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Graphic Chips maker NVidia beat earnings expectations in second quarter earnings as the Datacenter and gaming center revenues hit records. $NVDA lowered FQ3 revenue guidance to $3.25B, plus/minus 2% below a $3.34B consensus.

NVidia GeoForce 

NVIDIA Corporation NASDAQ: NVDA: Beat Earnings After Close Thursday

 $1.76 Beat $1.67 EPS and $3.12 billion Beat $3.11 billion forecast in revenue. 

Earnings 

  • Record revenue from all platforms – Datacenter, Gaming, Professional Visualization, Automotive
  • Revenue of $3.12 billion, up 40 percent from a year ago and slightly beat the $3.11B consensus.
  • GAAP EPS of $1.76 beats a $1.67 consensus.
  • Datacenter segment revenue grew 83% Y/Y to $760M, beating $744M consensus. 
  • Gaming segment revenue rose 52% to $1.8B, beating $1.75B consensus.
  • OEM and IP segment revenue  fell 54% to $116M, well below a $188M  on weak crypto demand 
  • Sequentially, OEM and IP revenue fell 70%. ( Nvidia had guided for its sales of products meant specifically for crypto miners to drop by about two-thirds sequentially. )
  • Ahead of the Turing Quadro launches, Professional Visualization revenue (driven by Quadro GPUs) rose 20% Y/Y to $281M, beating a $257M consensus. 
  • Grew Automotive revenue by 13 percent from a year earlier to $161 million. Announced that Daimler 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. Auto-related revenue was forecast to rise 4.2% to $147.9 million Factset said.

NVIDIA Corporation NASDAQ: NVDA

Market Reaction - After Hours 241.79 -15.65 (-6.08%)

Guidance 

NVIDIA’s outlook for the third quarter of fiscal 2019 is as follows:

  • Revenue is expected to be $3.25 billion, plus or minus two percent.
  • GAAP and non-GAAP gross margins are expected to be 62.6 percent and 62.8 percent, respectively, plus or minus 50 basis points.
  • GAAP and non-GAAP operating expenses are expected to be approximately $870 million and $730 million, respectively. GAAP and non-GAAP other income and expense are both expected to be income of approximately $20 million.
  • GAAP and non-GAAP tax rates are both expected to be 9 percent, plus or minus one percent, excluding any discrete items.
  • GAAP discrete items include excess tax benefits or deficiencies related to stock-based compensation, which are expected to generate variability on a quarter by quarter basis.

NVDA Earnings Q2 18

Turing Upgrade

On Monday Nvidia announced the release of its long-awaited upgrade of its Pascal chip architecture, Turing, Most had expected to be announced after earnings at the Gamescom 2018 expo in Germany. 

“Turing is Nvidia’s most important innovation in computer graphics in more than a decade,” CEO Huang on Monday at the annual Siggraph conference in Vancouver, Canada. “Hybrid rendering will change the industry, opening up amazing possibilities that enhance our lives with more beautiful designs, richer entertainment and more interactive experiences. The arrival of real-time ray tracing is the Holy Grail of our industry.”

  

Highlights of NVidia Analyst Day

Nvidia AD PC

Analyst Day Highlights

      • Double memory now for V100 with new DGX-2 appliance with 2x the number of V100s plus new NVLink switches (showed 10x+ better performance vs. DGX-1).
      • Expect a $50 billion TAM (vs $30B) data center market which TensorRT4 with Tensorflow integration helps penetrate.
      • RTX (real time ray tracing) which offers material improvements to game and pro viz developers.
      • Estimate a $60 Billion LT TAM as every vehicle should be autonomous by 2035, highlighting their simulation solutions.
      • Volta chosen by all major server OEM/ODMs and all major public clouds
      • 2,000 customers adopt NVIDIA inference platform
      • 86 of Top 500 Supercomputers NVIDIA Tesla Accelerated
      • Top 15 HPC Apps Accelerated; 550 accelerated apps
      • CUDA developers up 75% YoY to 770K

Nvidia AD Cloud

The punters were expecting Volta for gaming to be announced, but it did not materialize given the continued success of Pascal boosted by recent supply constraints. Analysts now believe  this will launch mid-year, which is a further positive catalyst in case the crypto downturn in price affect interest there. Note that $AMD does not have this yet either leaving $NVDA remains in a strong position in AI.

Nvidia AD Operating Expansion

Barclays issued a note after the analyst day, key segments and their comments are below:

Barclays on Gaming:

Core gaming trends remain strong helped by recent titles PUBG and Fortnite on top of the continued rise of e-sports. NVDA gained share this year (per Steam and NewZoo) vs. AMD which should be boosted by Volta for consumer (we expect mid-year) with plenty of runway as only 30% of the installed base is on Pascal.

 

 Nvidia AD Gaming

Barclays on Datacenter:

The appetite for GPU acceleration continues to grow as the company believes the TAM is now $50B (from $30B last year), driven by larger inference but also just farther reaching AI apps. Specifically, NVDA is making inroads into new industries such as healthcare (Clara medical imaging) and manufacturing (Isaac for robotics). The generational improvements to V100 and DGX-2 only help access these opportunities.

Nvidia AD Datacenter

Barclays on Automotive:

NVDA believes every vehicle will eventually have some level of autonomous and sees a $60B TAM by 2035 ($40B from self-driving cars and $20B from robo-taxis). Xavier just began sampling and seeks to simplify the multiple ECUs in an ADAS car today into one. They also announced Orin, which puts the performance of Pegasus into just 2 chips from 4, and DRIVE SIM to simulate driving miles more safely. 

 

 

Nvidia AD AV

 Source: NVidia,  AlphaStreet

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