10-QPeriod: Q3 FY2017

NVIDIA CORP Quarterly Report for Q3 Ended Oct 30, 2016

Filed November 22, 2016For Securities:NVDA

Summary

NVIDIA Corporation's third quarter fiscal year 2017 results (ending October 30, 2016) demonstrate robust growth across key business segments, signaling strong market demand and successful product execution. The company reported a significant 54% year-over-year increase in revenue to $2.004 billion, driven by exceptional performance in the GPU business, which saw a 53% increase, and a substantial 87% surge in the Tegra Processor business. Key growth drivers include strong sales of high-end GeForce gaming GPUs based on the new Pascal architecture, a more than doubling of datacenter revenue fueled by demand for AI and high-performance computing, and solid contributions from professional visualization and automotive sectors. The company also highlighted a favorable gross margin of 59.0%, an improvement from the prior year, attributed to product mix and strong demand. NVIDIA's strategic focus on visual computing platforms for Gaming, Professional Visualization, Datacenter, and Automotive markets appears to be paying off, with strong financial results supporting its market leadership position.

Financial Highlights

54 data points
Beta

Revenue

$2.00B

59.0% Gross Margin

Net Income

$542.00M

27.0% Net Margin

EPS (Diluted)

$0.02

Total Assets

$9.61B

Cash & Equivalents

$1.94B

Free Cash Flow

$562.00M

Financial Statements
Beta
Revenue$2.00B
Cost of Revenue$821.00M
Gross Profit$1.18B
R&D Expenses$373.00M
SG&A Expenses$171.00M
Operating Expenses$544.00M
Operating Income$639.00M
Interest Expense$16.00M
Net Income$542.00M
EPS (Basic)$0.03
EPS (Diluted)$0.02
Shares Outstanding (Basic)21.52B
Shares Outstanding (Diluted)26.12B

Key Highlights

  • 1Revenue surged by 54% year-over-year to $2.004 billion, driven by strong demand in the GPU and Tegra Processor segments.
  • 2The GPU business, a primary revenue driver, experienced a 53% year-over-year increase, largely propelled by high-end GeForce gaming GPUs and significant growth in datacenter solutions.
  • 3Datacenter revenue more than doubled (up 193% year-over-year), indicating strong demand for AI and high-performance computing solutions.
  • 4The Tegra Processor business showed remarkable growth with an 87% year-over-year increase in revenue, boosted by automotive systems and gaming development platforms.
  • 5Gross margin improved to 59.0% from 56.3% in the prior year, reflecting favorable product mix and strong demand.
  • 6Net income increased substantially by 120% year-over-year to $542 million, translating to diluted EPS of $0.83, up 89% from the prior year.
  • 7The company continued its capital return program, announcing an additional $2 billion under its repurchase program and increasing its quarterly dividend by 22% to $0.14 per share.

Frequently Asked Questions

NVIDIA's revenue growth was primarily driven by strong performance in its GPU business, particularly high-end GeForce gaming GPUs utilizing the new Pascal architecture, and significant demand in the datacenter for AI and high-performance computing solutions. The Tegra Processor business also contributed substantially with growth in automotive and gaming platforms.

The datacenter business is experiencing exceptional growth, with revenue up 193% year-over-year. This surge is attributed to strong demand for deep learning and high-performance computing, as well as increased adoption of Tesla and GRID solutions for cloud and virtualized computing. Initial sales of the NVIDIA DGX-1 AI supercomputer also contributed.

NVIDIA continues to return capital through share repurchases and cash dividends. The company announced an additional $2.00 billion authorization for its share repurchase program, extending it through December 2020. Furthermore, it declared a 22% increase in its quarterly cash dividend to $0.14 per share, signaling confidence in future cash flows and commitment to shareholder value.

NVIDIA early adopted a new accounting standard simplifying stock-based compensation accounting in the third quarter of fiscal year 2017. This resulted in adjustments, including recording excess tax benefits within income tax expense and a cumulative-effect adjustment to retained earnings. The adoption provided a tax benefit of $42 million in this quarter and impacted reported figures, such as a slight increase in net income and EPS compared to what would have been reported without the adoption.