The October Guide
For starters, I’m going to throw out the less than 1% Datacenter miss in July. It’s too small to matter and guidance is always more important.
At first glance, the October guide fell flat, calling for $54B in revenue, plus or minus 2%. That compared to the $55B whisper number. However, the Street’s published estimate was $53.4B, meaning the $54B guide was actually above the official number. Still, in the near term, the whisper carries more weight.
Importantly, that $54B expectation does not factor in any contribution from China. Trying to back into how much China was in the $55B whisper is more of an art, but here goes. Back in mid July, when it was announced that Nvidia could start to sell the H20 in China, the Street was looking for $51.5B in sales for October. Following that announcement, along with the hyperscalers reporting, the numbers increased by $2B. How much of that was China related is hard to say.
Additionally, only 18 of the 42 analysts updated their numbers, which means the average analyst who factored in events since mid July increased their estimates by about $4B. That $4B increase is what drove the whisper to $55B. We also don’t know how many analysts had China H20 revenue for October in their model prior to the curbs coming off. Some may have anticipated this playing out just as it has. All of that said, we can conservatively say there was $2B in China expectations in October estimates. Backing that out implies the whisper for October was $53B, and the $54B actual guide was 2% higher than the whisper.
On the call things got better. They said they could see between $2B and $5B in China revenue in the quarter if the licensing comes through as expected. That means the high end could be $59B, 7% ahead of the $55B whisper that included China.
If they come in at $59B, growth would be up 68% y/y. That compares to growth in July of up 82% when adding back the $8B in China revenue that they did not reel in. In other words, growth rates are slowing, but not as fast as many had feared.