NVIDIA's Blowout Quarter in 6 Metrics

NVIDIA (NVDA 3.65%), the leader in the graphics processor chip industry, released the financial report for its recently ended fourth quarter and year-end. The company beat its own forecast and produced a record quarter and full year in several respects, but the market didn't seem pleased with its performance. Let's look at some of the key metrics -- and a few reasons the stock may be stalled.

NVIDIA Tesla P100 chip provides top performance for artificial intelligence applications. Image source: NVIDIA.

Revenue increased by 55%

Revenue for the quarter was a record $2.173 billion, increasing 55% over the prior-year quarter. Revenue for the full year was $6.91 billion, also a record, up 38% year over year. This revenue comes from five sources: gaming, professional visualization, data center, auto, and OEM & IP. Gaming was the largest contributor, representing 62% of total revenue.

Datacenter revenue up 205%

Data center revenue -- while only comprising 7% of total revenue -- provided the most impressive gains, up 205%. NVIDIA attributes this growth to the "rapid adoption of AI worldwide." This growth is the result of the company's graphics processing units' (GPUs) use in deep learning artificial intelligence (AI) applications. This technology is accelerating and companies are adopting NVIDIA's GPUs for their systems internally, and some are paying for access to the processing power as a service, hosted on the cloud. NVIDIA sees this growth continuing as other companies follow the lead of big tech in leveraging gains from deep learning.

Data from NVIDIA 10-k. All figures in million. YOY = year over year.

Net income grew 216%

Net income reached $655 million, up from $207 million in the prior-year quarter, an increase of 216%. GAAP (generally accepted accounting principles) diluted earnings per share were $0.99 compared to $0.35, an increase of 183%. I like to see net income increase faster than revenue, as this indicates expenses are being kept in check. This was indeed the case, as operating expenses as a percentage of revenue decreased to 26% compared to 38% in the prior-year quarter.

GAAP gross margin increased by 350 bps

GAAP gross margins increased to a record 60% from 56.5% in the prior-year quarter. Even more impressive is that gross margins increased sequentially, from last quarter's record 59%. This is indicative of declining cost of revenues.

NVIDIA's new flagship GeForce GTX 1080 GPU for gaming. Image source: NVIDIA.

Cash, cash equivalents and marketable securities increased by over $1 billion

Cash and cash equivalents exceeded $6.798 billion, up from $5.037 billion, an increase of 35% over the prior-year quarter.

Returned over $1 billion to shareholders

The company reported that it repurchased $739 million in shares and paid $261 million in dividends for the year. It should be noted, though, that the share count increased year over year from 539 million shares to 553 million shares, an increase of 14 million shares. This is a result of stock based compensation, which some believe is justified, while others argue it's money down a hole. Time will tell.

If it was such a great quarter, why didn't the stock move?

This was a phenomenal quarter by nearly every metric -- the blowout everyone expected -- but it was likely already priced in. The stock was expensive at 52 times GAAP earnings, and it will make for tougher comps going forward. Others may feel they have "missed" the stock price run-up and be reluctant to buy. Foolish investors should continue to watch the operational and financial performance and be less concerned with short-term stock prices. So far, NVIDIA is making all of the right moves.