NVIDIA (NASDAQ: NVDA) reported very strong first-quarter results with revenue of $5.7B, rising 84% y/y and non GAAP EPS of $3.66 up 103%. The upside came from Gaming which accounted for $2.76B, rising a remarkable 106% y/y. Guidance of $7.1B for the July quarter also impressed pointing to robust demand at least in the near term.

CEO of NVIDIA, Jensen Huang commented "NVIDIA RTX has reinvented computer graphics and is driving upgrades across the gaming and design markets. Our partners are launching the largest-ever wave of NVIDIA-powered laptops. Across industries, the adoption of NVIDIA computing platforms is accelerating.".

Strength in gaming is coming from adoption of the RTX 30xx series family of GPUs and demand is so strong that the company has taken steps to make it less economically viable to use GPU for mining (reducing Etherum hash rate). Still, there are concerns about the sustainability of Gaming demand as COVID moves into the rear view mirror, leading Morgan Stanley analyst Joseph Moore to note "Clearly, the last twelve months saw a major GDP shift away from services such as restaurants and hotels towards discretionary consumer products; without question, the work from home economy was a major boost. But those work-from-home habits show no sign of slowing down, and the company's contention that those conditions have boosted gaming more secularly has some merit."

However, analysts like Harlan Sur from JPMorgan are raising price targets on increased guidance despite capacity constraints. JPMorgan moves its price target to $705 from $660 noting "The sequential revenue growth is led by its crypto mining processor product (CMP; up $245M Q/Q) followed by datacenter, gaming and ProViz. More impressively off a much higher base, the team believe there's enough supply to support sequential revenue growth through the second half of the year. That said, the team expects to be supply constrained into the second half of the year (especially in gaming)."

Numbers like these would normally have shares gapping up 10% overnight but with the sustainability of its primary revenue source in question, shares are likely to take a pause as the bulls and bears battle for control.

Shares are flat in pre-open trading Thursday.