buy rating on NVIDIA (NASDAQ:NVDA), increasing the price target to $165 from the previous $150. This adjustment follows NVIDIA's financial performance for the third fiscal quarter ending in October, where the company surpassed Wall Street's revenue and non-GAAP EPS expectations by 6% and 8%, respectively.
The robust growth in Data Center Compute revenue, which saw a 22% quarter-over-quarter increase compared to the 17% rise in the prior quarter, was a significant contributor to the positive results, despite an unexpected sequential decline in Data Center Networking.
NVIDIA's revenue outlook for the fourth fiscal quarter ending in January is projected at $37.5 billion, aligning with Street forecasts and indicating a 7% quarter-over-quarter growth. However, management has indicated potential near-term gross margin pressures due to Blackwell, which are expected to continue through the April quarter.
Despite these challenges, Goldman Sachs anticipates a surge in demand for AI infrastructure, improved supply conditions, and gross margin normalization in the second half of the calendar year 2025, leading to substantial sequential EPS growth and upward revisions in analyst expectations throughout the calendar year 2025.
Reflecting the strong performance in Data Center Compute, Goldman Sachs has revised its non-GAAP EPS estimates for NVIDIA, excluding stock-based compensation (SBC), for fiscal years 2025, 2026, and 2027, with increases of 1%, 5%, and 7%, respectively.
The firm's reaffirmed Buy rating on NVIDIA, which remains on the Americas Conviction List, is bolstered by the anticipation of several upcoming events that could serve as catalysts. These include the Consumer Electronics Show (CES) in January, NVIDIA's fourth fiscal quarter earnings release in February, and the GPU Technology Conference (GTC) in March.
In other recent news, NVIDIA has been making headlines due to its strong financial performance and strategic advancements. The company reported a record-breaking total revenue of $35.1 billion in the recent quarter, surpassing expectations. NVIDIA's revenue outlook for the next quarter aligns with market forecasts at $37.5 billion. However, a temporary dip in gross margins is anticipated due to the early ramp-up of their Blackwell product, but it is expected to recover later in the year.
Several firms, including Bernstein SocGen Group, Citi, Deutsche Bank (ETR:DBKGn), Morgan Stanley (NYSE:MS), and Evercore ISI, have updated their stances on NVIDIA. Bernstein SocGen Group and Citi increased the price target to $175 while maintaining an Outperform and Buy rating respectively. Deutsche Bank kept a Hold rating and raised the target to $140, and Morgan Stanley maintained an Overweight rating and increased the price target to $168. Evercore ISI nudged its price target up to $190 and maintained an Outperform rating.
InvestingPro Insights
NVIDIA's stellar performance, as highlighted in Goldman Sachs' analysis, is further supported by real-time data from InvestingPro. The company's market capitalization stands at an impressive $3.57 trillion, reflecting its dominant position in the semiconductor industry. NVIDIA's revenue growth is particularly noteworthy, with a staggering 194.69% increase over the last twelve months as of Q2 2025, aligning with Goldman Sachs' observations on the company's robust financial performance.
InvestingPro Tips reveal that NVIDIA has a perfect Piotroski Score of 9, indicating strong financial health and operational efficiency. This score supports Goldman Sachs' positive outlook on the company. Additionally, NVIDIA's impressive gross profit margins, currently at 75.98%, underscore its ability to maintain profitability even as it navigates potential near-term gross margin pressures mentioned in the article.
The data also shows that NVIDIA is trading at a P/E ratio of 67.04, which may seem high but is justified by its extraordinary growth rates. This is reflected in the PEG ratio of 0.16, suggesting that the stock may still be undervalued relative to its growth prospects. These metrics provide context to Goldman Sachs' decision to raise the price target and maintain a Conviction Buy rating.
For investors seeking more comprehensive analysis, InvestingPro offers 22 additional tips on NVIDIA, providing a deeper understanding of the company's financial position and market performance.
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