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Graphic Chips maker NVidia smashed earnings expectations in first quarter earnings as the Datacenter and gaming center revenues hit records. $NVDA  stock had surged to a record high of $260.50 ahead of the report.

NVidia GeoForce 

Earnings

Earned a record $1.98 per share on sales of $3.21 billion for the quarter ended April 29 smashing nalysts expectations of $1.47 and $2.91 billion,  up Revenue was up 66 percent from a year ago,  GAAP EPS up 151 percent from a year ago with record Datacenter revenue of $701 million, up 71 percent from a year earlier.

NVIDIA Corporation NASDAQ: $NVDA

Market Reaction >After hours $254.50 −5.63 (-2.16%)

“The GPU computing approach we have pioneered is ideal for filling this vacuum. And our invention of the Tensor Core GPU has further enhanced our strong position to power the AI era,” said Nvidia CEO Jensen Huang.

Highlights

  • Gaming revenue grew 68 percent from a year earlier to $1.72 billion.
  • Announced NVIDIA RTX™, a groundbreaking computer graphics technology that produces movie-quality images in real time.
  • Datacenter revenue grew 71 percent from a year earlier to a record $701 million.
  • Unveiled at the annual GPU Technology Conference, in San Jose, with nearly 8,500 registered attendees, advances to its deep learning computing platform – including NVIDIA® Tesla® V100 GPUs with 32GB memory, NVIDIA NVSwitch™
  • GPU interconnect fabric and NVIDIA DGX-2™, the first server with two petaflops of computational power.
  • Announced TensorRT 4™, the latest version of the TensorRT AI inference accelerator software, expanding its reach in the inference market by accelerating deep learning across a much broader range of applications.
  • Announced GPU acceleration for Kubernetes to facilitate enterprise inference deployment on multi-cloud GPU clusters.
  • Professional Visualization Professional Visualization revenue grew 22 percent from a year earlier to $251 million.
  • Announced the Quadro® GV100 GPU with RTX technology, making real-time ray tracing possible on professional design and content creation applications. 
  • Automotive revenue grew 4 percent from a year earlier to a record $145 million.
  • Introduced the NVIDIA DRIVE Constellation™ server with DRIVE Sim™ software, a complete system to safely test drive autonomous vehicles over billions of miles in virtual reality by leveraging NVIDIA GPUs and NVIDIA DRIVE Pegasus™.
  • New Platforms Introduced Project Clara, a medical imaging supercomputer, to revolutionize medical imaging.
  • Announced the Isaac software development kit for robotics, offering a collection of libraries, drivers, APIs and other tools for researchers, developers and startups.
  • Announced that Arm will integrate the open-source NVIDIA Deep Learning Accelerator to bring AI inference to mobile, consumer electronics and Internet of Things devices.

Stock Repurchases and Dividends

During the quarter, Nvidia returned $746 million to shareholders through a combination of $655 million in share repurchases and $91 million in dividends. In the whole of 2019, the company intends to return $1.25 billion to stockholders.

Outlook

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

  • Revenue is expected to be $3.10 billion, plus or minus two percent.
  • GAAP and non-GAAP gross margins are expected to be 63.3 percent and 63.5 percent, respectively, plus or minus 50 basis points.
  • GAAP and non-GAAP operating expenses are expected to be approximately $810 million and $685 million, respectively.
  • GAAP and non-GAAP other income and expense are both expected to be income of approximately $15 million.
  • GAAP and non-GAAP tax rates are both expected to be 11.0 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.

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, Barclays, AlphaStreet

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