^{Source: Predictions based on analysts’ consensus from Visible Alpha}

NVIDIA (NVDA) Financial Results: Analysis

Nvidia Corporation (NVDA) reported Q4 FY 2022 earnings on Feb. 16, 2022, that beat analysts’ expectations. Adjusted earnings per share (EPS) came in above analyst forecasts, rising 69.2% year over year (YOY). Nvidia’s revenue also came in above consensus estimates, up 52.8% compared to the year-ago quarter to a new quarterly record of $7.6 billion. Data center revenue exceeded analysts’ expectations. The company’s shares fell nearly 2% in extended trading. Over the past year, Nvidia’s shares have provided a total return of 73.1%, well above the S&P 500’s total return of 13.8%.

NVDA Data Center Revenue

Nvidia’s data center revenue grew 71.5% YOY, accelerating from the previous quarter’s pace. Nvidia Chief Financial Officer (CFO) Colette Kress said that data center revenue was primarily driven by sales of NVIDIA Ampere architecture GPUs.

Nvidia has traditionally specialized in making chips for the gaming and graphics industry, being a pioneer in the development of GPUs. It turns out that the robust computational capabilities employed by GPUs to power video games and graphics software are also well-suited for technologies like artificial intelligence (AI) and machine learning. Both of those technologies are increasingly important for the rapidly growing data center market. Demand for remote computing power increased substantially during the pandemic as more people began working from home and businesses were forced to shift certain operations online. That development has helped to boost demand for Nvidia’s chips used by data centers.

Increasing focus on the metaverse, a virtual world built on technologies like virtual reality (VR) and augmented reality (AR), is likely to create additional sources of demand for the company’s data center chips. Nvidia announced in late January that Meta Platforms, Inc. (FB)—the company formerly known as Facebook with ambitious plans to build the metaverse—would be building its AI Research SuperCluster using NVIDIA DGX A100 systems. Meta’s AI supercomputer is expected to be the largest customer installation of Nvidia’s DGX A100 systems.

NVDA Termination of Arm Acquisition

Nvidia terminated its $40 billion agreement to purchase U.K.-based semiconductor design firm Arm Ltd. from SoftBank Group Corp. (SFTBY) on Feb. 8, 2022. The acquisition was first announced in September 2020, but due to significant regulatory challenges, both Nvidia and SoftBank agreed to terminate the transaction. Nvidia said that it plans to record an approximately $1.4 billion charge in its operating expenses in the first quarter of FY 2023 to reflect the write-off of a prepayment it provided at the initial signing of the agreement in September 2020.

NVDA Outlook

Nvidia expects to generate approximately $8.1 billion in revenue in Q1 FY 2023, representing YOY growth of approximately 42%.

NVDA Earnings Call Recap

Chief Executive Officer (CEO) Jensen Huang talked about the company’s supply chain challenges in a call with analysts after earnings were released. “We expect supply to improve each and every quarter going forward,” he said. As a sign of how its addressing supply chain issues, the company said it had $9 billion in long-term supply obligations, up from $2.54 billion a year ago.

Nvidia’s next earnings report (for Q1 FY 2023) is projected to be released on May 12, 2022.