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NVIDIA Corporation Reports Strong Q4 Sales

By Anders Bylund - Feb 19, 2016 at 11:00AM

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Looking ahead, management is excited about several important growth markets.

GeForce GTX

Image source: NVIDIA.

NVIDIA (NVDA -1.18%) reported earnings on Wednesday night, covering the fourth quarter of fiscal year 2016. Shares rose as much as 12% on the news, as investors welcomed a strong revenue performance with open arms.

NVIDIA Q4 results: The raw numbers

 

Q4 2016 Actuals

Q4 2015 Actuals

Growth (YOY)

Revenue

$1.40 billion

$1.31 billion

7.4%

Net Income

$207 million

$193 million

7.3%

GAAP EPS (diluted)

$0.35

$0.35

0%

Data source: NVIDIA.

What happened with NVIDIA this quarter?
Every business segment delivered positive sales growth year over year, but some divisions shone brighter than others.

  • Graphics processors had a strong holiday quarter, boosting sales by 10% year over year. Within this large segment, gaming-oriented GeForce sales rose 21%.
  • Elsewhere, the smaller, but more buoyant, automotive segment soared 68% above the year-ago period's sales. Supporting this rambunctious trend, the Tegra mobile processor line saw sales jumping 40% higher.
  • During the fourth quarter, NVIDIA spent $62 million on dividend payouts and roughly $130 million on share buybacks, retiring 4.3 million shares in the quarter. The company's basic share counts are shrinking, but a generous share-based compensation program still keeps the diluted count on the rise.

NVDA Average Diluted Shares Outstanding (Quarterly) Chart

NVDA Average Diluted Shares Outstanding (Quarterly) data by YCharts.

Looking ahead, management offered what they call a "prudent" guidance framework for the coming quarter.

  • First-quarter revenues should land near $1.26 billion, or roughly 10% above the first quarter of 2015.
  • There was no bottom-line target, but GAAP gross margins should stop at 57.2%, while operating expenses should increase by 5%, to $500 million.

What management had to say
Those guidance figures were based on a firmly optimistic market view. According to CFO Colette Kress:

We remain excited about our business prospects. Gaming remains strong and eSports, VR, and new exciting games will lift it further. Graphics processor-accelerated datacenters are expanding in both high-performance computing and cloud, driven by the growth of deep learning. And autonomous driving continues to move forward. We have excellent positions in each of these growth markets.

Looking ahead
As it turns out, NVIDIA's number-crunching graphics products also turn out to be very good at the kind of math you need for big supercomputing projects and artificial intelligence efforts, which places the company firmly in the crosshairs of car manufacturers and Big Data collectors.

If NVIDIA can hang on to this enviable position, the company looks poised to benefit greatly from the self-driving car phenomenon, with a side of data-crunching for the Internet of Things. This will require constant innovation and crisp management execution, and nothing is set in stone. But this quarter gave investors a whiff of what that potential future could smell like.

Anders Bylund has no position in any stocks mentioned. The Motley Fool recommends Nvidia. Try any of our Foolish newsletter services free for 30 days.

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