A month has gone by since the last earnings report for Nvidia (NVDA). Shares have added about 2.7% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Nvidia due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
NVIDIA delivered second-quarter fiscal 2021 non-GAAP earnings of $2.18 per share, beating the Zacks Consensus Estimate by 12.4%. The reported figure also surged 76% year over year. Moreover, the bottom line increased 21% sequentially.
Revenues of $3.87 billion beat the consensus mark by 6% and jumped 50% year over year as well. The top line also climbed 26% sequentially.
The COVID-19 pandemic negatively impacted the company’s professional visualization and automotive businesses. Nevertheless, strong data-center and gaming performances offset these negatives to a large extent.
Beginning first-quarter fiscal 2021, NVIDIA started reporting revenues under two segments – Graphics and Compute & Networking.
Graphics include GeForce GPUs for gaming and PCs, the GeForce NOW game streaming service and related infrastructure, and solutions for gaming platforms; Quadro GPUs for enterprise design; GRID software for cloud-based visual and virtual computing; and automotive platforms for infotainment systems.
Graphics accounted for 54% of revenues. The segment top-line figure grew 16% year over year and 9% sequentially.
Compute & Networking represented 46% of second-quarter fiscal 2021 revenues. The segment comprises Data-Center platforms and systems for AI, HPC, and accelerated computing; DRIVE for autonomous vehicles; and Jetson for robotics and other embedded platforms.
Compute & Networking revenues soared 130% from the year-ago quarter and 52% sequentially.
Market Platform Top-Line Details
Based on the market platform, Gaming revenues (43% of revenues) were up 26% year over year and 24% quarter on quarter to $1.65 billion driven by higher sales across the company’s major gaming products. During the fiscal second quarter, the firm ramped up more than 100 new GeForce laptops for students, creators and gamers across different price points.
Revenues from Data Center (45% of revenues) soared 167% year over year and 54% sequentially to $1.75 billion. This upswing was driven by solid demand from hyperscale and vertical industry end customers. Mellanox contributed 30% to data-center revenues and 14% to the company’s overall revenues.
Professional Visualization revenues (5% of revenues) plunged 30% year over year and 34% sequentially to $203 million.
Automotive revenues (3% of revenues) in the reported quarter totaled $111 million, down 47% on a year-over-year basis and 28% sequentially.
OEM and Other revenues were up 32% year over year and 6% sequentially to $146 million (4% of revenues). This year-over-year growth primarily resulted from higher demand for entry-level laptop GPUs from PC OEMs.
NVIDIA’s non-GAAP gross margin expanded 590 basis points (bps) from the year-ago quarter to 66%, reflecting higher data-center products and a favorable GeForce GPU product mix.
Non-GAAP operating expenses flared up 38% year over year and 26% sequentially to $1.04 billion on increased headcount and the Mellanox acquisition-related costs.
Non-GAAP operating income soared 89% year over year and 26% sequentially to $1.52 billion.
Balance Sheet and Cash Flow
As of Jul 26, 2020, NVIDIA’s cash, cash equivalents and marketable securities were $10.98 billion, down from $16.35 billion as of Apr 26.
As of Jul 26, total long-term debt $6.96 billion, flat with the fiscal first quarter.
Cash flow from operating activities increased 67.3% year over year and 72.2% sequentially to $1.57 billion. Free cash flow was $1.35 billion, up 63.9% year over year and 78.9% sequentially. In the first half of fiscal 2021, the company generated operating and free cash flows of $2.48 billion and $2.1 billion, respectively.
In the second quarter, NVIDIA paid dividends of $99 million. The company remains committed to paying its quarterly dividend. During the first half of fiscal 2021, the company returned $197 million in dividend to shareholders.
For the third quarter of fiscal 2021, NVIDIA anticipates revenues of $4.4 billion (+/-2%).
Non-GAAP gross margin is projected to be 65.5% (+/-50 bps). Non-GAAP operating expenses are expected to be $1.54 billion.
Capital expenditures are expected to be approximately $225-$250 million.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 10.44% due to these changes.
At this time, Nvidia has a great Growth Score of A, a grade with the same score on the momentum front. However, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Nvidia has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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