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NVIDIA Earnings Demolish Expectations -- Rocket 141%

By Beth McKenna – Updated May 11, 2018 at 2:39PM

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The artificial intelligence leader's fiscal Q1 report was a thing of beauty.

NVIDIA Corp. (NVDA -0.66%) reported powerful fiscal first-quarter 2019 earnings on Thursday after the market close. The graphics processing unit (GPU) specialist's revenue jumped 66% to $3.21 billion, earnings per share soared 151% to $1.98, and EPS adjusted for one-time factors surged 141% to $2.05. 

Wall Street was expecting adjusted EPS of $1.45 on revenue of $2.89 billion, so NVIDIA crushed it. Again. 

NVIDIA shares were down about 3% in after-hours trading on Thursday. This "blow-out expectations/stock drop" dynamic isn't uncommon. The market's expectations are sky-high for NVIDIA, with some market participants looking for any perceived hairline crack in the company's quarterly report -- and when you're looking everywhere to find fault, it's easy to do. The stock has returned a whopping 110% for the one-year period through Thursday.

The inside of a data center with the outline of a person's head, filled with 0s and 1s and other things in the digital realm, in the foreground -- concept for AI.

Image source: Getty Images.

The powerful key numbers

Metric

Fiscal Q2 2019 

Fiscal Q1 2018

Change (YOY)

Revenue

$3.21 billion

$1.94 billion

66%

GAAP net income

$1.24 billion  $507 million 145% 

Adjusted net income

$1.29 billion  $533 million  141% 

GAAP earnings per share (EPS)

$1.98  $0.79  151%

Adjusted EPS

$2.05  $0.85  141% 

Data source: NVIDIA. GAAP = generally accepted accounting principles. YOY = year over year.

GAAP gross margin was 64.5%, up from 59.4% in the year-ago quarter, while adjusted gross margin came in at 64.7%, up from 59.6%. Both metrics were up a whopping 510 basis points (5.1 percentage points).

Data center and gaming remain the platform dynamic duo 

Platform

Fiscal Q1 2018 Revenue

Change (YOY)

Change (QOQ)

Gaming

 $1.72 billion

68% 

 (1%)

Data center

 $701 million 

71%

 16%

Professional visualization

 $251 million

22% 

 (1%)

Automotive

 $145 million

4%

 10%

OEM and IP

 $387 million

148%

115%

Data source: NVIDIA. OEM and IP = original equipment manufacturer and intellectual property. YOY = year over year. QOQ = quarter over quarter.

Gaming GPU growth was driven by the soaring popularity of esports, brisk demand for top cinematic-quality video games, and momentum of the Battle Royale genre. Sales edging down 1% from the previous quarter isn't a matter of concern -- gaming gets a boost from holiday sales. The success of the Nintendo Switch gaming console remains a tailwind, as NVIDIA supplies Tegra processors for this product. These sales tallied $442 million, up 33% from the year-ago quarter.

Data center's growth was led by continued robust sales of products powered by the company's Volta GPU architecture, including the Tesla V100 GPU and the new DGX supercomputing systems. Volta-based products are optimized for tackling the immense computational requirements of high-performance computing (HPC) and artificial intelligence (AI) workloads. 

Auto remains a relatively slow-grower, but we'd expect that at this stage. NVIDIA has been laying the groundwork for significant growth when driverless vehicles become legal to sell across the county, which many industry experts believe could occur as early as 2021. More than 370 entities are developing vehicles and systems based on NVIDIA's AI-powered autonomous vehicle platform, DRIVE PX. The company's partners include top automakers such as Toyota, Mercedes-Benz, and Audi, and ride-hailing giant Uber.

Cryptoccurrency 

OEM sales included $289 million in revenue from application-specific boards for cryptocurrency mining. These sales represent about 9% of NVIDIA's total quarterly sales. That said, the crypto market represents a bigger portion of the company's business than this percentage suggests. Some miners buy the company's GeForce gaming GPUs rather than its application-specific product, so these sales would fall into gaming. These sales can't be accurately quantified. 

New platforms and products 

NVIDIA introduced three new platforms in the quarter:

  • A healthcare platform centered on Project Clara, a medical imaging supercomputer.
  • A robotics platform, including the Issac software development kit.
  • An Internet of Things (IoT) platform via a teaming with Arm, which will bring AI inferencing to mobile, consumer electronics, and IoT devices.

It also announced many new products or product upgrades: 

  • NVIDIA RTX, a breakthrough computer graphics technology that produces movie-quality images in real time.
  • Many advances to its deep-learning platform. (Deep learning is a category of AI that aims to mimic in machines the way humans make inferences from data.) 
  • TensorRT 4, the latest version of the TensorRT AI inference accelerator software.
  • Quadro GV100 workstation GPU with RTX technology, enabling real-time ray tracing for professional designers and content creators.
  • DRIVE Constellation server with DRIVE Sim software, comprising a system aimed at safely testing autonomous vehicles in virtual reality (VR). 

The future looks bright 

NVIDIA had a terrific quarter. In the press release, CEO Jensen Huang summed up the bright picture ahead:

At the heart of our opportunity is the incredible growth of computing demand of AI, just as traditional computing has slowed. The GPU computing approach we have pioneered is ideal for filling this vacuum. 

Editor's note: This article has been updated to note that revenue from application-specific boards for cryptocurrency mining equaled about 9% of total revenue. 

Beth McKenna owns shares of Nvidia. The Motley Fool owns shares of and recommends Nvidia. The Motley Fool has a disclosure policy.

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