Gaming PC

Bigger Things to Come as NV Approaches $1T Market Cap

Rounding out the PC industry’s latest earnings season is, as usual, NVIDIA. The company’s fiscal calendar is unusual, being nearly a year ahead, meaning that casual delays in reporting results can still be profitable. And in this case, it ended up being the proverbial case of saving the best for last.

In the first quarter of fiscal 2024, NVIDIA reported revenue of $7.2 billion, down 13% from the same period last year. Like the rest of the chip industry, NVIDIA has weathered a significant downturn in demand for its computing products over the past several quarters, which has dampened NVIDIA’s revenue and profitability. But while NVIDIA’s consumer gaming division continues to struggle, the strong performance of NVIDIA’s Data Center Group has kept the company reasonably profitable overall, posting a segment record in the most recent quarter. Established and helped evade NVIDIA. Tough financial conditions facing rivals AMD and Intel.

NVIDIA First Quarter 2024 Financial Results (GAAP)
Q1 FY2024 Q4 FY2023 Q1 FY2023 Q/Q year/year
Earnings $7.2 billion $6.1 billion $8.3 billion +19% -13%
gross profit 64.6% 63.3% 65.5% +1.3ppt -0.9ppt
Operating income $2.1 billion $1.3 billion $1.9 billion +70% +15%
net income $2 billion $1.4 billion $1.6 billion +44% +26%
EPS $0.82 $0.57 $0.64 +44% +28%

So, while Q1 2024 was by no means a record quarter for NVIDIA, it was still a relatively strong quarter for the company. NVIDIA’s $2 billion net profit was one of the company’s best quarters in that regard, actually up 26% year-over-year, despite the decline in revenue. That said, if you read between the lines, you’ll see that NVIDIA paid the Arm acquisition split fee last year (Q1 FY2023). So NVIDIA’s GAAP net income looks a little better than it otherwise would have. Meanwhile, non-GAAP net income decreased 21%. Meanwhile, NVIDIA’s gross margin continued to perform well in the most recent quarter, with NVIDIA’s GAAP gross margin of 64.6%.

But even with a strong quarter in an industry recession, it’s definitely not the biggest news to come out of NVIDIA’s latest earnings call. Rather, this is the company’s forecast for the second quarter of 2024. That said, NVIDIA expects sales to explode in Q2, with revenue projected at his $11 billion. If that happens, such a quarter would well surpass his NVIDIA’s previous earnings record and crush Wall Street expectations. As a result, NVIDIA’s stock has already risen in overnight trading, and by the time the market opens a little later this morning, NVIDIA is expected to knock on the door of a market capitalization of over $1 trillion, making it a $930 billion+ company. It has been. .

NVIDIA Reportable Segment Results

NVIDIA Segment Results, First Quarter 2024 (GAAP)
Q1 FY2024 Q4 FY2023 Q1 FY2023 Q/Q year/year
data center $4,284 million $3,616 million $3.75 billion +18% +14%
game $2.24 billion $1,831 million $3.62 billion +22% -38%
professional visualization $295 million $226 million $622 million +31% -53%
car $296 million $294 million $138 million +1% +114%
OEMs and IPs $77 million $84 million $158 million -8% -51%

But first, let’s take a look at NVIDIA’s individual segment performance. In the most recent quarter, he said the undisputed leader in NVIDIA’s product portfolio was the company’s data center division, which posted $4.3 billion in revenue. The data center segment is now responsible for the bulk of his NVIDIA’s revenue, as most of the other major segments, gaming, and minor segments are all down year-over-year. Compared to other segments, data center revenue not only increased 14% year-over-year, but also set a new record for the company.

This was also the first quarter in which NVIDIA’s data center revenue surpassed Intel’s data center revenue. However, this was most likely a fluke given Intel’s unusually weak quarter ahead of the mass shipment of Sapphire Rapids CPUs. In any case, quarters like this highlight why the big three PC chip makers are chasing the data center market, as profitability is well ahead of the consumer market.

NVIDIA, which includes both NVIDIA’s data center computing products (GPUs, CPUs, etc.) and NVIDIA’s former Mellanox networking products, accounted for most of the growth in this segment due to demand for GPUs for use in large scale language models (LLMs), etc. We believe this is due to the increase. A type of generative AI. As suggested by the explosion of public interest in ChatGPT and other products late last year, and the rippling effect it had on his NVIDIA data center GPU sales, the tech giant is pushing AI training or reasoning. NVIDIA reported that cloud service providers and consumer Internet companies were the major drivers of growth, enterprise revenue was more stable, and network revenue declined year-over-year.

Meanwhile, NVIDIA expects demand for its data center products to remain strong, even as it continues to ramp up production of its H100 HPC accelerators, L-series server cards, and its first Grace CPU-based products. increase. As a result, NVIDIA is very well positioned when considering the demand for GPUs in servers and data centers, so expectations for NVIDIA’s data center sector are very high, perhaps even higher than during the recent peak of the cryptocurrency boom. Advantageous.

NVIDIA’s consumer gaming division, on the other hand, was rather mixed. With $2.2 billion in revenue, sales of GeForce and other cards were significantly higher than in the final quarter of the cryptocurrency boom and when the pandemic increased overall demand for computing products in the consumer space. decreased to The 38% year-over-year decline means NVIDIA’s direct customers are still depleting product inventory (especially the latest generation RTX 30-series parts), and RTX 40-series shipments are still up due to launches of most of the desktop product stack. It depends on what you are doing. and a laptop.

Still, the $2.2 billion in gaming revenue actually beats some analysts’ expectations for the segment. So, while NVIDIA’s gaming sales are down significantly, it appears to be slightly lower than industry watchers had expected.

Moving down the list, NVIDIA’s professional visualization segment pretty much follows the gaming segment in good times and bad. Accordingly, revenue fell 53% year-over-year to $295 million, with the most recent quarter being particularly challenging. Partners are still reducing inventories, but the introduction of new products is improving the situation.

Meanwhile, the Automotive segment was another of NVIDIA’s growth segments in the quarter, with revenue up 114% to $296 million in the quarter. While this segment has not yet become a breakthrough segment for NVIDIA, sales have consistently looked strong since the launch of the Orin platform and the resulting surge in overall sales.

Finally, NVIDIA’s OEM and other segments also saw a significant decline, dropping 51% to $77 million. According to the company, this is mainly due to declining sales of his entry-level GeForce MX GPUs.

Looking Ahead: Targeting to Exceed NVIDIA’s Fiscal 2020 Earnings in a Single Quarter

But while NVIDIA’s first quarter report was solid in an otherwise lukewarm tech market, the other half of the story around its latest earnings release is about what happens next. Or rather, what NVIDIA is projecting.

NVIDIA forecasts revenue of $11 billion (plus or minus 2%) in the second quarter of fiscal 2024. This represents a significant 64% year-over-year increase in the company’s total revenues, a nearly identical 53% increase over the first quarter. And as NVIDIA says, it’s no fluke.

Driving this significant revenue increase is expected to be a sales boom for NVIDIA’s data center products, especially as production of NVIDIA’s high-end data center products continues to increase. Business interest in AI has already created significant demand for the H100 and other accelerators, and that demand isn’t expected to wane anytime soon as NVIDIA builds more accelerators than ever before. To catch up, the company has already ordered “a lot more” GPUs for the second half of this year, building on the initial demand boom.

Sad story aside, it’s now clear that artificial intelligence is the growth driver for the data center market across the industry, and with NVIDIA controlling the majority of that market, it’s hard to see the biggest profit from that demand. I can.

If NVIDIA’s $11 billion quarter comes to fruition, NVIDIA would report as much revenue as the entire 2020 fiscal year or even the entire pre-pandemic 2018 fiscal year. All of this represents a significant growth from our track record to date. It was a very large company before the pandemic.

The $11 billion quarterly forecast also beat analysts’ expectations for the quarter, which was around $7.2 billion prior to the announcement.

As a result, NVIDIA’s stock price soared almost immediately after the earnings announcement and remained high overnight as investors adjusted to new earnings expectations for NVIDIA. About an hour before the stock market opened, NVIDIA’s stock was up $78 to $385, up 26%, a stock with very little precedent in the turbulent tech world.

NVIDIA 10 year market capitalization (stock

A significant rise in NVIDIA’s stock price has also boosted NVIDIA’s market capitalization. When the market opens, NVIDIA is expected to open as a $930 billion+ company, more than $175 billion above its previous night’s market cap. To put things into perspective, this is equivalent to all of AMD ($174 billion) in terms of market capitalization growth, or all of Intel with pennies left ($121 billion).

This also puts NVIDIA on the doorstep of the next trillion-dollar company. It’s a very elite club, according to Bloomberg, of which he’s only been with eight so far (and he’s currently a member of only five). NVIDIA has already grown exponentially as the most valuable chip maker (fabless or not), and this surge in market cap only widens the gap.

But whether or not NVIDIA hits the $1 trillion mark, the company’s latest earnings report and subsequent share price rally underscore the value of AI infrastructure, whether it’s recognized or not. The rest of the industry is keen to make sure the artificial intelligence narrative isn’t just his NVIDIA’s story, and to that end, expect plenty of AI-related news and hardware developments to come out. need to do it.

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