Nvidia’s Earnings Preview: Growth Momentum To Continue In 2017

Nvidia (NASDAQ:NVDA) will be reporting its Q1 2018 earnings on May 9th. Fiscal 2017 was a good year for the company as it saw a solid 38% growth in revenue and a staggering 171% improvement in net income. Nvidia’s stock price has risen by more than 200% in the last one year. The company’s business model based on driving GPU compute platforms into highly targeted markets, is clearly paying off and is enabling Nvidia to extend its leadership across business segments. The strong growth momentum is expected to continue in calendar 2017 as well, mainly driven by continued growth in Gaming, Professional Visualization, Datacenter, and Automotive.

The expansion of Nvidia’s deep learning platform beyond training to speed up Artificial Intelligence (AI) inferencing production workloads in hyper-scale data centers and Automotives is clearly paying off. Towards the end of Q4, Nvidia launched a few major products – the mobile versions of their GTX 1050 and GTX 1050 Ti , G-SYNC HDR, which enhances the gaming experience and Quadro GP100, which creates a new supercomputing workstation. We believe these product launches should help the company retain its growth momentum going forward. Additionally, Nvidia is likely to witness stronger demand for its GPUs as enterprises in the fields such as healthcare, retail, transportation, and finance adopt deep learning on GPUs to make run time of their applications faster.

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Strong Nintendo Sales To Boost Nvidia’s Tegra Revenue

In calendar 2016, Nvidia announced that its Tegra processor will power Nintendo’s upcoming game console, the Switch. Landing this socket was a notable win for Nvidia, given that the company had failed to gain a spot for its Tegra processor in any leading gaming console. The Switch hit the market in March this year and Nintendo expects to sell 10 million Switches in the current fiscal year. It reported solid March sales of 2.74 million units, beating the company’s initial sales estimate of two million units for the month. ^[1]

The strong sell-through for Nintendo Switch combined with the strong momentum of Nvidia’s DRIVE PX 2 platform with autonomous car makers demonstrates that Nvidia’s strategy for its Tegra processor business seems to be successfully evolving since the company exited from the smartphones market in 2015.

Expansion of AI Will Continue To Drive Growth In The Data Center Business

At $296 million, Nvidia’s Data Center revenue tripled year-on-year, on account of strong growth in supercomputing, hyperscale datacenters, and grid virtualization.  Interest in deep learning is surging as industries and basis researchers increasingly seek to harness this revolutionary technology.  Being at the forefront of the technology, Nvidia is poised to gain from the growth.

Nvidia is witnessing an exceptional demand from cloud-based service providers. Major cloud-based service providers such as Amazon Web Services, Microsoft Azure, and Alibaba Cloud are deploying Nvidia’s GPUs as coprocessors in their data centers to equip them with AI, data analytics, and parallel computing. The company is expanding its deep learning platform beyond training to speed up AI inferencing production workloads in hyper-scale data centers.

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1. Nintendo upbeat on outlook on strong Switch sales, Market Watch, April 27, 2017 [↩]