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NVIDIA’s Unstoppable Rise: How This Tech Giant is Defying the Odds!

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NVIDIA Corporation is a global leader in the technology industry, known for its groundbreaking advancements in graphics processing units (GPUs) and artificial intelligence (AI). The company’s portfolio is diverse, with a strong focus on gaming, professional visualization, data centers, and automotive markets.

The Q1 FY24 earnings report highlighted several key growth drivers for NVIDIA. The company’s Data Center revenue was up 14% from a year ago, driven by growing demand for generative AI and large language models using GPUs based on NVIDIA’s Hopper and Ampere architectures. This indicates a strong market demand for NVIDIA’s high-performance computing solutions. In the automotive sector, NVIDIA’s revenue for the first quarter of fiscal year 2024 was $296 million, up 114% from a year ago. This growth was driven by sales of self-driving platforms and AI cockpit solutions, suggesting that NVIDIA’s investment in AI and autonomous driving technologies is starting to pay off.

NVIDIA’s recent product launches, including four AI inference platforms and the GeForce RTX 4070 GPU, could drive future growth. The company also announced several partnerships and collaborations, including with Google Cloud, ServiceNow, Dell Technologies, and Medtronic. These partnerships could expand NVIDIA’s market reach and drive revenue growth.

NVIDIA’s strategic moves and strong performance in key sectors position it well for future growth. The company’s commitment to innovation and its strategic partnerships could drive its success in the competitive technology market.

Earnings Insights & Expectations: Nvidia Corporation ($NVDA)

NVDA reported its latest quarterly earnings on May 24, 2023. The company beat the estimated normalized EPS by $0.17, reporting $1.09. Additionally, the GAAP EPS exceeded expectations, coming in at $0.82, which was $0.21 more than projected. The company’s revenue for the quarter was $7.19 billion, surpassing the forecast by $676.15 million. Looking ahead, NVDA Inc is scheduled to release its earnings report for the upcoming quarter on August 23, 2023, after the market closes. The estimated normalized EPS is $2.03, while the GAAP EPS is projected to be $1.72. The revenue forecast for the quarter is $11.05 billion.

Income Statement Items

Financial Metrics Q1 FY24 Q4 FY23 % Change
Total Revenue $7.19B $6.05B +18.8%
Gross Profit $4.77B $3.83B +24.5%
Operating Income $2.31B $1.26B +83.5%
Net Income $2.04B $1.41B +44.7%

Balance Sheet Items 

Financial Metrics Q1 FY24 Q4 FY23 % Change
Total Current Assets $24.88B $23.07B +7.8%
Total Assets $44.46B $41.18B +7.9%
Total Current Liabilities $7.26B $6.56B +10.7%
Total Liabilities $19.94B $19.08B +4.5%
Total Equity $24.52B $22.10B +10.9%

Cash Flow Items 

Financial Metrics Q1 FY24 Q4 FY23 % Change
Cash Flow from Operations $2.91B $2.25B +29.3%
Capital Expenditure -$248M -$509M -51.3%
Free Cash Flow $3.36B $1.39B +141.7%
Cash Flow from Investing Activities -$841M -$3M +27933.3%
Cash Flow from Financing Activities -$380M -$1.66B -77.1%

Our Commentary:

  • Compared to the same quarter last year, NVIDIA’s total revenue for the first quarter of 2024 increased by 18.8%. This growth was driven by strong performance across all segments, particularly in the Gaming and Data Center sectors. This aligns with the company’s announcement of record revenues in these segments.
  • The company’s GAAP Earnings Before Tax, Net Income, and Earnings Per Share also saw substantial increases, reflecting the strong operational performance and profitability of the company.
  • On the balance sheet, NVIDIA’s total current assets and total assets increased by 7.8% and 7.9% respectively, providing the company with a robust financial position. This aligns with the company’s return to shareholders of $99 million in cash dividends during the first quarter.
  • The company’s total liabilities also increased, but at a slower rate than its assets, leading to an increase in equity. This suggests that NVIDIA has been able to finance its growth more through its earnings rather than by taking on additional debt.
  • NVIDIA’s cash flow from operations increased by 29.3%, and despite a decrease in capital expenditure, the company generated a higher free cash flow, which increased by a staggering 141.7%.
  • Cash flow from investing activities turned negative, indicating increased investments by the company, while cash flow from financing activities decreased significantly, indicating repayments of borrowings or return of capital to shareholders.

Business Highlights

  • The robust demand for NVIDIA’s GeForce RTX 30 Series GPUs continued to drive the extraordinary performance of the company’s Gaming sector. GeForce RTXTM 4060 is a family of graphics processing units (GPUs), and GeForce RTX 4070 is a graphics processing unit (GPU) based on the Ada architecture. Both were unveiled by the business.
  • A substantial boost was also seen in the Data Centre segment, which NVIDIA attributes to the growing usage of the company’s A100 Tensor Core GPUs and AI software platforms. Four new inference platforms have been released by the firm. These inference platforms combine the company’s full-stack inference software with the most recent NVIDIA Ada, NVIDIA HopperTM, and NVIDIA Grace HopperTM processors.
  • With an increase in demand for NVIDIA’s cutting-edge graphics and artificial intelligence solutions, the business’s Professional Visualisation and Automotive segments also contributed to the overall growth of the company. A record revenue of $296 million was brought in by the Automotive section, which was up 114% from the previous year.
  • NVIDIA AI Foundations was developed by NVIDIA with the intention of assisting businesses in the development and operation of bespoke big language models and generative AI models for domain-specific activities. These models are trained using the firms’ own confidential data.
  • The firm increased its partner network to include companies like as Amazon Web Services, Google Cloud, Microsoft Azure, and Oracle Cloud Infrastructure, all of which offer new products and services that are based on the NVIDIA H100 Tensor Core GPU.
  • NVIDIA has announced a partnership with Medtronic to develop an artificial intelligence platform for medical devices. Additionally, NVIDIA has joined forces with Dell Technologies in Project Helix to supply full-stack solutions to assist businesses in developing and deploying trustworthy generative AI applications.
  • Forward Outlook: NVIDIA anticipates that its excellent performance will carry over into the following quarter, driven by demand that is expected to remain stable across all of its market sectors. The company is in a good position to capitalise on the expanding opportunities in the gaming, data centre, and artificial intelligence areas, which should drive future development in revenues and profitability. However, in order to keep a healthy balance sheet and ensure that the company has a positive free cash flow, the corporation will need to effectively manage its capital expenditures.

Source : https://www.sec.gov/Archives/edgar/data/1045810/000104581023000087/q1fy24pr.htm

Discovering Growth Drivers: Nvidia Corporation ($NVDA)

  • Segment Performance
    • Data Center revenue was $4.28 billion, up 14% from a year ago, led by growing demand for generative AI and large language models using GPUs based on NVIDIA’s Hopper and Ampere architectures.
    • Gaming revenue was $2.24 billion, down 38% from a year ago. The year-on-year decrease reflects weaker demand due to the macroeconomic slowdown and lower shipments to normalize channel inventory levels.
    • Professional Visualization revenue was $295 million, down 53% from a year ago, on lower sell-in to partners to help reduce channel inventory levels.
    • Automotive revenue was $296 million, up 114% from a year ago on growth in sales of self-driving platforms and AI cockpit solutions.
    • OEM and Other revenue was down 51% from a year ago and down 8% sequentially, primarily driven by lower entry-level notebook GPU sales.
  • Strong Demand in the Data Centre Segment: The company’s revenue from the Data Centre segment increased by 14% compared to the same period last year. This increase was driven by the growing demand for generative AI and big language models that use GPUs based on NVIDIA’s Hopper and Ampere architectures. This suggests that there is a significant demand in the market for high-performance computing solutions provided by NVIDIA.
  • Revenue Growth in the Automotive Industry: The automotive industry reported revenue of $296 million for the first quarter of the fiscal year 2024, an increase of 114% from the same period a year ago. This increase was driven by growth in sales of self-driving platforms and AI cockpit solutions. This is evidence that NVIDIA’s investments in artificial intelligence (AI) and autonomous driving technologies are beginning to bear fruit.
  • New Product Launches: NVIDIA has introduced four new AI inference platforms. These platforms integrate the company’s full-stack inference software with NVIDIA Ada, NVIDIA Hopper, and NVIDIA Grace Hopper processors. These processors are optimised for generative AI, huge language model, and other AI tasks. In addition to this, the business released the GeForce RTX 4070 GPU, which is built on the NVIDIA Ada Lovelace architecture. These upcoming launches of new products can be the engine that powers future expansion.
  • Partnerships & Collaborations: NVIDIA has established a number of partnerships and collaborations, some of which are with companies such as Google Cloud, ServiceNow, Dell Technologies, and Medtronic. These alliances have the potential to broaden NVIDIA’s market reach and boost the company’s income.
  • Investment in Cloud Services: NVIDIA provides enterprise customers with NVIDIA AI cloud services both directly and through its network of partners as part of the company’s investment in cloud services. The company has signed into multi-year cloud service agreements to support both its current offers and its research and development endeavours. To facilitate the hosting of these services in the data centres of cloud service providers, the company has formed partnerships with those providers.

Valuation Overview: Nvidia Corporation ($NVDA)

Valuation Ratios Current 2024E 2025E 2026E
EV/ Sales 36.12 27.00 29.00 29.00
EV/ EBITDA 131.26 59.23 63.65 68.19
EV/ EBIT 167.60 69.92 56.06 53.42
Price/Earnings 215.46 73.57 79.58 78.22

Author : Equisights Team

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