Nvidia Corporation (NASDAQ: NVDA) Posts Record Revenue of $1.305 Billion – Third Quarter Fiscal Year 2016 Earnings Out

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Nvidia (NASDAQ: NVDA) recently posted its quarterly results for the third quarter of Fiscal Year 2016. The graphics giant posted a record revenue of $1.305 Billion dollars which is 13% more than the same quarter from last year.  With a GAAP diluted net income of $246 Million dollars, the company posted an earnings per share of $0.44 for this quarter. Things have been looking real good for green lately and their strong financials continue to represent their bullish trend.

NVIDIA Third Quarter 2016 Results_Gaming_16A slide from the Investor Day pressdeck of March 17th 2015. @Nvidia Public Domain

Nvidia (NASDAQ:NVDA) posts third quarter results for FY2016 - Record revenue, Geforce stronger than ever and significant automotive growth

Mr. Jen-Hsun Huang had the following to say at the earnings call:

"Our record revenue highlights NVIDIA's position at the center of forces that are reshaping our industry," said Jen-Hsun Huang, co-founder and chief executive officer, NVIDIA. "Virtual reality, deep learning, cloud computing and autonomous driving are developing with incredible speed, and we are playing an important role in all of them. "We continue to make great headway in our strategy of creating specialized visual computing platforms targeted at important growth markets. The opportunities ahead of us have never been more promising,".

The company has all but finished its roll out of high end graphic cards of this generation (minus one major exception) and the revenue of this quarter comes mostly from consistent sales and a strong hold on its market share. With such a majority market share, Nvidia can manage to meet expectations without breaking much of a sweat. Infact, the company made a point of noting that they are not becoming complacent just because they have a majority share and take their competitor very seriously - all the while pointing out that AMD is a completely different company from Nvidia and not really comparable to green. 

This year has seen them venture further into the Automotive side of things - yielding very promising results. Infact, it recently introduced its Drive PX chip as well - powered by the Tegra X1 - which is supposed to be a major earner once it gets the requisite design wins and production ramp.

At the time of writing, the company's stock is trading at $27.71 with a market capitalization of 15.11 Billion dollars. The share price has been up by 20% this quarter starting from $23. This past week has seen the bullish trend falter somewhat but the overall trend remains positive and this quarters strong earnings should put some of the bull back in its share price.  Without any further ado, here are the results and the highlights:

Financial Highlights

Nvidia Quarterly Trend by Markets

As can be expected from Nvidia (NASDAQ: NVDA), the GPU side of things was the primary driver behind the results. This includes the Geforce division as well as Quadro and Tesla divisions. Over $1.1 Billion dollars in revenues is accounted for by this particular business unit. This side of Nvidia (NASDAQ: NVDA) saw a healthy growth of 16% Quarter over Quarter and 12% Year over Year – both of which are very good indicators.

  • The ‘Gaming’ or the GeForce side of things saw a healthy growth of 40% year over year and 15% sequentially, bringing in a revenue of $761 Million.
  • The Professional Visualization or Quadro side of things was up 8% sequentially and down 8% Year over Year at $190 Million.
  • The Datacenter side of things (aka the Tesla and the Grid) were also up 13% sequentially but down 8 percent year over year at 82 Million dollars.
  • The Tegra SBU accounted for $129 Million US dollars on the revenue and while it was up 1% quarter over quarter, it actually declined by a significant 23% year over year. The reason stated in the financials is that the decline reflects the end of life of OEM smartphones and tablets which featured older variants of Tegra.
  • The Automotive segment, which includes the infotainment system for Tesla Motors infact actually went up by a resounding 50% year over year and over 11% sequentially – which is very promising.
  • Licensing revenue was flat at $66 Million.

Nvidia (NASDAQ: NVDA)’s quarterly cash dividend saw an increase of 18%. The company has already returned an aggregate of $604 Million to shareholders in the first 3 quarters of Fiscal Year 2016 and aims to take the amount upto $800 Million by the year end. Nvidia has mentioned that it aims to return a cool $ 1 billion to shareholders in FY17. The quarterly cash dividend will be paid on December 14, 2015 and will be paid to all shareholders on record on the 20th of November 2015.

Nvidia Q3 FY16 GAAP Financial Result

Revenue$1,305$1,153$1,225up 13%up 7%
Gross margin56.3%55.0%55.2%up 1.3%up 1.1%
Operating expenses$489$558$463down 12%up 6%
Operating income$245$76$213up 222%up 15%
Net income$246$26$173up 846%up 42%
Diluted earnings per share$0.44$0.05$0.31up 780%up 42%

Nvidia Q3 FY16 IFRS Financial Result

Revenue$1,305$1,153$1,225up 13%up 7%
Gross margin56.5%56.6%55.5%down 0.01%up 1%
Operating expenses$430$421$415up 2%up 4%
Operating income$308$231$264up 33%up 17%
Net income$255$190$220up 34%up 16%
Diluted earnings per share$0.46$0.34$0.39up 35%up 18%

Quarterly Overview

This quarter saw the launch of the GM206 powered GTX 950 – which is Nvidia (NASDAQ: NVDA)’s entry level Maxwell GPU and fully DX 12.0 capable. Retailing for $159 MSRP, it was targeted at MOBA gamers and particularly the APAC market including China. Green launched the GeForce Now game streaming service (dubbed the ‘netflix of gaming’). Nvidia (NASDAQ: NVDA) also launched the SHIELD Android TV in certain European markets.

The company also ventured further into the territory of Virtual Reality and introduced two software development kits this year, namely the GameWorks VR and DesignWorks VR. The first is intended to be a dev kit for creating gaming and other visual experiences for Virtual Reality devices whileas the second is aimed at professionals wanting to integrate VR in their own apps.

Nvidia (NASDAQ: NVDA) unveiled the GRID 2.0 platform which delivers high graphical intensive workloads straight to a slave drive.

As far as the automotive industry goes, Nvidia (NASDAQ: NVDA)’s tegra chips landed in more production vehicles including the likes of the Mercedes-Benz, Audi, Porsche, Bentley and Honda at the International Auto Show in Frankfurt. The partnership with Tesla Motors is also highlighted, since the chip is a pretty integral part of the Tesla, powering the digital instrument cluster and infotainment system.

Outlook for Nvidia Corporation for Fourth Quarter Fiscal Year 2016

  • Revenue is expected to be $1.30 billion, plus or minus two percent.
  • GAAP and non-GAAP gross margins are expected to be 56.7 percent and 57.0 percent, respectively, plus or minus 50 basis points.
  • GAAP operating expenses are expected to be approximately $503 million. Non-GAAP operating expenses are expected to be approximately $445 million.
  • GAAP and non-GAAP tax rates for the fourth quarter of fiscal 2016 are expected to be 20 percent, plus or minus one percent.
  • The above GAAP outlook amounts exclude restructuring charges, which are expected to be in the range of $25 million to $35 million, in the fourth quarter of fiscal 2016.
  • Capital expenditures are expected to be approximately $20 million to $30 million.