Nvidia Reports Earnings Soon: 5 Important Things to Watch
After selling off hard during the market’s February/March plunge, Nvidia’s stock has rocketed to new highs over the last two months, leaving the GPU giant sporting a $215 billion market cap.
As a result, informal sales and EPS expectations might be above official analyst estimates going into Nvidia’s April quarter (fiscal first quarter) earnings report. Currently, the consensus among analysts polled by FactSet is for revenue of $2.97 billion (up 34% annually), GAAP EPS of $1.39, and non-GAAP EPS of $1.66.
For the July quarter — Nvidia usually provides sales guidance within its reports — the revenue consensus is at $3.23 billion (up 25%).
I’ll be live-blogging Nvidia’s report, which is expected to arrive around 4:20 P.M. Eastern Time on Thursday, and an earnings call scheduled for 5:30 P.M. Here are some things for investors to look for.
1. GPU Sales to Cloud Giants
Nvidia’s Data Center segment, which covers sales of server GPUs and Nvidia’s GPU-packed DGX servers, saw revenue grow 43% annually in the January quarter to $968 million thanks to strong demand from Internet/cloud giants (the proverbial hyperscalers). And with the traffic spikes caused by the COVID-19 pandemic having provided an additional boost to cloud CAPEX, the April quarter is expected to be meaningfully stronger.
The consensus is for Data Center revenue to be up 66% annually in the April quarter to $1.05 billion. For the July quarter, which should benefit from initial sales of Nvidia’s new A100 flagship server GPU and DGX A100 server, the consensus is for Data Center revenue to rise 71% to $1.12 billion.
2. Gaming GPU Sales
Notebook and Nintendo Switch sales have both jumped over the last two months, and so has gaming activity in general. All of that bodes well for the near-term performance of Nvidia’s Gaming segment, which covers sales of gaming GPUs and game console processors (including the Tegra X1 processor that powers the Switch).
For the April quarter, the consensus is for the Gaming segment revenue to be up 23% to $1.3 billion. For the July quarter, during which Gaming revenue will face tougher comps, the consensus is for revenue to be up 7% $1.41 billion.
3. Mellanox Commentary
At the end of its April quarter, Nvidia closed its $6.9 billion deal for data center interconnect silicon and hardware supplier Mellanox Technologies. Look for Nvidia to share some details about how Mellanox performed in the April quarter and its expectations for the July quarter.
Like Nvidia’s server GPU business, Mellanox is likely benefiting right now from strong hyperscaler orders. Two of the products Nvidia unveiled last week — the DGX A100 and its EGX A100 accelerator for edge servers — integrate Mellanox SmartNICs (network adapters that offload certain processing functions from a server’s CPUs).
4. Automotive Segment Sales
With many auto plants having been shuttered thanks to COVID-19, Nvidia’s Automotive segment, which covers sales of infotainment/digital cockpit processors as well as Nvidia’s Drive platform for autonomous driving and ADAS systems, might be having a rough time right now.
The consensus is for Automotive revenue to be down 3% in the April quarter to $161 million, and 21% in the July quarter to $165 million.
5. Gross Margin Growth
With the help of favorable comps and strong high-margin server GPU sales, Nvidia’s non-GAAP gross margin (GM) rose 9.4 percentage points annually during its January quarter to 65.4%. In addition, the company guided in February for an April quarter non-GAAP GM of 65.4%, plus or minus 0.5%. At the midpoint, that outlook implies a 7-point annual increase.