NVDA 2nd quarter

NVDA is announcing earnings after the bell, here are my notes:

Revenue growth by quarter (percent)

2016 13  24  54  55
2017 49  56  32  34
2018 66

Company guidance for 2nd quarter, $3.1 B (+39%)

EPS growth by quarter (percent)

2016  39  960  104  117
2017  85   91   41   52
2018 141

This quarter:

potential headwinds from less crypo mining customers
potential headwinds from customers waiting for new products later in the year
update on auto market, when will it start to grow
update on new products (NVDA announced this already)

Jim
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Some additional comments:

EPS has grown faster than Rev. every quarter.

With potential headwinds, any number above guidance $3.1B (+39%) I would be happy with.

Company guidance on auto market is key for me. (future data center and gaming growth are given)

Jim (long NVDA)

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Company guidance on auto market is key for me. (future data center and gaming growth are given)


I don’t think it is fully baked in. DC revenue, that is.
Here was a comment from ER/CC for Q1, just to refresh folks on where things left off with DC revenue:

"Moving to datacenter, we had another phenomenal quarter with revenue of $701 million, up 71% year-on-year, up 16% sequentially. Demand was strong in all market segments and customers increasingly embraced our GPUs and CUDA platform for high-performance computing and AI. Adoption of our Volta architecture remained strong across a wide range of verticals and customers.

In the public cloud segment, Microsoft Azure announced general availability of Tesla V100 instances joining Amazon, IBM and Oracle. And Google Cloud announced that the V100 is now publicly available in beta. Many other hyperscale and consumer Internet companies also continued their ramp of Volta, which delivers five times the deep learning performance of its predecessor, Pascal.

Volta has been chosen by every major cloud provider and server maker, reinforcing our leadership in AI deep learning."

I am in the IT channel, and a pattern I tend to notice is that a company can grow, and grow rapidly, up to a point, with just their direct sales force. Eventually, to really scale they need the channel partners to become an extension of their sales force. There must be some equation for (increase in sales trainings on Vendor X) + (increase in number of vendors touting partnerships with Vendor X) + (increase in Vendor X-related-solutions booths at various other large vendor/IT trade shows) = Vendor X has made it to the big time.

I know that is dumbing it down, but you see it with Nutanix in the past 2-3 years, Pure more recently, and having been an NVIDIA investor in 2016 based on DC/AV markets, I was ready for channel to explode…and then nothing happened. I got a big yawn whenever I brought them up. Then in 2017 the noise/activity just kept ramping, and now it is a no-brainer that NVIDIA will be part of AI/DL/ML-related DC solutions, and you see the Vendor partnerships and training from other vendors (HPE or Lenovo as an example) stating their NVIDIA GPU options with their servers, or in the case of Lenovo the HGX/DGX partnership. You recently heard the AIRI partnership with Pure and NVIDIA. Point is that all that noise and jumping-on-bandwagon activity is, to me, a symptom.

Per Q1 numbers, DC was, without growth, now a $2.8b business, by itself. NVDA has a huge market cap of course, so they should be doing big numbers. But if you ran across a $2.8b business and found it was growing at 71%, you would be thrilled with that company.

The AV market is slower to develop than I thought, but I think it ironically bodes well for the long-term growth of the stock.

Inception to 2015 - solid company, know for gaming

  1. NVDA was great at games.

Wave 1
2. NVDA stayed great at games, and gaming market exploded, and NVDA started touting DC/AI markets and AV markets as their future. Stock skyrockets.
3. I think the first 3 Q’s of 2017 (or FY 2018 for NVDA) was sequentially pretty low-key, and may have played a factor in the stock being in a channel since Jan. Because last year’s DC revenues were being compared to much lower numbers the previous year, I think the DC growth was given a good pat on the back, but investors were most impressed with the bursting Gaming rev/earnings and all the buzz around the nascent AV market.

Wave 2
4. So I think we are about to see the DC number kick up a notch. At least that is my hope with today’s ER. I would like to see approx $800m, which gets you 90%+ y/y growth. If they somehow hit $832m, that is seriously accelerating DC growth of 100% y/y.
5. If they do 800, 825, and 850 in the next 3 Qs for DC = almost $3.2b in revenue.

Wave 3
6. The AV market finally starts kicking in meaningful and material revenue and follows a more non-linear growth due to mass production of vehicles (my guess).

My thesis falls apart a bit if DC revenue is “just” $715m announced for today’s Q. My expectation is they surprise me with very strong DC growth, otherwise it may be in a channel or even down for a while longer.

No pretty tables, but below is Q by Q growth of DC revenue.
2015 (NVDA FY 2016) ?, ?, ?, 97,
2016 (NVDA FY 2017) 143, 151, 240, 296,
2017 (NVDA FY 2018) 409, 416, 501, 606,
2018 (NVDA FY 2019) 701, ?, ?, ?,

Dreamer

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No pretty tables, but below is Q by Q growth of DC revenue.
2015 (NVDA FY 2016) ?, ?, ?, 97,
2016 (NVDA FY 2017) 143, 151, 240, 296,
2017 (NVDA FY 2018) 409, 416, 501, 606,
2018 (NVDA FY 2019) 701, ?, ?, ?,

Dreamer

Based solely on the historical data and seasonality, I would say that it shouldn’t be overly disappointing if DC revenue is “only” $715M (note the small sequential gains from Q1 to Q2 from 2016 and 2017). If they hit $750M or more for this announcement in about an hour, that would seem to be quite a decent quarter…over $800M would be crushing it ($832M for DC, and NVDA may get to $300+ by mid-Sept.).

As I said, I am basing that only on the numbers you presented and have not looked for any independent guidance numbers (not even any company-provided guidance).

-volfan84

Based solely on the historical data and seasonality, I would say that it shouldn’t be overly disappointing if DC revenue is “only” $715M (note the small sequential gains from Q1 to Q2 from 2016 and 2017). If they hit $750M or more for this announcement in about an hour, that would seem to be quite a decent quarter…over $800M would be crushing it ($832M for DC, and NVDA may get to $300+ by mid-Sept.).

As I said, I am basing that only on the numbers you presented and have not looked for any independent guidance numbers (not even any company-provided guidance).

-volfan84

Survey says: “Quite Decent”
Market says: down initially before any time to actually digest

Datacenter

– Grew Datacenter revenue by 83 percent from a year earlier to $760 million.

-volfan84

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Market doesn’t like that Q3 forecast of $3.19B-$3.32B (analysts expected $3.34B)

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Maybe one of the biggest things the market didn’t like, from the CFO commentary:

“Our revenue outlook had anticipated cryptocurrency-specific products declining to approximately $100 million, while actual crypto-specific product revenue was $18 million. Whereas we had previously anticipated cryptocurrency to be meaningful for the year, we are now projecting no contributions going forward.”

Hopefully this will be the end of having NVDA’s business tied to cryptocurrencies in any meaningful way.

Here’s the link to the CFO commentary:
https://s22.q4cdn.com/364334381/files/doc_financials/quarter…

-volfan84

9 Likes

They had solid growth all around. Nit pickiness around guidance right now, but results themselves were good.

DC revenue didn’t hit my lofty $800m hope, but still impressive at $760m for 80%+ y/y growth (so grew y/y more than previous Q’s growth of 70% y/y).

https://seekingalpha.com/pr/17247774-nvidia-announces-financ…

Datacenter

Grew Datacenter revenue by 83 percent from a year earlier to $760 million.
Marked the launch of Summit, the world’s fastest supercomputer, at Oak Ridge National Laboratory, powered by more than 27,000 NVIDIA® Volta Tensor Core GPUs.
Announced that five of the world’s seven fastest supercomputers are powered by NVIDIA GPUs, based on the new list of the world’s 500 fastest systems. NVIDIA GPUs provide 56 percent of the list’s new computing power.
Introduced NVIDIA HGX-2™, the first unified computing platform for both AI and high performance computing. A number of partners around the world, including cloud service providers, server OEMs and ODMs, are building systems incorporating HGX-2.
Google Cloud integrated into its offerings the NVIDIA Tesla® P4 GPU optimized for AI inference and graphics virtualization.
Researchers at Fast.ai achieved the fastest-ever AI training time using NVIDIA Tesla V100 GPUs available on Amazon Web Services.
Launched AIRI Mini with Pure Storage and ONTAP AI with NetApp, providing enterprises with an easy-to-deploy, modular approach for implementing and scaling deep learning.
Gaming

Grew Gaming revenue by 52 percent from a year earlier to $1.80 billion.
Announced there are more than 25 Max-Q GeForce gaming notebook designs offered by all major OEMs, enabling high-end performance for thin and light notebooks.
Next-generation NVIDIA G-SYNC® HDR displays began shipping, delivering stunning 1,000 NIT HDR, stutter-free gaming.
Professional Visualization

Grew Professional Visualization revenue by 20 percent from a year earlier to $281 million.
Unveiled its first Turing-based GPUs – NVIDIA® Quadro RTX™ 8000, RTX 6000 and RTX 5000 – which will revolutionize the craft of some 50 million designers and artists.
Introduced the NVIDIA RTX Server, a full ray-tracing global illumination rendering server that will give a giant boost for the world’s render farms as Moore’s law ends.
Announced broad industry support for the NVIDIA RTX platform from the world’s top graphics software companies.
Automotive

Grew Automotive revenue by 13 percent from a year earlier to $161 million.
Announced that Daimler (DDAIF) and Bosch have selected NVIDIA’s DRIVE™ platform to bring fully automated and driverless vehicles to city streets, with pilot testing to begin next year in Silicon Valley.

Dreamer

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I think the quarter looks just fine…

“Growth across every platform – AI, Gaming, Professional Visualization, self-driving cars – drove another great quarter,” said Jensen Huang, founder and CEO of NVIDIA. “Fueling our growth is the widening gap between demand for computing across every industry and the limits reached by traditional computing. Developers are jumping on the GPU-accelerated computing model that we pioneered for the boost they need.

From https://nvidianews.nvidia.com/news/nvidia-announces-financia…

Revenue (billions)		Q1		Q2		Q3		Q4
2017				1.31		1.43		2.00		2.17
2018				1.94		2.23		2.64		2.91
2019				3.21		3.12			

EPS (non-GAAP)		        Q1		Q2		Q3		Q4
2017				0.46		0.53		0.94		1.13
2018				0.85		1.01		1.33		1.72	
2019				2.05		1.94

Current (2019 Q2 Earnings):

Revenue Growth (billions)
2018 Q2 TTM Revenue = 8.34
2019 Q2 TTM Revenue = 11.88
YOY TTM Revenue Growth = 42.4%, previous quarter growth 45.8%

EPS Growth (non-GAAP)
2018 Q2 TTM Earnings = 3.93
2019 Q2 TTM Earnings = 7.04
YOY TTM EPS Growth = 79.1%, previous quarter growth 77.1%

P/E (Check Current Price) = 257.44/7.04 = 36.6
Trailing 1Y PEG = 36.6/79.1 = 0.46

Datacenter revenue $760M, up 83%
Gaming revenue $1.8B, up 52%
Professional visualization revenue $281M, up 20%
Automotive revenue $161M, up 13%


Gross Margin (non-GAAP)	        Q1		Q2		Q3		Q4
2017						58.1		59.2		60.2	
2018				59.6		58.6		59.7		62.1
2019				64.7		63.3

Data Center Revenue (mil)	Q1		Q2		Q3		Q4
2017								240		296
2018				409		416		501		606
2019				701		760		

Gaming	Revenue (mil)		Q1		Q2		Q3		Q4
2017								1244		1348
2018				1027		1186		1561		1739
2019				1723		1805		

Pro Visual Revenue (mil)	Q1		Q2		Q3		Q4
2017								207		225
2018				205		235		239		254
2019				251		281		

Automotive Revenue (mil)	Q1		Q2		Q3		Q4
2017								127		128
2018				140		142		144		132
2019				145		161		

Matt
Long NVDA
MasterCard (MA), PayPal (PYPL), Skechers (SKX) and Square (SQ) Ticker Guide
See all my holdings at http://my.fool.com/profile/CMFCochrane/info.aspx

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The revenue number for each division seems not right in your table. The total revenue for 19Q1 is 3.21B, but the sum of the 4 divisions is 2.82B. If you look at the divisional revenue, 19Q2 is greater than 19Q1 for all 4 divisions. But the total of 19Q2 is 3.12B while 19Q1 is 3.21B.

Agreed, I’m pretty happy with:
a) 83% Datacenter revenue growth YoY. Nice. And that trajectory looks pretty solid.
b) Finally kicking crypto into the goodnight. It’s just noise at this point, so sooner it’s out of the picture, the better.
c) Moderate/sustained growth in Pro and Automotive

Gaming should get a boost in the next 2 quarters with new cards coming out (Aug 20 announcement in Cologne anyone?), and even that was up over 50%.

I think the algos just didn’t like the gap between the guidance number, and I can live with that as a long-term holder, not a day-trader.

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The difference in the numbers is the crpto mining sales. They don’t break it out separate.

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Using TMFCochrane’s numbers I am projecting EPS this year of $10.49, leaving a trailing P/E in 6 months of ~24.

How derived? Last 2 Q earnings, which includes this quarter is $3.99.

Historically Q3 + Q4 greatly exceeds Q1 + Q2. Last year Q3 + Q4 exceeded by 63%, the year before the Q3 + Q4 excess was more than 100%, so I am using the 63% number.

Taking $3.99 * 1.63 = $6.50 for the next 2 Qs. $3.99 + $6.50 = $10.49.

Given how this Q2 was historically slow (relatively speaking) due to crypto-currency falling, and Q3 will be lower than otherwise given the new product cycle, this 63% number may not hold unless Q4 is a blow out in gaming. Nevertheless, Q3 + Q4 greatly exceeds the first 2 Qs. The trailing P/E will be absurdly cheap in the next 6 months absent a total collapse in GPU demand, particularly for gaming.

Yes, I believe myopic is the proper term to describe this if the stock sells off for this without looking forward. I have no doubt analysts understand this and will put out upgrades or defense articles talking about buying on the weakness given this.

Price target by this number is $440, assuming 42x remains the natural P/E for Nvidia at this stage of its existence. at 30x is $314.

Ant said that PSTG was de-risked, I can say that Nvidia is clearly de-risked at this point in time and if the market wants to be this myopic, behave as appropriate.

Please any serious counters, or Tinker, your right, your right, I know your right, and toss in with your own comments. I can go either way.

Tinker

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Taking $3.99 * 1.63 = $6.50 for the next 2 Qs. $3.99 + $6.50 = $10.49.

Given how this Q2 was historically slow (relatively speaking) due to crypto-currency falling, and Q3 will be lower than otherwise given the new product cycle, this 63% number may not hold unless Q4 is a blow out in gaming. Nevertheless, Q3 + Q4 greatly exceeds the first 2 Qs. The trailing P/E will be absurdly cheap in the next 6 months absent a total collapse in GPU demand, particularly for gaming.

Derisked? I agree. 63%, though, is a little high IMO because NVDA had the benefit of better GMs last year due to crypto. I would lower the $10.49 by 5% to $9.97. Does this change my decision on buying, selling, holding? No.

Chris

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The revenue number for each division seems not right in your table. The total revenue for 19Q1 is 3.21B, but the sum of the 4 divisions is 2.82B.

Kevin, I don’t break out or track the OEM and IP revenue numbers, just the four largest and most consequential divisions.

Matt
Long NVDA
MasterCard (MA), PayPal (PYPL), Skechers (SKX) and Square (SQ) Ticker Guide
See all my holdings at http://my.fool.com/profile/CMFCochrane/info.aspx

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Oem/IP was $121 million which came in light from last quarter.


This is what OEM/IP looks like all in millions:

q116   q216   q316   q416   q117   q217   q317   q417   q118   q218   q318   q418   q119   q219
218    170    193    202    173    163    186    176    224    251    191    111    390    121

This is the first sequential quarter that NVDA revenue and net income has been down in any year going back to Q12016 ( Q1 to Q4). Every sector that they report, in this quarter, Gaming, Professional Visualization, Automotive and Data Center, were all up sequentially and the only one that was down was OEM/IP. This was called out in the Conference Call by Colette Kress.

Lastly, in our OEM segment, revenue declined by 54% year-on-year and 70% sequentially. This was primarily driven by the sharp decline of cryptocurrency revenues to fairly minimal levels.

They had $2.1 Billion in FCF, which was their best quarter ever and they have $7.9 Billion in cash with $2 billion in debt. Their balance sheet is improving.

So after looking at this I think this was a great report. Although Revenue and Net income did decline it was all do to crypto which was not even something they were looking to grow, it was just a nice add on.

Andy

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CC from SA.

https://seekingalpha.com/article/4199978-nvidia-corporation-…

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I like this part…

You mentioned guidance. I actually think that on a year-over-year performance, we’re doing terrific. And I’m super excited about the ramp of Turing. It is the case that we benefited in the last several quarters from an unusual lift from crypto. In the beginning of the year, we thought and we projected that crypto would be a larger contribution through the rest of year. But, at this time, we consider it to be immaterial for the second half. And so, that makes comparisons on a sequential basis – on a I guess, quarterly sequential basis harder. But, on a year-to-year basis, I think we’re doing terrific. Every single one of our platforms are growing, high-performance computing of course, Datacenters is growing. AI, the adoption continues to seep from one industry to another industry. The automation that’s going to be brought about by AI, is going to bring productivity gains to industries like nobody has ever seen before. And now with Turing, we’re going to be able to reignite the Professional Visualization business, open us up to photorealistic rendering for the very first time, render farms, and everybody who is designing products that has to visualize it photo realistically to reinventing and resetting graphics for video games. And so, I think we’re in a great position, and I’m looking forward to reporting Q3, when the time comes.

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And yet Nvidia guided for Revenue growth of $3.25 Billion, that is a steep decline, Clocking in YoY growth of 23%. That isn’t very good for a company sitting at a P/E of 36. In order to get back to 40% growth they will need to hit $3.7 billion could they be sandbagging it for $450 million? If everything stays the same they will need to hit the following to reach $3.7 billion.
Q32019 Q22019

Gaming $2.175 Billion $1.8 Billion 21%
Professional Visualization $ 337.5 Million $ 281 Million 20%
Data Center $ 900 Million $ 760 Million 18%
Auto $ 187.5 Million $ 161 Million 16%
OEM/IP $ 150 Million $ 121 Million 24%

I think that they will have a hard time hitting $3.7 Billion but I think 3.25 Billion is to low. Maybe they could hit growth of low 30%. So they are slowing next quarter and then the only catalyst I see is Touring but that will probably be in the 4th quarter. I like this company but the stock is probably heading lower and then volatile for awhile.

Andy
Long NVDA

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Sorry about that. Here is a better formatted version.

And yet Nvidia guided for Revenue growth of $3.25 Billion, that is a steep decline, Clocking in YoY growth of 23%. That isn’t very good for a company sitting at a P/E of 36. In order to get back to 40% growth they will need to hit $3.7 billion could they be sandbagging it for $450 million? If everything stays the same they will need to hit the following to reach $3.7 billion.


                              Q32019                 Q22019

Gaming                        $2.175 Billion         $1.8 Billion 21%
Professional Visualization    $ 337.5 Million        $ 281 Million 20%
Data Center                   $ 900 Million          $ 760 Million 18%
Auto                          $ 187.5 Million        $ 161 Million 16%
OEM/IP                        $ 150 Million          $ 121 Million 24%

I think that they will have a hard time hitting $3.7 Billion but I think 3.25 Billion is to low. Maybe they could hit growth of low 30%. So they are slowing next quarter and then the only catalyst I see is Touring but that will probably be in the 4th quarter. I like this company but the stock is probably heading lower and then volatile for awhile.

Andy
Long NVDA

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