Who Moved NVIDIA's Cheese?

On Thursday night, chip designer NVIDIA (Nasdaq: NVDA  ) presents its second-quarter results for all to see. The company has exceeded Wall Street's earnings estimates in six of the last seven quarters, but the latest update simply met expectations. What should we expect this time?

Word on the Street
The average analyst (presumably about 5'9" and wearing a beige sweater) sees NVIDIA's earnings falling 44% year over year to $0.14 per share. Revenue should be pretty flat at $1.0 billion.

Providing some additional detail, Rajvindra Gill of Needham believes that the company could beat estimates this quarter. NVIDIA recently wrested away the plum contract for Apple's (Nasdaq: AAPL  ) notebook graphics from Advanced Micro Devices (NYSE: AMD  ) , so there's a catalyst for you. Moreover, Gill thinks that the Tegra mobile processor should continue its recent rise to power. If nothing else, the chip is at the heart of the Google (Nasdaq: GOOG  ) Nexus 7 tablet, which is selling about as fast as Big G's manufacturing partners can crank 'em out.

BMO Capital adds that the Microsoft (Nasdaq: MSFT  ) Surface tablet could provide another meaningful catalyst -- that is, unless comments from system builder Asus and other device-making leaders pressure Mr. Softy into canceling that product line before launch. Redmond would be crazy to alienate its system partners at this crucial juncture in computing history. Then again, nobody ever said that Microsoft always made the best and most rational choice available. Anything is possible, I suppose.

The Foolish takeaway
NVIDIA used to be a pure play on computer graphics, but that is changing fast. The graphics division accounted for 80% of the company's sales in the 2011 fiscal year but just 64% over the last four quarters. The Tesla line of supercomputing chips is slowly encroaching on the old graphics turn, but Tegra's mobile heft is the real heir to NVIDIA's internal throne. The consumer products segment, which includes Tegra, has nearly quadrupled its annual revenue run rate since January 2011.

In this report, any success on the graphics side would just be bonus gravy on top of the burgeoning Tegra line's rise to power. Look for management's comments on mobile product wins and guidance on how NVIDIA's in-house LTE radio processing is received by would-be handset and tablet customers. Given the potential cost savings and streamlined design that comes from building LTE processing into the Tegra itself, I'm guessing we'll hear nothing but good news on that front.

NVIDIA is in the unusual position of riding Apple's powerful coattails in some markets while facing Cupertino head-to-head in others. Read up on the challenges and opportunities this unique relationship might bring in our brand-new premium report on Apple. The company serves as both lifeblood and death knell for a number of high-flying tech stocks, so make sure you understand the whole Apple story by clicking here.

Fool contributor Anders Bylund owns shares in Google but holds no other position in any of the companies mentioned. Check out Anders' holdings and bio, or follow him on Twitter and Google+. The Motley Fool owns shares of Google, Microsoft, and Apple. Motley Fool newsletter services have recommended buying shares of Google, NVIDIA, Apple, and Microsoft. Motley Fool newsletter services have recommended creating bull call spread positions in Apple and Microsoft, and writing puts on NVIDIA. The Motley Fool has a disclosure policy.

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