Last week, Nvidia (NVDA 3.46%) turned in a powerful report for the third quarter of fiscal 2024. The graphics processing unit (GPU) specialist's growth was largely driven by continued robust demand for its chips and products that enable artificial intelligence (AI) capabilities.

For the quarter ended Oct. 29, Nvidia's revenue surged 206% year over year to $18.12 billion, sprinting by Wall Street's expectation of 150% growth. Adjusted earnings per share (EPS) skyrocketed 593% to $4.02, crushing the analyst consensus estimate of 433% growth. Moreover, management guided for fiscal Q4 top- and bottom-line growth of 231% and 407%, respectively. Both outlooks easily exceeded the Street's expectations.

Earnings releases tell only part of the story. Management's comments during earnings calls often contain key information about a company's prospects and strategy. Below are two key things from Nvidia's Q3 earnings call that you should know.

1. Might develop "new regulation-compliant solutions that do not require a license" for export to China and other affected countries

As background, in mid-October, the U.S. government released new and expanded export control regulations pertaining to AI-enabling products that exceed certain performance thresholds.

From the remarks of CFO Colette Kress:

Toward the end of the quarter, the U.S. government announced a new set of export control regulations for China and other markets, including Vietnam and certain countries in the Middle East. ... For [products with] the highest [AI] performance levels, the government requires licenses. For lower performance levels, the government requires a streamlined prior notification process. And for products with even lower performance levels, the government does not require any notice at all.

Kress said that over the past few quarters, Nvidia's sales to China and other impacted destinations of products that are now subject to licensing requirements have "consistently contributed approximately 20% to 25% of data center revenue." In the just-reported fiscal third quarter, the data center platform's revenue accounted for 80% of Nvidia's total revenue. So, the company's sales to China and other affected countries of its products now subject to regulation contributed about 16% to 20% (0.80 x 20% to 0.80 x 25%) of its total quarterly revenue.

Kress said management expects sales to these destinations will "decline significantly" in the fourth quarter, but the good news is that the company expects that decline "will be more than offset by strong growth in other regions."

Nvidia is exploring expanding its data center products to include new regulation-compliant solutions for export to the impacted destinations that do not require a license. However, their development would take some time, so management does not expect their sales to contribute meaningfully to Q4 revenue.

2. Annualized recurring revenue run rate should reach $1 billion by the end of Q4

From Kress' remarks:

Let me also provide an update on our software and services offerings, where we are starting to see excellent adoption. We are on track to exit the year at an annualized revenue run rate of $1 billion for recurring software, support, and services offerings. We see two primary opportunities for growth over the intermediate term with our DGX Cloud service and with our NVIDIA AI Enterprise software.

It's impressive that Nvidia's recurring revenue stream is poised to reach an annualized run rate of $1 billion by the end of the current fiscal year (late January 2024). Its products that generate the bulk of its recurring revenue and which management views as its primary recurring revenue growth opportunities over the intermediate term haven't been available for all that long.

Nvidia AI Enterprise, which is a suite of artificial intelligence and data analytics software that enables enterprises and other organizations to develop a range of AI solutions, was announced in March 2021. DGX Cloud was just launched in March 2023. This is a cloud-based AI supercomputing service that gives organizations "immediate access to the infrastructure and software needed to train advanced models for generative AI and other groundbreaking applications."

Nvidia is having success at attracting big-name companies to these two offerings. For instance, Kress added that its most recent DGX Cloud customer announcement was on the morning of the company's earnings release. The customer is biotechnology pioneer Genentech, a subsidiary of pharmaceutical giant Roche Holding, which will use the service and other Nvidia tools to optimize its AI drug discovery program.