Nvidia Posts Solid Earnings Backed By Tegra 3 & Kepler Architecture

by Trefis Team
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Graphics and mobile chip maker Nvidia (NASDAQ:NVDA) reported its Q2 2013 earnings on Thursday, August 9. The company posted a 3% y-o-y and a 13% sequential increase in revenues backed by the introduction of Kepler architecture and strong sales of quad-core Tegra 3 processors. While its competitor AMD (NYSE:AMD) struggled to hold its ground amid macroeconomic headwinds, Nvidia registered a phenomenal 97% increase in net income and maintained an optimistic outlook for growth in the next quarter as well. The company’s stock price jumped 5% in after-hour trading following the earnings release.

While both the GPU and the consumer products business registered strong double digit growth, the professional solutions business registered a 7.7% sequential decline as the Quadro processor-line faced softness in demand from Europe. Additionally, the delayed ramp up-of Romley workstations stalled demand this quarter. However, with the introduction of new Tesla processors, Nvidia expects to see growth in this business in the coming quarters.

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Tegra 3 Rides High On Growth In Smartphones & Tablets

Out of the three divisions reported by Nvidia, the consumer products business was the clear winner, posting a 35.5% sequential and a 7% y-o-y increase in Q2. The company registered record revenue from Tegra sales with an increased ramp of smartphone and tablet devices running on Tegra 3 processors. This quarter we also saw Nvidia expand its Auto portfolio with the Tegra visual computing module. (Read Related Article)

Nvidia expects to ship about 25 million Tegra processors in 2012, doubling its shipments from 2011. [1]. We estimate Tegra-related revenues to cross $2 billion by 2018 and believe that this division could become Nvidia’s most valuable segment by the end of our forecast period.

Ivy Bridge Design Wins Contribute To Growth In Notebooks Division

The consumer GPU business registered a 15.3% sequential increase with the notebook GPU segment hitting a record this quarter on the strength of Nvidia’s Ivy Bridge design wins. The company also witnessed strong demand for its desktop GTX products and saw a slight drop in the desktop channel inventory level. However, considering the late roll-out of Ivy Bridge this quarter, we expect to see higher gains in the next quarter.

We are in the process of updating our price estimate of $20.98 for Nvidia post the Q2 2013 earnings.

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Nvidia’s Tegra Processors To Power Microsoft’s New Surface PC TabletNb

Notes:
  1. Estimated Brisk Tegra 3 Sales to Benefit Taiwan’s Contract Suppliers, cens.com, Dec 21 2011 []
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