01—Abstract
Summary
Summary of the 10-Q filed November 18, 2022. Cited figures are marked; the original filing is the authoritative source.
NVIDIA Corporation's 10-Q filing for the period ending October 30, 2022, reveals a challenging quarter marked by a significant decline in revenue and net income compared to the prior year.
Revenue dropped 17% year-over-year to $5.93 billiona, while net income fell a steep 72% to $680 million. This downturn was primarily driven by a substantial decrease in the Graphics segment, down 48% year-over-year, attributed to a strategic reduction in product shipments to align channel inventory with demand amidst macroeconomic headwinds and COVID-related disruptions in China. The significant increase in inventory provisions, totaling $702 million in the quarter, also heavily impacted gross margins, which fell to 53.6% from 65.2% a year ago.
Despite these headwinds, the Compute & Networking segment showed resilience, growing revenue by 27%b year-over-year, driven by strong demand from cloud service providers and other vertical industries, and the initial shipments of the new H100 data center GPU. However, this growth was somewhat tempered by U.S. government export restrictions impacting sales to China, though NVIDIA has been working to mitigate this with alternative product offerings.
The company continues to return capital to shareholders through share repurchases and dividends, with $8.28 billionc remaining under its share repurchase authorization. Investors should closely monitor inventory levels, the impact of geopolitical and macroeconomic factors, and the performance of the Compute & Networking segment as NVIDIA navigates these complex market conditions.
02—Key points
Key Highlights
- Revenue declined 17% year-over-year to $5.93 billion, primarily due to a sharp drop in the Graphics segment.
- Net income decreased significantly by 72% year-over-year to $680 million.
- Compute & Networking revenue grew 27% year-over-year, driven by Data Center demand, while Graphics revenue fell 48% year-over-year.
- Gross margin contracted to 53.6% from 65.2% a year ago, heavily impacted by $702 million in inventory provisions.
- The company began shipping its new H100 data center GPU, indicating progress in high-performance computing.
- U.S. export restrictions on certain AI chips to China impacted revenue, though mitigation efforts are underway.
- NVIDIA continued to return capital to shareholders, repurchasing $3.65 billion in shares and paying $100 million in dividends during the quarter.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2023, NVIDIA Corp kept $0.11.
- Revenue$5.93B100.0%
- Cost of revenue−$2.75B46.4%
- Gross profit$3.18B53.6%
- Operating costs−$2.58B43.4%
- Operating income$601.0M10.1%
- Interest, other & tax$79.0M1.3%
- Net income$680.0M11.5%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2023filed November 18, 2022Financial Statements
Q3 FY2023 against Q3 FY2022
| Line item | Q3 FY2023Q3 FY2022 | Change |
|---|---|---|
| Revenue | $5.93B$7.10B | −16.5% |
| Cost of Revenue | $2.75B$2.47B | +11.4% |
| Gross Profit | $3.18B$4.63B | −31.4% |
| R&D Expenses | $1.95B$1.40B | +38.6% |
| SG&A Expenses | $631.00M$557.00M | +13.3% |
| Operating Expenses | $2.58B$1.96B | +31.4% |
| Operating Income | $601.00M$2.67B | −77.5% |
| Interest Expense | $65.00M$62.00M | +4.8% |
| Net Income | $680.00M$2.46B | −72.4% |
| EPS (Basic) | $0.03$0.10 | −72.7% |
| EPS (Diluted) | $0.03$0.10 | −72.2% |
| Shares Outstanding (Basic) | 24.83B24.99B | −0.6% |
| Shares Outstanding (Diluted) | 24.99B25.38B | −1.5% |
05—Questions
Frequently Asked Questions
What were the main drivers of NVIDIA's revenue decline in this quarter?
The primary driver for the revenue decline was a significant drop in the Graphics segment, down 48% year-over-year. This was due to NVIDIA's strategic decision to reduce product shipments to partners to align channel inventory with current demand expectations, exacerbated by macroeconomic conditions and COVID-related disruptions in China.
How did the inventory provisions impact NVIDIA's financial results?
NVIDIA recorded substantial inventory provisions totaling $702 million in the third quarter, which significantly impacted gross margins. These provisions were comprised of $354 million for inventory on hand and $348 million for inventory purchase obligations exceeding current demand projections. This led to a decrease in gross margin to 53.6% from 65.2% in the prior year.
What is the outlook for the Compute & Networking segment, and how are U.S. export restrictions affecting it?
The Compute & Networking segment showed resilience with a 27% year-over-year revenue growth, driven by demand from cloud service providers and vertical industries, and the initial shipments of the H100 GPU. However, U.S. government export restrictions on certain AI chips to China impacted revenue. NVIDIA is mitigating this by offering alternative products to customers in China and is seeking licenses, but the long-term impact remains a key area to monitor.
How is NVIDIA managing its capital and returning value to shareholders?
NVIDIA continued its capital return program by repurchasing $3.65 billion of its common stock and paying $100 million in cash dividends during the quarter. The company has $8.28 billion remaining under its share repurchase authorization through December 2023, indicating a continued commitment to returning capital to shareholders.
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