Updated to include latest after-hours pricing information, added information on the latest quarter's revenue breakdown.



) --


(NVDA) - Get Report

trounced Wall Street's expectations for its fiscal first-quarter results on Thursday as gross margins continued to expand and its Tegra mobile processor business thrived.

The Santa Clara, Calif.-based maker of graphics chips reported a non-GAAP

generally accepted accounting principles profit of $165.7 million, or 27 cents a share, for the three months ended May 1. Revenue totaled $962 million for the latest quarter, up 8.5% on a sequential basis but down 4% from a year-ago total of $1 billion.

The average estimate of analysts polled by

Thomson Reuters

was for a profit of 19 cents a share in the quarter on revenue of $948 million. Prior to this report, Nvidia had beaten Wall Street's earnings consensus view in five of the past six quarters.

Non-GAAP gross margins came in at 50.4% for the latest quarter, up from 48.1% in the fourth quarter and 45.6% a year earlier.

Nvidia said it now sees sequential revenue growth of 4-6% for the second quarter, implying a range of $1 billion to $1.02 billion. This view exclude the impact of its recent Icera acquisition. Wall Street's current consensus estimate is for revenue of $991.9 million in the July-ending quarter.

The company also said it expects GAAP gross margin of 50.5-51.5%, and GAAP operating expenses of $332 million to $336 million.

Earlier this week, Nvidia announced an agreement to acquire Icera, a maker of baseband processors used in smartphones, for $367 million in cash. The company said at that time it anticipates "slight" dilution from the transaction through the first half of calendar 2012. On Thursday, Nvidia added that it believes the deal will close toward the end of this month, or at the beginning of June.

"Our core GPU

graphics processing unit businesses are solid, with expanding revenues and margins. And this quarter, our Tegra mobile business took off," said Jen-Hsun Huang, the company's president and CEO. "With the Tegra super chip and the Icera wireless communication processor, we will offer our customers the two most important processors of the mobile computing revolution."

In separate comments on the quarter posted on Nvidia's corporate Web site, the company provided a revenue breakdown that underscores the tremendous growth the company has seen in demand for the Tegra chips, which are used in smart phones and tablets. The consumer products business, which houses the Tegra business, saw a sequential jump of 78% to $122.6 million in the first quarter from $68.8 million in the fourth quarter.

The rise in Tegra demand was attributed to several customer using the chip bringing their first Android-based products to market.

The commentary also noted a 3.8% sequential increase in revenue from Nvidia's core GPU business to $637.6 million from $614 million as the company benefited from a new patent cross-license agreement with


(INTC) - Get Report

, outperformance of its desktop GPU business, and a significant increase in demand for notebook GPUs.

Opinions were split on the company ahead of the numbers with 20 of the 31 analysts rating the shares at hold (19) or sell (1) vs. 11 bullish ratings of strong buy (6) and buy (5). The 12-month median price target sits at $23.

The stock closed Thursday's regular session at $20.50, up 3.2%. The shares initially gained ground in after-hours action, rising as high as $21.50, but they've since reversed course. The stock was last quoted at $20.48, down 2 cents, on volume of 2.6 million, according to



The culprit could be the revenue outlook for the second quarter. Although the range is above the current consensus, analysts may have been expected a more robust forecast, especially given the blowout first-quarter numbers.

For instance, BMO Capital Markets, which has a market perform rating -- the equivalent of a hold -- and a target price of $20 on the stock, said in a preview of the quarter earlier this week that it was looking for 7% sequential revenue growth in the second quarter, although that growth is based on its $947 million estimate for the first quarter.

Based on the regular session finish, the stock has gained roughly 29% so far in 2011, although it's pulled back more than 20% since hitting a 52-week high of $26.17 on Feb. 2.


Written by Michael Baron in New York.

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