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NVIDIA Crushes Its Forecast and Powers Past Expectations

By Danny Vena – May 16, 2018 at 1:14PM

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The GPU-maker produced another record-setting performance, but was it enough?

Going into NVIDIA's (NVDA 1.51%) first-quarter financial report, expectations were running high.

The company had delivered seven successive quarters of triple-digit growth in its data center segment, which houses revenue from cloud computing and artificial intelligence uses (AI). Many believe that this business unit will continue to power the company's growth, as AI gains more widespread adoption.

That triple-digit growth streak came to an end, but the company still managed to blast past analyst expectations. 

GeForce graphics processor.

Image source: NVIDIA.

The raw numbers

Metric

Q1 2019

Q1 2018

Year-Over-Year Change

Revenue

$3.2 billion

$1.9 billion

66%

Net income

$1.2 billion

$507 million

145%

GAAP earnings per share

$1.98

$0.79

151%

Data source: NVIDIA First-Quarter 2019 Financial Release. Chart by author. GAAP = generally accepted accounting principles.

What happened at NVIDIA this quarter?

  • Overall revenue of $3.2 billion grew 66% year over year, sailing past analysts' consensus expectations for $2.91 billion. Each segment of the company produced year-over-year growth.
  • Adjusted net income of $1.285 billion grew 141%, producing adjusted earnings per share of $2.05, obliterating analysts' expectations for $1.65.
  • Data center sales hit a record $701 million, up 71% year over year. Revenue was also up 16% sequentially as the company saw strong sales of its Volta processor for cloud computing and artificial intelligence. It's worth noting that this was the slowest pace of year-over-year growth at the unit in two years.
  • Revenue in the gaming segment soared, up 68% year over year to $1.7 billion. Growth was fueled by demand from esports enthusiasts and battle royale gamers.
  • NVIDIA sold cryptocurrency mining-specific chips totaling $289 million, which were included in the OEM segment. This is the first time the company has provided this metric.
  • The automotive market grew to $145 million, up 4% compared to the prior-year quarter. The company continued its transition from infotainment to self-driving cars.

Segment

Q1 2019

Q1 2018

Year-Over-Year Change

Gaming

$1.72 billion

$1 billion

68%

Professional visualization

$251 million

$205 million

22%

Data center

$701 million

$409 million

71%

Auto

$145 million

$140 million

4%

OEM & IP

$387 million

$156 million

148%

Total

$3.2 billion

$1.9 billion

66%

Data source: NVIDIA First-Quarter 2019 Quarterly Revenue Trend. Chart by author.

"We had a strong quarter with growth across every platform," said Jensen Huang, founder and CEO of NVIDIA. "Our datacenter business achieved another record and gaming remained strong. At the heart of our opportunity is the incredible growth of computing demand of AI, just as traditional computing has slowed."

Looking ahead

For the upcoming second quarter, NVIDIA expects revenue of about $3.1 billion, which would represent year-over-year growth of 39%. Analysts are looking for $2.95 billion and adjusted earnings per share of $1.48. The company also expects GAAP gross margins of 63.3%, slightly below the record level achieved this quarter.

We knew that the days of triple-digit year-over-year growth in data center revenue couldn't go on forever. While 71% growth is still impressive, it leaves investors wondering if the demand for chips used in AI and cloud computing has slowed permanently, or if this is a blip on the radar. As both of these technologies are still in their infancy and facing growing adoption, I don't think those with a longer time horizon have anything to worry about. The future looks bright for NVIDIA.

Danny Vena owns shares of Nvidia. The Motley Fool owns shares of and recommends Nvidia. The Motley Fool has a disclosure policy.

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