Interesting Earnings Week-Nvidia and Salesforce Earnings Review

I often cover only the stocks in my portfolio or the ones that I am looking to add to my portfolio. Or, I’m hating on Tesla, a company that continues to completely stink it up, which is pleasing me. So, we’re going to do a review of these companies’ earnings, neither of which I own.

The first place to start is Nvidia, which, out of these two, I am closest to owning. In my life-fund thing portfolio, not the one I manage, my grandfather bought a sizable chunk of Nvidia in 2018 (thanks Grandpa Joe, good call). This introduces a little bias, I think, maybe just a measure of fear, but on the whole, I am pretty unbiased, as a forewarning.

Nvidia has captured headlines for years now through their immense revenue, profit, market cap, everything, growth. Even a year ago, the market would hold its breath when Nvidia reported earnings because those numbers were so indicative of the AI market, how much companies were willing to spend. Every single time, every single quarter, the company would blow expectations, even the absolute wildest expectations, out of the water. Eventually though, as always happens, analysts caught up, sort of. Nvidia is not destroying the estimates as much as before, but they have not missed, or even come close, for a few years now.

This quarter is similar to the last. All their numbers were pretty spectacular, but there is already so much priced in. They grew their sales by 78% y/y, which is INSANE. They beat on their EPS by a significant margin, they beat revenue by a billion dollars, their estimates for next quarter were nearly a full $2 billion higher than analysts were expecting, a number they’ll still probably beat. Nvidia, a datacenter company, reported 93% growth in that segment of their business, or 16% from just the last quarter. Their full-year revenue was $130 billion, up 114% y/y.

Yet, the stock was pretty much flat, actually trading down a smidgen after the news had been digested. They grew their revenue by 12% in just one quarter, which is more than most companies (looking at Block’s bih ah) do in a year.

Nvidia’s months of 100% growth in their stock price are over as well. In June 2023, the company reached a record high, and they have pretty much been there ever since, nine months. All the while, their underlying numbers have continued to grow and compound.

Nvidia is looking more and more enticing, their growth is staying strong, big companies are buying their chips, no other company seems close, and their valuation metrics are not wildly out of touch with the broader market (27 forward p/e vs 20 forward p/e). They are absolutely worth looking at.

Now, Salesforce, a company that can be tricky to understand. Basically though, Salesforce helps companies keep and manage data on customers, employees, that sort of thing. ServiceNow, a company I also own, is a customer relationship management software (CRM) as well, but they focus on different things so not exactly a competitor. I have looked at Salesforce in the past because they are something cloud based, they are a software company, and they sell to businesses. I decided against them because I preferred ServiceNow, and because I do not really like Marc Benioff, the CEO of Salesforce. I have a poor habit of rooting against companies I choose not to buy into, but I’m going to try and avoid that.

Salesforce did not have a spectacular quarter. They missed on revenue, not by too much, but a miss is a miss. Salesforce did beat on EPS, but I do not super care about that in a mid-size tech company. I really disliked the fact that their revenue growth is slowing down, only a paltry 7% for the past year. Some people, like my slime Joseph Carlson, don’t care that much about the slower top-line growth, but I think that is more of a difference in investing styles.

I do not care about great margin growth or net income growth as much as I care about revenue growth. I know their market cap is almost $300 billion, and that it is unrealistic to expect massive revenue growth, but Microsoft, a company ten times its size, grew its revenue twice as fast last year. Obviously, Microsoft is one of the greatest modern companies, but that’s the point. I don’t want to settle. Salesforce is, ironically, a sell for me.