Nvidia (NVDA +1.79%) released fiscal 2025 first-quarter results (for the three months ending April 28, 2024) on May 22, and there was a lot to like about the semiconductor giant's quarterly report as it crushed estimates and delivered better-than-expected guidance thanks to the terrific demand for its artificial intelligence (AI) chips.
The company's revenue shot up a stunning 262% year over year to $26 billion while earnings jumped a massive 461% to $6.12 per share. Both numbers were better than what Wall Street was looking for. The data-center business, which produced 87% of Nvidia's revenue, played a stellar role in this growth. After all, Nvidia's data-center revenue jumped a whopping 427% year over year to a record $22.6 billion last quarter thanks to its dominant position in the AI chip market.
NASDAQ: NVDA
Key Data Points
However, there was another business that reported healthy growth of 45% from the year-ago period. Though this business is currently producing a small portion of Nvidia's top line, the immense opportunity in this segment indicates that it could move the needle in a bigger way in the future. Let's take a closer look at it.
Nvidia is starting to capitalize on this multibillion-dollar market
Nvidia's professional-visualization business -- which includes sales of professional graphics cards used in workstations and its Omniverse platform that helps users make virtual designs of real-world objects -- gained impressive traction in the previous quarter.
More specifically, Nvidia's professional-visualization revenue increased to $427 million in the previous quarter from $295 million in the prior-year period. On the company's latest earnings-conference call, Nvidia management attributed this healthy growth to the growing demand for its Omniverse digital-twin solutions.
According to CFO Colette Kress:
Companies are using Omniverse to digitalize their workflows. Omniverse power digital twins enable Wistron, one of our manufacturing partners, to reduce end-to-end production cycle times by 50% and defect rates by 40%. And BYD, the world's largest electric vehicle maker, is adopting Omniverse for virtual factory planning and retail configurations.
It is worth noting that Nvidia has built a solid base of customers for its Omniverse digital-twin solutions, including the likes of Mercedes-Benz and BMW. And now, the company is looking to expand the reach of the Omniverse platform by offering it as a platform-as-a-service. Developers and enterprises will be able to use Nvidia's Omniverse platform with a subscription for creating digital twins, training autonomous vehicles, and testing and simulating robots.
More specifically, Nvidia is offering cloud-based application-programming interfaces (APIs) that will allow developers to integrate its software for creating digital-twin applications. The good part is that its Omniverse Cloud APIs are already being offered by multiple industrial-software companies such as Microsoft, Siemens, Rockwell Automation, Ansys, and Cadence, among others.
These moves should allow Nvidia to capitalize on the growing digitalization within the industrial space. Mordor Intelligence estimates that the manufacturing industry's digital transformation could generate a whopping $876 billion in revenue in 2029. The digital-twin market, on the other hand, is expected to generate $240 billion in annual revenue in 2035 compared to an estimated $13 billion this year.
All this indicates that Nvidia's professional-visualization business has tremendous room for growth in the future and could very well become an additional catalyst for the company along with its data-center and gaming businesses.
The chipmaker can keep growing at a terrific pace for a long time
In its investor day presentation a couple of years ago, Nvidia management said it sees a $150 billion addressable opportunity for its Omniverse enterprise-software platform, along with another $150 billion for related hardware. The company's fiscal Q1 professional-visualization revenue suggests that it is on track to generate annual revenue of $1.7 billion from this market in fiscal 2025.
Nvidia, therefore, seems to be at the beginning of a massive growth curve in professional visualization. Meanwhile, the company estimates that its total addressable market (TAM) across all of its businesses stands at a whopping $1 trillion. Again, that's not surprising considering that it is serving fast-growing markets such as AI chips.
With Nvidia's revenue expected to nearly double in the current fiscal year to $120 billion, it can be said that the company has tapped just over 10% of its TAM. As such, there is a good chance that Nvidia could remain a high-growth company in the long run, making it an ideal bet for investors looking to add a growth stock to their portfolios.
