10-QPeriod: Q2 FY2017

NVIDIA CORP Quarterly Report for Q2 Ended Jul 31, 2016

Filed August 23, 2016For Securities:NVDA

Summary

NVIDIA Corporation (NVDA) reported strong financial results for the second quarter of fiscal year 2017, ending July 30, 2016. Revenue surged by 24% year-over-year to $1.43 billion, driven by robust performance in the GPU segment, particularly in gaming, datacenter, and professional visualization markets. The Tegra Processor business also showed significant growth, up 30% year-over-year, fueled by automotive applications. Profitability saw a dramatic improvement, with net income increasing by 873% to $253 million, or $0.40 per diluted share. This substantial growth was attributed to strong revenue gains, improved gross margins (57.9%), and a significant reduction in operating expenses compared to the prior year, which had included substantial restructuring charges. The company continued its commitment to returning capital to shareholders, repurchasing shares and paying dividends.

Key Highlights

  • 1Revenue increased 24% year-over-year to $1.43 billion, driven by strong GPU and Tegra segment performance.
  • 2Net income dramatically increased by 873% year-over-year to $253 million.
  • 3Diluted EPS grew to $0.40 from $0.05 in the prior year's comparable quarter.
  • 4Gross margin improved to 57.9% from 55.0% year-over-year, indicating improved pricing power and product mix.
  • 5Operating expenses decreased by 9% year-over-year, largely due to lower restructuring charges compared to the prior year.
  • 6The GPU business saw a 25% revenue increase, with significant growth in Gaming, Datacenter, and Professional Visualization.
  • 7Tegra Processor business revenue increased by 30%, driven by automotive systems.

Frequently Asked Questions

Revenue growth was primarily driven by strong demand in the GPU segment, particularly for gaming (GeForce), datacenter applications (Tesla), and professional visualization (Quadro). The Tegra Processor business also contributed significantly, with notable growth in automotive systems.

Profitability saw a substantial improvement. Net income grew by 873% to $253 million, and diluted earnings per share increased to $0.40 from $0.05 in the comparable prior-year period. This was a result of strong revenue growth outpacing operating expense increases and improved gross margins.

NVIDIA has outstanding 1.00% Convertible Senior Notes due 2018. During the quarter, the Notes were convertible at the holders' option, and the company received conversion notices for an aggregate of $229 million in principal amount, with settlements expected in the next quarter. The company manages potential dilution through convertible note hedge and warrant transactions.

NVIDIA is actively returning capital to shareholders through share repurchases and cash dividends. The company completed an accelerated share repurchase (ASR) of $500 million and intends to return approximately $1.00 billion to shareholders in fiscal year 2017 through a combination of repurchases and dividends.