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NVIDIA's Earnings Beat Expectations; Stock Pops

By Beth McKenna - May 22, 2020 at 1:00PM

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The AI-driven data center business posted its second consecutive record quarter.

NVIDIA (NVDA 5.92%) reported robust fiscal first-quarter 2021 results after the market close on Thursday, May 21. 

The graphics processing unit (GPU) specialist's revenue jumped 39% year over year to $3.08 billion. Like last quarter, its year-over-year growth was driven by record revenue in its artificial intelligence (AI)-driven data center platform. Earnings per share adjusted for one-time items soared 105% to $1.80.

Shares of the tech stock are up 2.2% on Friday, as of 11:59 a.m. EDT. We can attribute the market's positive reaction to results on both the top and bottom lines beating Wall Street's consensus estimates, and to second-quarter revenue guidance coming in a little higher than analysts had expected.

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Image source: Getty Images.

NVIDIA's key numbers 

Metric

Fiscal Q1 2021

Fiscal Q1 2020

Change

Revenue

$3.08 billion

$2.22 billion

39%

GAAP operating income

$976 million $358 million 173%

GAAP net income

$917 million  $394 million 133%

Adjusted net income

$1.12 billion $543 million 106%

GAAP earnings per share (EPS)

$1.47 $0.64 130%

Adjusted EPS

$1.80 $0.88 105%

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

Wall Street was looking for adjusted EPS of $1.68 on revenue of $2.98 billion. And NVIDIA had guided for adjusted EPS of $1.61 on revenue of $3 billion. So its results surpassed both its outlook and analysts' estimates.  

GAAP gross margin landed at 65.1%, up considerably from 58.4% in the year-ago quarter and a bit higher than last quarter's 64.9%. Adjusted gross margin was 65.8%, up notably from 59% in the year-ago period and a little better than last quarter's 65.4%

For additional context, in the prior quarter, NVIDIA's revenue and adjusted EPS rose 41% and 136%, respectively, year over year. 

Platform performance 

Platform

Fiscal Q1 2021 Revenue

Change (YOY)

Change (QOQ)

Gaming

 $1.34 billion

27% (10%)

Data center

 $1.14 million 

80% 18%

Professional visualization

 $307 million

15% 

(7%)

Automotive

 $155 million

(7%)

(5%)

OEM and IP

 $138 million

39% (9%)

Total

 $3.08 billion

39%

(1%)

Data source: NVIDIA. OEM and IP = original equipment manufacturer and intellectual property; not a target market platform. QOQ = quarter over quarter.

NVIDIA's results were affected by the coronavirus pandemic. Here's what CFO Colette Kress had to say:

COVID-19 created challenges in supply and demand. Early in the quarter [which ended on April 26], our partners' supply chains were disrupted. Shelter-in-place [orders] resulted in closure of retail outlets and China iCafes, affecting [retail] sales of our gaming products. However, [this dynamic] drove a surge in e-tail demand. Automobile infotainment system demand and autonomous development infrastructure builds declined, and the impact is expected to continue for the next several quarters.

The gaming platform's year-over-year increase was due to higher sales across all major products, while its sequential decline was driven by seasonally lower sales of desktop GPUs. The data center business' growth was driven by higher demand from hyperscale and vertical industry end customers. 

What management had to say

CEO Jensen Huang summed up the quarter in the earnings release:

NVIDIA had an excellent quarter. The acquisition of Mellanox expands our cloud and data center opportunity. We raised the bar for AI computing with the launch and shipment of our Ampere GPU. And our digital GTC conference attracted a record number of developers, highlighting the accelerating adoption of NVIDIA GPU computing.

Our data center business achieved a record and its first $1 billion quarter. NVIDIA is well positioned to advance the most powerful technology forces of our time -- cloud computing and AI.

The acquisition of high-performance networking specialist Mellanox Technologies closed on the first day of NVIDIA's fiscal second quarter, April 27. 

Second-quarter guidance

NVIDIA started fiscal 2021 off on a strong note despite the challenges presented by the pandemic.

For the second quarter, management guided for revenue of $3.65 billion, representing growth of 41.5% year over year. Mellanox is expected to contribute a "low-teens percentage" of total revenue. 

Going into the release, the Street had been modeling for revenue of $3.15 billion excluding the contribution from Mellanox. We'd have to back out 13.7% -- a mid-teens percentage -- from NVIDIA's outlook of $3.65 billion to get to the $3.15 billion estimate. So the company's revenue guidance was a little better than analysts were anticipating.

NVIDIA also guided (albeit indirectly, by providing a bunch of inputs) for adjusted EPS of $1.94, according to my calculations. This represents growth of 56.5% year over year. 

Beth McKenna has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends NVIDIA. The Motley Fool has a disclosure policy.

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