Nvidia Reports Another Stellar Quarter Driven By The Launch Of Pascal & Enhanced Interest In Deep Learning

Leading GPU manufacturer Nvidia (NASDAQ:NVDA) reported its Q2 2017 earnings on August 11th. The company built on its growth momentum by posting revenues of $1.43 billion, an increase of 24% over the prior year and 9% quarter to quarter. It was above guidance  and consensus as well. Except for a 6% decline in its OEM and IP business (in line with declining mainstream PC demand), Nvidia witnessed strong growth in all its business segments. The company registered strong double digit growth across its four key platforms – Gaming, Professional Visualization, Datacenter and Automotive, which together account for 89% of its revenue, up from 85% a year earlier.

Nvidia’s business model, based on driving GPU compute platforms into highly targeted markets, is clearly paying off. At the center of the strong Q2 2017 growth was the recently launched Pascal architecture, which the company believes is one of its most successful launches ever. The accelerating adoption of deep learning and Nvidia’s increasing engagement with hyperscale datacenters around the world added to the company’s growth momentum in Q2 2017.

Towards the end of Q2 2017, Nvidia launched four major products – GeForce GTX 1080, 1070 and 1060 for the enthusiast market, and the TITAN X, the world’s fastest consumer GPU for deep learning development, digital content creation and extreme gaming. We believe the expanding Pascal portfolio will help the company retain its growth momentum in the current quarter and beyond. Pascal will enable Nvidia to further extend its leadership across its key growth markets – Gaming, Professional Visualization, Datacenter Acceleration and Automotive Electronics.

Key Highlights For Q2’17 Earnings

• Gaming revenue grew 18% year over year to $781 million, mainly driven by the integration of Pascal-based GPUs. The GeForce installed base is around 80 million users. Only about a third has even upgraded to Maxwell and Pascal just started shipping. So the scope or expansion is vast.
• Quadro revenue was up 22% year over year to $214 million, driven by growth from the high-end of the market for real-time rendering tools and mobile workstations. Most of this growth was driven by M6000 GPU 24 gig (Maxwell architecture). Pascal is in the process of ramping into workstations all over the world and we expect growth to accelerate further in coming quarters.
• At $151, Nvidia’s data center revenue more than doubled year over year, on account of strong growth in supercomputing, hyperscale datacenters and grid virtualization.  Interest in deep learning is surging as industries and basis researchers increasingly seek to harness this revolutionary technology. Deep learning currently represents almost half of Nvidia’s data center revenue and accounts for vast majority of growth in the data center business. We believe, it will continue to fuel growth going forward as well, as Nvidia is at the forefront of the technology.
• Automotive revenue reached a record $119 million, increasing 68% year over year, driven by premium infotainment and digital cockpit features in mainstream cars. The DRIVE PX 2 automotive supercomputer is being shipped to 80+ companies and the company remains on track to ship its autopilot solution based on the DRIVE platform. The automotive segment accounts for majority of Nvidia’s Tegra processor revenue.

We are in the process of updating our valuation for Nvidia.

See our complete analysis for Nvidia

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