Nvidia Marks A Solid Start To Fiscal 2018; Strong Growth Across The Product Portfolio

Leading GPU manufacturer, Nvidia (NASDAQ:NVDA), reported its Q1 2018 earnings on May 9th. Continuing the growth momentum from fiscal 2017, the company marked a solid start to fiscal 2018, beating its guidance as well as analyst expectations. While growth remained broad-based, with year-on-year growth across platforms – gaming, professional visualization, data center, and automotive – Nvidia’s data center revenue nearly tripled while its core PC gaming business increased 49% compared to last year.

In the last few years, Nvidia has managed to diversify its business, creating new markets for its GPUs. While the company continues to derive a significant portion of its revenue from PCs, it has managed to carve out solid growth by leveraging its GPU in the deep learning and Artificial Intelligence (AI) space. The company believes that deep learning and AI, which have countless applications in developing technologies, will provide for top-line increases for many quarters and years to come.

Nvidia’s stock, which gained over 200% in 2016, shot up by more than 15% after the company’s Q1 2018 earnings release.

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Expansion Of Deep Learning & AI Will Continue To Drive Growth In The Data Center Business

Nvidia’s data center business marked its seventh consecutive quarter of sequential improvement, with revenue increasing a staggering 186% year-on-year, in Q1 2018. Growth in the quarter was driven by strong demand from cloud service providers and enterprises building training clusters for web services, gains in high-performance computing, GRID graphics virtualization, and the DGX-1 AI super-computer. The HPC business doubled year-on-year, driven by the adoption of Tesla GPUs into supercomputing centers worldwide.

Major cloud-based service providers such as Amazon Web Services, Microsoft Azure, and Alibaba Cloud are deploying Nvidia’s GPUs as coprocessors in their data centers to equip them with AI, data analytics, and parallel computing. The company is expanding its deep learning platform beyond training to speed up AI inferencing production workloads in hyper-scale data centers. Interest in deep learning is surging as industries and basic researchers increasingly seek to harness this revolutionary technology.  Being at the forefront of the technology, Nvidia is poised to gain from the growth.

PC Gaming Still Has Room To Grow

Nvidia’s Gaming revenue grew 49% year-on-year, driven by healthy demand for the Pascal based GPUs. The company introduced the GeForce GTX 1080 GPU almost a year back, which along with the recently launched GTX 1080 Ti, saw strong demand from gamers. The company also launched the TITAN Xp, designed for enthusiasts and researchers who demand extreme performance, last quarter.

Gaming continues to be a strong growth driver for Nvidia, driven by the strong growth in e-sports and MOBA (Multiplayer Online Battle Arena). The steady stream of AAA titles coming into the market pushed GPU sales higher. A series of highly anticipated blockbuster titles are expected to launch in the next few months, which will continue to push up the demand for high end GPUs.

Strong Automotive Growth Will Drive Nvidia’s Tegra Business

Nvidia’s automotive revenue grew to a record $140 million, up 24% year-over-year in Q1 2018, primarily from strong infotainment module sales. In just a year since its launch, the DRIVE PX 2 AI car platform has been deployed by over 225 car and truck makers, suppliers, research organizations, and startups, with more than 50% growth in Q1 2018 alone.

Nvidia continues to expand its partnerships with companies using AI to address the complex problems of autonomous driving. In Q1 2018, it partnered with Bosch, the world’s largest auto supplier, and PACCAR, one of the largest truck makers, to develop self-driving solutions.

The automotive segment is the biggest component and the strongest growth driver for Nvidia’s Tegra business. Given the  exponential growth potential in the market and solid progress Nvidia has made in this segment in the last few years, growth is likely to continue for the foreseeable future.

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