After hitting a speed bump last quarter, graphics and mobile processing chip specialist NVIDIA (Nasdaq: NVDA) is roaring back, jumping by north of 10% following its earnings report. That bump is still there, but the company is working its way over it. Although revenue fell from a year ago, the results did top the Street's toned-down expectations.

Can I get your digits?
Total revenue decreased by 4% to $924.9 million, which led to non-GAAP net income of $97.5 million, or $0.16 per share. On a GAAP basis, NVIDIA put up net income of $60.4 million, or $0.10 per share.

As usual, NVIDIA's core GPU business carried most of the weight at $579.7 million in revenue, down 6.7% sequentially from the fourth quarter. Although that represents a 9% decline compared with a year ago, keep in mind that the floods in Thailand washed out much of the PC supply chain, which is now getting back on its feet. The second-quarter outlook also topped what investors were expecting, with revenue expected to be in the range of $990 million to $1.05 billion.

Break it down
Professional solutions, which includes workstation graphics and computing, brought in $212.6 million, inching higher from last time around. The important consumer-products division, which includes some of NVIDIA's most promising potential growth catalysts, such as mobile device components including its Tegra mobile application processors and Icera baseband modems, generated sales of $132.6 million. That's up 20.8% sequentially and 8% year over year.

NVIDIA said the growth in the consumer-products segment was driven by its Tegra business as it continues to work its way up the production ramp for its quad-core Tegra 3, while other areas, including embedded devices, entertainment, and automotive, languished.

Dodging a double-whammy
NVIDIA recently launched its latest generation of GPUs built on its 28-nanometer Kepler architecture, after five years of development. CEO Jen-Hsun Huang said these chips are "accelerating [NVIDIA's] business," and that the second and third quarters should see strong growth in its notebook business, with design wins on Intel's (Nasdaq: INTC) new Ivy Bridge platform.

Manufacturing partner Taiwan Semiconductor (NYSE: TSM) continues to see 28-nanometer supply constraints, which are holding back these Kepler chips. NVIDIA conceded that there's some money being left on the table, as it can't meet all the OEM and channel demand for these chips but expects supply to keep improving. Huang said TSMC has "done a great job" with 28-nanometer, but demand is simply booming, so it's having trouble keeping up with all of its customers.

The Tegra 3 chip is built on a 40-nanometer process, just like its predecessor. Some criticized NVIDIA initially on this decision, saying the Tegra 3 was just a jumbo-sized Tegra 2 with more cores packed onto a larger die package (which is pretty accurate), instead of shrinking everything and improving power efficiency. It looks like NVIDIA lucked out here, because if it had chosen 28-nanometer for the Tegra 3, these supply constraints at TSMC would be a double-whammy by holding back both Kepler and Tegra 3.

As it stands, the Tegra business isn't being affected.

Hey, Qualcomm, how about we split this spot?
Speaking of which, Huang said the Tegra business grew by 50% last quarter and was roughly split equally between smartphone and tablet shipments. NVIDIA pointed out that the first quad-core smartphone, the HTC One X, was launched in February, carrying a Tegra 3.

Ksp

Source: HTC. HTC One X.

It's important to note that this specific model is not available in the important U.S. market, as there are two versions of the One X. The domestic model carries a Qualcomm (Nasdaq: QCOM) 28-nanometer dual-core Snapdragon S4 with integrated LTE, while the international version sports the Tegra 3. Meanwhile, those same 28-nanometer supply constraints at TSMC are also holding Qualcomm back.

For now, NVIDIA is conceding Qualcomm's LTE advantage, instead choosing to focus its mobile efforts outside the U.S., primarily in Europe and Asia. Huang said, "Although we don't have LTE at the moment, LTE is predominantly a U.S.-centric phenomenon." That being said, NVIDIA is still hoping to bring Tegra 3 LTE phones to the US toward the tail end of the year.

Huang says NVIDIA's share of the discrete application processor market is "growing quite rapidly," chipping away at Qualcomm's dominant lead.

Hey, Intel, can I have your seat?
The chipmaker continues to see a lot of opportunity in Microsoft (Nasdaq: MSFT) Windows 8 and its support of ARM Holdings-based chips, although Intel remains confident that its support of legacy x86 applications will give it a major advantage in fending off ARMy recruits such as NVIDIA and Qualcomm from stealing Chipzilla's favorite seat.

In the meantime, NVIDIA's biggest concern right now is overcoming the supply issues of its Kepler GPUs, which are also constraining margins. Trying to take on a mobile titan like Qualcomm is a daunting task, but NVIDIA is sure up for it.

NVIDIA is trying its darnedest to tap into The Next Trillion-Dollar Revolution. Grab this free report to find out more.