Nvidia’s Stock Soars On Strong Q3’17 Results

Leading GPU manufacturer, Nvidia (NASDAQ:NVDA) reported its Q3’17 results on November 10th. The company built on its growth momentum by posting revenues of $2 billion and gross margins of 59%, translating to a 53% and 280 basis points increase in the metrics, respectively. It was above guidance  and consensus as well. This led to a 14% surge in Nvidia’s stock price in the after-hours. The company’s business model, based on driving GPU compute platforms into highly targeted markets, is clearly paying off. This is enabling Nvidia to extend its leadership across its segments.

At the center of the strong Q3 2017 growth was the recently launched Pascal architecture, which the company believes is one of its most successful launches ever. The accelerating adoption of deep learning and Nvidia’s increasing engagement with hyper-scale data centers around the world added to the company’s growth momentum in Q3 2017.

Key Highlights For Q3’17 Earnings

Gaming: At $1.24 billion, Nvidia’s gaming revenue increased 63% year on year. During the quarter, Nvidia confirmed that the new Nintendo NX Switch will be powered by its Tegra platform. This is a significant win for the company because until now it had failed to gain a spot for its Tegra processor in any leading gaming consoles. Going forward, we can expect more design wins for Nvidia. In addition, the company expanded its line of Pascal GPUs with the introduction of GeForce GTX 1050 and GTX 1050 Ti for PC Gamers and GeForce GTX 1080, 1070 and 1060 for notebook gamers.

Data-center: With a 59% revenue growth, Nvidia’s data-center revenues nearly tripled in Q3, sequentially. The company witnessed an exceptional demand from cloud-based service providers. Nvidia claims that major cloud-based service providers such as Amazon Web Services, Microsoft Azure and Alibaba Cloud were deploying its GPUs as coprocessors in their data centers to equip them with Artificial Intelligence (AI), data analytics and parallel computing. Furthermore, the company launched Tesla P40 and P4 GPUs, and the NVIDIA TensorRT deep learning inferencing framework, which it claims that will expand its deep learning platform beyond training to speed up AI inferencing production workloads in hyper-scale data centers. During the quarter, Nvidia also announced a collaboration with Japan’s FANUC to implement AI to increase robotics productivity and bring new capabilities to automated factories.

Automotive: At $127 million, the company’s  automotive revenues increased at 61% on a year over year basis in Q3. Nvidia is witnessing strong demand for its DRIVE PX 2 platform from autonomous car makers. In Q3, the company announced a deal with Tesla Motors to power its autopilot system in all of Tesla Motors’ factory produced vehicles – the Model S, Model X and upcoming Model 3. In addition, Nvidia partnered with China’s Baidu to develop a self-driving, artificially intelligent car and mapping system.

We are in the process of updating our valuation for Nvidia.

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