Nvidia Shocks the Street

Taking a Look at Nvidia's (NVDA) Strong Quarter, Weekly Activity, & Portfolio Update.

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Nvidia Defies Expectations with Strong Quarterly Beat

This past week, NVDA released their Q2 2024 earnings results, and they knocked it out of the park. NVDA announced record revenue of $13.51B. This marks a whopping 101% increase compared to last year and an 88% surge from the prior quarter.

The Data Center sector was a standout with revenues reaching $10.32B, signifying a growth of 141% from the previous quarter and a staggering 171% increment YoY (Absolutely destroyed their Data Center component).

GAAP earnings per diluted share settled at $2.48, reflecting an 854% rise YoY and 202% jump from the preceding quarter. Meanwhile, the Non-GAAP earnings per diluted share stood at $2.70, showcasing a 429% and 148% rise YoY from the last quarter.

Jensen Huang, NVDA's founder and CEO, emphasized the onset of a fresh computing paradigm. He highlighted the global shift from general-purpose computing towards accelerated computing and generative AI. NVDA's GPUs, complemented by Mellanox's networking and switching solutions, and powered by the CUDA AI software, are leading the generative AI's computational infrastructure (Hinting at increased demand, continued growth).

Huang also mentioned, during the quarter, several leading cloud providers unveiled massive AI frameworks built on NVDA's H100. In tandem, major IT and software entities have forged partnerships to infuse NVIDIA AI across various industries, marking the commencement of a generative AI adoption race. Furthermore, NVDA emphasized its shareholder commitment by returning $3.38B in Q2 2024, achieved through the repurchase of 7.5M shares amounting to $3.28B (Shareholders should like this, but I personally don’t think this was the best use of capital), and through cash dividends. As the quarter closed, NVDA still had $3.95B allocated for share buybacks. Management got the greenlight for an additional $25B for share repurchases, with no expiration set, indicating continued buybacks throughout the fiscal year.

Q2 Fiscal 2024 Summary.

For the upcoming Q3 2024, NVDA gave color on their guidance/expectations:

• Revenue Projections: The company forecasts its revenue to hover around $16B, with a possible variation of 2% in either direction.

• Gross Margins: They also anticipate GAAP gross margins to be around 71.5% and non-GAAP gross margins to stand at approximately 72.5%. Both estimates have an allowance for a deviation of 50 basis points.

• Operating Expenses: On the GAAP front, operating expenses are projected to be close to $2.95B. For non-GAAP, this estimate is around $2B.

• Other Income and Expense: Both under GAAP and non-GAAP measures, NVDA expects an income approximating $100M. This projection, however, does not factor in the potential gains or losses arising from investments not affiliated with NVDA.

• Tax Rate Forecast: NVDA's estimated tax rates for both GAAP and non-GAAP are noted at 14.5%, with a permissible fluctuation of 1%. This projection excludes any discrete items.

Breaking Down Each Segment

Here is a breakdown of each segment of their business, showing revenue trends.

Data Center Segment:

• Q2 revenue soared to a record of $10.32B, marking an increase of 141% from Q1 and 171% YoY.

• Introduction of the NVDA GH200 Grace Hopper Superchip (Who is in charge of NVDA’s name selection… LOL) designed for intricate AI and HPC tasks; with a subsequent version featuring HBM3e memory slated for Q2, 2024.

• NVDA revealed its L40S GPU, the universal data center processor, and the MGX server reference design, both of which are set to release this quarter.

• Collaborations were announced with global enterprises such as ServiceNow, VMware, Snowflake, WPP, SoftBank, and Hugging Face to advance AI initiatives.

• NVDA also made significant strides in AI software with the AI Workbench toolkit and the AI Enterprise 4.0 software. Furthermore, H100 GPUs set records in the MLPerf training benchmarks.

Gaming Segment:

• Q2 revenue reached $2.49B, an 11% increase from Q1 and a 22% YoY growth.

• NVDA started shipping the GeForce RTX 4060 series GPUs, priced from $299, and introduced the Avatar Cloud Engine for enhanced game interactions.

• The DLSS gaming portfolio expanded with titles like Diablo IV, Ratchet & Clank: Rift Apart, and others.

Professional Visualization Segment:

• Q2 revenue stood at $379M, reflecting a 28% growth from Q1 but a 24% decline from the previous year.

• New workstation RTX GPUs based on the Ada Lovelace architecture are set to release this quarter.

• NVDA rolled out a significant update for the Omniverse platform and collaborated with industry leaders like Pixar and Adobe to form the Alliance for OpenUSD.

Automotive Segment:

• Q2 revenue reported was $253M, a decrease of 15% from Q1, but an increase of 15% YoY.

• NVDA's DRIVE Orin technology will be integrated into the new XPENG G6 Coupe SUV’s driver assistance system.

• A strategic partnership with MediaTek was formed to develop automotive systems integrated with NVDA GPU chiplet IP.