Nvidia (NASDAQ:NVDA) released their second quarterly earnings today, which did not disappoint. In the second quarter, Nvidia posted record revenue of $6.51 billion which was a 68% improvement year-on-year. The company saw revenue growth across the board, with the Gaming and Data Center markets also breaking quarterly records.
Nvidia has surpassed Wallstreet’s expectations, gaining 61.70% over the past 12 months. The tech giant manufactures Graphic Processing Units (GPU) for Gaming and specialised markets and is seeing a surge in demand in recent quarters.
With plenty to discuss surrounding the Q2 earnings release, this article will highlight 3 things investors can takeaway from Nvidia’s Q2 earnings.
Nvidia sees back to back record breaking quarters in revenue
There is no doubt that Nvidia has outperformed in recent quarters, posting record breaking quarters in terms of revenue. In the second quarter, Nvidia posted $6.51 billion in quarterly revenue which beat analysts consensus by 13%. Second quarter revenue also beat the companies previous quarter revenue by 15%.
With no surprise to shareholders, the companies strong Gaming and Data markets have taken the gold medal. The companies gaming market generated $3.06 Billion in revenue, which beat the previous quarterly record by 10.8%. The companies gaming market growth was primarily due to both GeForce graphics cards sales as well as game-console SOCs.
In terms of the companies Data centre revenue, the company also saw record breaking revenue of $2.37 billion. The Data Center revenue grew 16% from the previous quarter and 35% year-on-year. The CFO, Colette Kress noted that this growth was “led by the ramp of NVIDIA Ampere architecture products into vertical industries and hyperscale customers.”
In addition, Nvidia also saw year-on-year revenue growth in the Professional Visualisation and Automotive markets. The companies professional visualisation segment includes the NVIDIA Omniverse™, the world’s first 3D, real-time simulation and collaboration platform and the NVIDIA RTX A2000, which brings RTX to the volume segment of the desktop workstation market. The visualisation segment also broke revenue records, reporting $519 million.
“We are thrilled to have launched NVIDIA Omniverse, a simulation platform nearly five years in the making that runs physically realistic virtual worlds and connects to other digital platforms.” said Jensen Huang, founder and CEO of NVIDIA in Q2 press release.
Lastly, Nvidia’s automotive market generated $152 million in revenue, which was relatively flat quarter-on-quarter. In the second quarter, Nvidia announced collaborations with multiple autonomous trucking companies which are powered by NVIDIA DRIVE.
Nvidia expects to continue revenue winning streak in Q3
Nvidia also updated the companies Q3 guidance with revenues expected to be $6.80 billion (+-2%) for the next quarter. The guidance beats Q3 expectations with the average consensus from analysts at $6.53 Billion.
In regards to expenses, the company expects GAAP operating expenses to increase to $1.96 billion in Q3. The increase if realised would represent a 10.7% increase in GAAP operating expenses quarter-on-quarter.
The positive outlook for the third quarter highlights the companies dominance in both the Gaming and Data centre market. Bank of America Global Research analyst Vivek Arya says that the company’s gaming segment will continue its double-digit growth throughout fiscal 2022.
Net income reaches $2.62 Billion for the first time ever
As a result of strong revenue growth across the two main segments: Graphics and Compute & Networking – the companies net income also broke quarterly records. Nvidia reported a GAAP net income of $2.37 billion, the companies highest ever by quarter. The net income beat Q1 by 13% and beat Q2 2020 by 92%.
Now you might ask why net income was so low in Q2 2020. For context, in the second quarter of 2020 Nvidia’s Professional Visualisation and Automotive revenue was impacted, which directly effected net income. However, the growing Gaming and Data markets have remained the companies growth catalyst throughout 2020 and 2021.
“Despite the pandemic’s impact on our professional visualization and automotive platforms, we are well positioned to grow, as gaming, AI, cloud computing and autonomous machines drive the next industrial revolution around the world,” said Jensen Huang, founder and CEO of NVIDIA
The Bottom Line – Nvidia Q2 earnings
In summary, the Q2 earnings highlight Nvidia’s dominance in the Graphic and Compute & Networking segments. This is illustrated in the companies record breaking Gaming and Data revenue, which beat the previous quarter by 15% and 10% respectively. Furthermore, the record breaking net income and higher Q3 guidance are bullish indicators derived from the companies recent success.
However, the increase in forecasted operating expenses alongside dropping cryptocurrency chip product sales (CMP) may expose the stock to higher volatility. As discussed in our Nvidia stock forecast, there is no reward without risk. We have seen NVDA stock experience higher than usual levels of volatility over the past 6 months.
Overall, Nvidia continues to beat both analysts consensus and its previous performances which of course is driving a strong bullish sentiment across Wallstreet.
Written by Tyger Fitzpatrick
The information above is not financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.
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