Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

NVIDIA Corp. Nearly Doubled Earnings in the Second Quarter

By Anders Bylund - Aug 17, 2018 at 7:59PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The graphics processor expert's product mix is shifting back over to the data center, leaving cryptocurrency miners out in the cold.

NVIDIA ( NVDA -2.14% ) published a business update on Thursday evening, covering the second quarter of the company's fiscal 2019. The designer of graphics processors and other high-performance number-crunching chips enjoyed strong data center sales while cryptocurrency mining fell right off the map.

NVIDIA's second-quarter results: The raw numbers

Metric

Fiscal Q2 2019

Fiscal Q2 2018

Year-Over-Year Change

Revenue

$3.12 billion

$2.23 billion

40%

Net Income

$1.10 billion

$583 million

89%

GAAP earnings per share (diluted)

$1.76

$0.92

91%

Data source: NVIDIA. GAAP = generally accepted accounting principles.

What happened with NVIDIA this quarter?

  • NVIDIA's second-quarter sales rose in lockstep across its two reportable segments, as both the GPU and Tegra divisions posted 40% year-over-year growth.
  • Breaking the quarter down by target markets, data center products led the way with an 82% revenue boost. System builders and data center operators are embracing NVIDIA's latest Tesla processors with double the previous generation's on-chip memory reserves. In particular, NVIDIA saw strong demand from companies involved in artificial intelligence and data analysis.
  • OEM and intellectual property sales lagged far behind as revenue in this segment fell 54% below the year-ago period's result. Weak demand from cryptocurrency enthusiasts explained the big drop in OEM sales, where NVIDIA includes its crypto-specific products. Management had expected roughly $100 million in revenue related to digital coin mining but the actual figure was approximately $18 million.
  • Three months ago, NVIDIA centered its second-quarter revenue guidance around the $3.1 billion mark. Unadjusted earnings were expected to land near $1.98 per diluted share.
Nvidia's corporate logo, presented in the form of a custom-cut lawn and viewed askew.

Image source: Nvidia.

What management had to say

Following these soft crypto-mining results, NVIDIA isn't betting on a big swing to the upside anytime soon.

"Whereas we had previously anticipated cryptocurrency to be meaningful for the year, we are now projecting no contributions going forward," said CFO Colette Kress in a prepared statement.

In a conference call with analysts, Kress and CEO Jensen Huang added some color commentary to the flagging cryptocurrency sector. Some enthusiasts had been buying gaming cards with top-shelf performance profiles in the hopes of scraping together some crypto-mining income when they weren't playing Fortnite and PlayerUnknown's Battlegrounds. That trend is taking a break now, but gaming product sales still rose 55% year over year. In other words, NVIDIA's management doesn't need to worry too much about weak crypto demand pumping the brakes on gaming card growth. That slowdown already happened and it didn't really hurt.

Looking ahead

NVIDIA recently started shipping development systems for its DRIVE Pegasus autonomous driving platform. Management claims that more than 370 companies are using or at least investigating this platform for use in their self-driving vehicle projects. The company also introduced a closely related chip under the Jetson name this quarter, aimed at automating industrial processes and machinery with a number-crunching system optimized for low energy requirements.

In the data center sector, the DGX server system -- with special optimizations for the artificial intelligence use case -- saw a second-generation platform introduced in the second quarter. DGX-2 should ramp up to commercial production volume during the third quarter.

All told, management expects third-quarter revenue in the neighborhood of $3.25 billion, give or take 2%. At the midpoints of the guidance ranges provided for gross margin, operating expenses, and effective tax rates, GAAP net income should land near $1.08 billion, or $1.73 per diluted share. Hitting these targets would amount to year-over-year sales growth near 39%, as well as 29% higher earnings.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

NVIDIA Corporation Stock Quote
NVIDIA Corporation
NVDA
$300.37 (-2.14%) $-6.56

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
624%
 
S&P 500 Returns
140%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/06/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Our Most Popular Articles

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.