Can We Expect Another Stellar Quarter From Nvidia?

November 9th, 2016 by Trefis Team
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Leading GPU manufacturer Nvidia (NASDAQ:NVDA) is set to report its Q3 2017 earnings on November 10th after the market close. (Fiscal years end witj Jamuary.) We believe that the expanding Pascal portfolio has likely helped the company in retaining its growth momentum in the current quarter as well. Pascal is enabling Nvidia to further extend its leadership across its key growth markets:  Gaming, Professional Visualization, Datacenter Acceleration and Automotive Electronics.

During the quarter, Nvidia confirmed that the new Nintendo NX Switch will be powered by its Tegra platform. This is a significant win for the company because until now it had failed to gain a spot for its Tegra processor in any leading gaming consoles. Going forward, we can expect more design wins for Nvidia. Furthermore, the company won a key contract with Tesla Motors to equip the latter’s cars for self-driving features.

In the table below we note the key metrics as expected for the company in Q3:

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Screen Shot 2016-11-08 at 7.51.28 PM

Source: SEC filings, Yahoo Finance

Below we discuss the key factors that are contributing growth for Nvidia across its segments:

Nvidia’s data center revenue growth is being driven by a strong growth in supercomputing, hyper-scale data centers, and grid virtualization. Interest in deep learning is surging as industries and basic 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.

Nvidia’s Gaming revenue will continue to remain on an upward trajectory, 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 of the potential expansion is vast.

Automotive revenue growth is being driven by premium infotainment and digital cockpit features in mainstream cars. The DRIVE PX 2 automotive supercomputer is seeing strong adoption and the company remains on track to ship its autopilot solution based on the DRIVE platform. The automotive segment accounts for a majority of Nvidia’s Tegra processor revenue.

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