Nvidia Earnings Live Updates, Revenue Results

Eric Jhonsa

Nvidia beat earnings and sales expectations for the April quarter but shares were not rising much, perhaps because expectations for the chipmaker were already so high.

Fiscal first quarter revenue of $3.08 billion beat a $2.98 billion consensus, while GAAP EPS of $1.47 beat a $1.39 consensus and non-GAAP EPS of $1.80 beat a $1.65 consensus.

For the current quarter, Nvidia expects revenue of $3.65 billion (+/- 2%), with Mellanox expected to contribute a low-teens percentage of the revenue. This compares with a consensus of $3.25 billion.

Shares of Nvidia were moving between slightly up and slightly down in after-hours trading. 

TheStreet and RealMoney's tech columnist, Eric Jhonsa, is analyzing the company's earnings report issued after the market close, and then the earnings call with Nvidia executives that's scheduled to begin at 5:30 p.m. ET.

Nvidia is a holding in Jim Cramer’s Action Alerts PLUS Charitable Trust Portfolio. Want to be alerted before Cramer buys or sells NVDA? Learn more now.

Comments (91)
No. 1-50
Eric Jhonsa
Eric Jhonsa

Editor

Thanks for joining us.

Eric Jhonsa
Eric Jhonsa

Editor

Nvidia's call has ended. Shares are close to unchanged after the company topped FQ1 estimates on the back of 27% Y/Y Gaming segment growth and 80% Data Center segment growth, and issued strong FQ2 sales guidance that assumes Mellanox will account for a low-teens percentage of revenue. With shares up nearly 50% YTD going into earnings, pre-earnings expectations were high.

Eric Jhonsa
Eric Jhonsa

Editor

Huang with some closing remarks. Says Nvidia had "a great and busy quarter." Goes over the Mellanox acquisition and the A100 launch. Also declares platforms such as Drive, Clara, Jarvis, etc. are opening up "large new markets."

Eric Jhonsa
Eric Jhonsa

Editor

Question about tech integration plans for Mellanox. Also one (amid reports that Nvidia is prepping an Ampere-architecture gaming GPU line) about Nvidia's thinking about Gaming product launches amid conference cancellations.

Huang: I miss the conferences. But we can still reach gamers with online events. When we launch something new, you new gamers will be excited to see it.

Regarding Mellanox R&D plans, Huang notes Nvidia has been working with Mellanox for a long time. Also mentions that Nvidia makes extensive use of Mellanox switches and SmartNICs within its own data center, and talks up how the companies worked together to develop the recently-announced EGX A100 edge server platform.

Eric Jhonsa
Eric Jhonsa

Editor

Question about full-year opex guidance of $4.1B, and what the drivers for it. Also whether there might be some pent-up demand in areas such as HPC post-COVID.

Kress: We have close to 3K Mellanox coming on board, which will increase opex. Also, there's a 53rd week in this fiscal year. And we're investing in our business.

Huang: Some vertical industries have been affected by COVID, such as automotive. But demand will eventually rebound. Automakers will invest in autonomous driving. Energy and retail have also been affected, but they're not large end-markets for Nvidia.

Adds that some companies in affected industries, such as BMW, are now investing more on robotics.

Eric Jhonsa
Eric Jhonsa

Editor

Huang: There was no accelerated computing platform until Nvidia came along. We've been working on accelerated computing for more than 20 years. We're now accelerating the world's most important workloads.

Says the single most important type of machine learning model today is the recommender system, as it's used by everything from shopping websites to streaming services. Calls it "a gigantic engine" that needs to be accelerated.

Eric Jhonsa
Eric Jhonsa

Editor

Question about Mellanox's product line, and Nvidia's plans for it. Also one about the recent acquisition of networking software provider Cumulus Networks.

Huang notes Nvidia's new DGX A100 server is packed with Mellanox SmartNICs, and that the communications bottlenecks that have emerged within its data center have made Mellanox strategically valuable. Declares its technology and understanding of distributed computing to be unmatched.

Also notes that the emergence of applications whose microservices are distributed across a large-scale data center is helping drive demand for Mellanox's SmartNICs, which can offload networking and security processing from CPUs.

Regarding Cumulus, Huang says Nvidia wants to "innovate from end to end" as workloads become distributed across data centers, and that it also wants to innovate across the entire software stack.

"It takes software to create markets," Huang says.

Eric Jhonsa
Eric Jhonsa

Editor

Question about the impact of potential cloud capex "digestion." Also one about Nvidia guiding for stock comp to grow strongly.

Kress: There's a major difference between GAAP and non-GAAP opex guidance between FQ2. Stock comp plays a role, but other factors, such as acquisition-related expenses, are also playing a role.

Huang: The number of AI models being trained and deployed is growing tremendously, and model sizes are also growing considerably. This is driving both training and inference demand. Cloud computing demand is also growing a lot.

Also notes Nvidia's Data Center revenue has diversified a lot, with hyperscalers now only accounting for about half of revenue. And he reiterates that Nvidia expects the A100 to have a strong multi-year ramp.

Eric Jhonsa
Eric Jhonsa

Editor

Question about the A100 launch, and whether Nvidia plans to launch training and inference-specific products going forward (the A100 is meant to handle both AI training and inference).

Huang: We've learned a lot over the years about how customers want to accelerate workloads. The Tesla V100 was used for scale-up training workloads involving one user, while the Tesla T4 was used for scale-out inference workloads supporting millions of users. With Ampere, we created an architecture that delivers gigantic performance gains, and is also unified, accelerating a wide variety of workloads. It's the first "elastic" GPU architecture, capable of both scaling up and scaling out.

"The versatility of Ampere is the thing that I'm most excited about," he adds.

Eric Jhonsa
Eric Jhonsa

Editor

Question about gross margin guidance: Why is GM expected to be flat Q/Q in spite of Mellanox's contribution and lower Automotive revenue? Also one about the potential impact of U.S./China tensions.

Kress: We're guiding for slight sequential GM growth from a record FQ1. We're launching a new GPU architecture, and new architectures tend to initially have lower margins before gradually rising. Higher game console processor sales could also impact margins.

Regarding trade tensions, Huang says he doesn't expect Nvidia to be impacted much.

Eric Jhonsa
Eric Jhonsa

Editor

Question about Mellanox's expected growth for calendar 2020, and one about the "long-lasting impact" of COVID-19 on AI-related demand.

Kress: It's a little early for us to offer a full-year forecast for Mellanox, and we usually give just quarterly guidance. Mellanox did great in 2019 and calendar Q1.

Huang: COVID-19 is reshaping industries and markets. I think there will be structural changes. Enterprise cloud adoption will accelerate. Countries will try to create a "computational defense system" to protect against things like COVID-19. We're going to need greater "remote autonomous" capabilities, which will drive robotics adoption. And more and more people are going to be working from home.

Eric Jhonsa
Eric Jhonsa

Editor

Question about gross margin, and whether 66% is "the new baseline." Also one about inference-related sales.

Kress: Server GPU sales will continue providing a margin lift, and the addition of Mellanox revenue will also help.

Huang: Accelerated computing adoption is inflecting. Recommendation systems for websites, apps, etc. are all based on machine learning now, and are being accelerated after previously relying on CPUs.

Also says once more that adoption of cloud computing instances featuring Nvidia GPUs is a growth driver in its early innings, as is GPU adoption for "industrial edge" applications. Notes recent edge computing deals with Walmart, the USPS and BMW.

Eric Jhonsa
Eric Jhonsa

Editor

Question about the A100 ramp.

Huang: Accelerated computing "is now common sense" for data centers. Wasn't the case when Nvidia launched Volta (its Tesla V100 GPU). The number of workloads we're accelerating "has expanded tremendously" over the last 5 years. Our GPUs are forward and backwards-compatible, which should help with the A100 transition.

Also mentions that Tesla V100 and T4 GPU sales rose Q/Q in FQ1, even as Nvidia began shipping the A100.

Eric Jhonsa
Eric Jhonsa

Editor

Huang: RTX gaming GPUs are doing really well. Notebook design wins and the rollout of Super notebook gaming GPUs are also helping, as is Nintendo Switch demand.

Eric Jhonsa
Eric Jhonsa

Editor

Kress adds that Nvidia sees Gaming revenue being up by a low-to-mid single-digit % Q/Q. That's close to consensus expectations.

Eric Jhonsa
Eric Jhonsa

Editor

Question about Gaming demand and seasonality.

Kress: Some of the COVID-19 effects we saw in FQ1 could also impact FQ2. Desktop GPU sales are expected to be down Q/Q due to seasonality, but laptops are expected to be strong. We expected overall Gaming revenue to be up Q/Q.

Eric Jhonsa
Eric Jhonsa

Editor

First question is about Data Center visibility. How would you characterize visibility today, and what does it look like for 2H20?

Kress: Data Center visibility began improving a couple quarters ago. We still have solid visibility for FQ2 Data Center demand.

Regarding 2H20, she notes Nvidia has been seeing broad-based Data Center strength and that the A100 is just beginning to ramp. Notes Nvidia only gives quarterly guidance, but says the company feels good about the A100.

Eric Jhonsa
Eric Jhonsa

Editor

The Q&A session is starting.

Eric Jhonsa
Eric Jhonsa

Editor

Regarding guidance, Kress says Nvidia expects both Automotive and Pro Vis revenue to drop Q/Q. Says Gaming revenue will be hurt by iCafe closings, but adds strong demand from online retail channels will help offset.

Eric Jhonsa
Eric Jhonsa

Editor

Kress: Mellanox's revenue rose 40% Y/Y in calendar Q1. We expect the deal to be immediately accretive to margins, EPS and cash flow.

Eric Jhonsa
Eric Jhonsa

Editor

Kress now going over Nvidia's FQ1 financials. Reiterates gross margin benefited from GeForce product mix and Data Center growth.

Eric Jhonsa
Eric Jhonsa

Editor

Kress: Nvidia's ecosystem now has 1.8M developers.

Eric Jhonsa
Eric Jhonsa

Editor

Now going over new offerings for the EGX platform for edge servers and embedded computing, as well as new software such as the Merlin software framework for building recommendation systems and the Jarvis framework for building conversational AI services.

Eric Jhonsa
Eric Jhonsa

Editor

Kress highlights the A100's ability to be partitioned into 7 GPUs, as well as to scale out into large clusters. Notes it's already seeing strong cloud and supercomputer uptake.

Eric Jhonsa
Eric Jhonsa

Editor

Says Data Center strength was across the board, and that Nvidia has solid FQ2 visibility for the segment.

Eric Jhonsa
Eric Jhonsa

Editor

Kress: Data Center revenue topped $1B for the first time. The A100 contributed meaningfully to FQ1 Data Center sales.

Eric Jhonsa
Eric Jhonsa

Editor

Kress goes over Nvidia's next-gen Drive computing platform (Orin), which will deliver major performance and power efficiency gains with the help of Ampere-architecture GPUs.

Eric Jhonsa
Eric Jhonsa

Editor

Kress: Automotive revenue is expected to decline about 40% Q/Q in FQ2 thanks to COVID-19's impact on the auto industry.

Eric Jhonsa
Eric Jhonsa

Editor

Regarding pro visualization sales, Kress highlights strong notebook workstation demand and a growing ecosystem of software supporting ray-tracing acceleration.

Eric Jhonsa
Eric Jhonsa

Editor

Kress goes over the ray-tracing/DLSS capabilities of RTX gaming GPUs, including the recent rollout of DLSS 2.0.

Says the GeForce Now cloud gaming platform has added more than 2M users globally since coming out of beta in February.

Eric Jhonsa
Eric Jhonsa

Editor

Kress: Nvidia also benefited from strong demand for Nintendo Switch consoles (powered by Nvidia's Tegra X1 SoC).

Eric Jhonsa
Eric Jhonsa

Editor

Kress: Gaming revenue topped our expectations in spite of COVID-19's impact on Chinese demand.

Adds that Nvidia has seen a 50% increase in GeForce game play due to COVID-19, and that notebook gaming GPU demand has been strong.

Eric Jhonsa
Eric Jhonsa

Editor

CFO Collette Kress now talking.

Eric Jhonsa
Eric Jhonsa

Editor

Declares once more that the data center will be "the new unit of computing" going forward, and that Mellanox's networking technologies will play a critical role in Nvidia's efforts to address this shift.

Eric Jhonsa
Eric Jhonsa

Editor

Huang now talking about the Mellanox purchase. Notes it significantly expands Nvidia's data center footprint, and reiterates that it better positions Nvidia for both AI efforts and "data center-scale computing."

Eric Jhonsa
Eric Jhonsa

Editor

Huang thanks front-line workers and Nvidia employees. Highlights Nvidia's efforts to fight COVID-19, including support for research efforts.

Eric Jhonsa
Eric Jhonsa

Editor

CEO Jensen Huang is making an initial statement this time around.

Eric Jhonsa
Eric Jhonsa

Editor

IR chief Simona Jankowski is going over Nvidia's safe-harbor statement.

Eric Jhonsa
Eric Jhonsa

Editor

Nvidia's call is starting.

Eric Jhonsa
Eric Jhonsa

Editor

Typically, Nvidia's call features prepared remarks from CFO Collette Kress, followed by a Q&A session featuring both Kress and CEO Jensen Huang.

Eric Jhonsa
Eric Jhonsa

Editor

Here's the webcast link, for those interested.

Eric Jhonsa
Eric Jhonsa

Editor

Hi. I'm back to cover Nvidia's earnings call, which should be starting in a few minutes.

Eric Jhonsa
Eric Jhonsa

Editor

I'm taking a short break, but will be back to cover Nvidia's earnings call, which starts at 5:30 PM ET. Shares are down fractionally after Nvidia topped April quarter estimates and issued strong July quarter sales guidance against a backdrop of high expectations.

Eric Jhonsa
Eric Jhonsa

Editor

Regarding Mellanox (expected to account for a low-teens % of FQ2 revenue), it's worth noting that at 13% of Nvidia's revenue guidance of $3.65B, Mellanox would generate $474.5M worth of FQ2 revenue.

That would be above reported calendar Q1 revenue of $428.7M, and well above Q2 2019 revenue of $310.3M. Like Nvidia's server GPU business, strong cloud capex is a tailwind for Mellanox's server interconnect sales.

Eric Jhonsa
Eric Jhonsa

Editor

Nvidia ended the quarter with $1.13B worth of inventories, up from $979M at the end of FQ4 and down from an elevated year-ago level of $1.43B. Days sales of inventory (DSI) stood at 95 days.

Eric Jhonsa
Eric Jhonsa

Editor

Nvidia ended its April quarter with $16.4B in cash and $7B in debt. However, the quarter ended just before Nvidia closed the Mellanox acquisition, which had a $6.9B enterprise value and was paid for with cash.

Eric Jhonsa
Eric Jhonsa

Editor

The company adds that Mellanox's sales will be included within Data Center sales figures going forward.

Eric Jhonsa
Eric Jhonsa

Editor

Nvidia on its "Graphics" and "Compute & Networking" sales reporting going forward:

"Our Graphics segment includes GeForce GPUs for gaming and PCs, the GeForce NOW game streaming service and related infrastructure, and solutions for gaming platforms; Quadro GPUs for enterprise design; GRID software for cloud-based visual and virtual computing; and automotive platforms for infotainment systems.

Our Compute & Networking segment includes Data Center platforms and systems for AI, HPC, and accelerated computing; DRIVE for autonomous vehicles; and Jetson for robotics and other embedded platforms. Starting with the second quarter of fiscal 2021, we will also include Mellanox revenue in this segment."

Eric Jhonsa
Eric Jhonsa

Editor

A low tax rate also remains an EPS tailwind. Nvidia had a non-GAAP effective tax rate of just 7.7% in FQ1, a little below guidance of 8%-10%. FQ2 tax rate guidance is also at 8%-10%.

Eric Jhonsa
Eric Jhonsa

Editor

With Mellanox now on board, Nvidia is guiding for FQ2 non-GAAP opex of $1.04B, and for fiscal 2021 (ends in Jan. 2021) opex of $4.1B.


Earnings

FEATURED
COMMUNITY