NVIDIA Posts Phenomenal Quarter Amidst COVID Slowdown, Data Center Tops $1 Billion For The First Time

NVIDIA CEO Says Competition In The Server Space Is 'Seriously Intense', Also Says GPU Shortages To Last Through Next Year

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NVIDIA just posted an incredible first quarter for fiscal year 2021 amidst coronavirus-induced uncertainty with revenue up 39% year-over-year and flat quarter-over-quarter. The company's data center ventures topped $1 billion in revenue for the first time and (NASDAQ:NVDA) introduced its brand new Ampere-based A100 GPU. They expect to come out swinging later this year with a full-blown 7nm launch. The stock market reaction was neutral to cool in after-hours trading with the stock continuing on a slightly downward trend and docking 2.17% off the market cap. This is because most of this information has already been priced in the major rally seen since March 13, 2020.

Very few companies have been able to maintain their momentum in what is essentially a global economic halt as well as a pandemic. Even less managed to post strong results that beat Wall Street estimates. NVIDIA is a seasonal business and their posted quarter comfortably beats the non-COVID comparable-quarter of Q2 FY2020 from last year - which is phenomenal.

The company posted a GAAP EPS of $1.47 an the back of a revenue of 3.08 billion. It is easy to see why the stock has been on a major rally since March, going from a low of $196 to its current value of $348. So the question then becomes, can NVIDIA maintain its current velocity or is a correction inbound? We have something for both NVDA bulls and bears.

Ethics disclaimer: I own no stock in NVIDIA or its competitors and have no intention to do so for the foreseeable future. This analysis is provided on as-is basis and the reader assumes all risk and liability.

NVIDIA has had an incredibly strong quarter considering they did not launch all that much on their desktop side and posted some refresh models on their mobility side. This reflects the company's presence in the markets it operates in and the ongoing demand for tech used in DIY PCs.

The transition to WFH helped the mobility side of things as demand for laptops shot up.

According to our sources, the company will launch its 7nm based Ampere lineup later this year, which will provide a generational leap in performance as well as a reduction in manufacturing cost for the GPU-maker.

This, in turn, will lead to a slight increase in Total Available Market (TAM) as well as a potential increase in market share. The primary reason for the latter being that AMD, its only competitor, does not operate in the high-end market segment for GPUs.

According to our source, NVIDIA has 5nm locked down for 2021 and will be pursuing an accelerated ramp to the same.

We do not expect any serious competition from Intel in terms of the GPU AIC this year.

We expect a slower Q2 FY2021 as NVIDIA is not preparing to launch its 7nm lineup till Q3 FY2021.

According to our sources, Intel's TGL and DG1 mobility efforts pose an existential threat to NVIDIA's bread and butter entry-level MX lineup. The company will have to respond by shifting more powerful chips to the MX lineup - reducing margins.

The Auto segment remains a question mark for now.

There have been rumors (we were unable to verify their authenticity) that Nintendo Switch might be planning to pass on NVIDIA for its next console.

The full press release is as follows:

NVIDIA today reported revenue for the first quarter ended April 26, 2020, of $3.08 billion, up 39 percent from $2.22 billion a year earlier, and down 1 percent from $3.11 billion in the previous quarter.

GAAP earnings per diluted share for the quarter were $1.47, up 130 percent from $0.64 a year ago, and down 4 percent from $1.53 in the previous quarter. Non-GAAP earnings per diluted share were $1.80, up 105 percent from $0.88 a year earlier, and down 5 percent from $1.89 in the previous quarter.

NVIDIA completed its acquisition of Mellanox Technologies Ltd. on April 27, 2020, for a transaction value of $7 billion. It also transitioned its GPU Technology Conference to an all-digital format, drawing more than 55,000 registered participants, while NVIDIA founder and CEO Jensen Huang’s keynote videos were viewed 3.8 million times in their first three days.

“As the world battles COVID-19, we salute the first responders, healthcare workers, and service workers who courageously step in harm’s way to save lives and keep the world going,” Huang said. “We also thank the scientists around the world racing to find a vaccine for COVID-19.

“NVIDIA had an excellent quarter. The acquisition of Mellanox expands our cloud and data center opportunity. We raised the bar for AI computing with the launch and shipment of our Ampere GPU. And our digital GTC conference attracted a record number of developers, highlighting the accelerating adoption of NVIDIA GPU computing.

“Our Data Center business achieved a record and its first $1 billion quarter. NVIDIA is well positioned to advance the most powerful technology forces of our time – cloud computing and AI,” he said.

In the first quarter of fiscal 2021, NVIDIA paid dividends of $98 million. Due to current market uncertainties, NVIDIA is evaluating the timing of resuming share repurchases and will remain nimble based on market conditions. NVIDIA is currently authorized to repurchase up to $7.24 billion in shares through December 2022. It remains committed to paying its quarterly dividend.

NVIDIA Q1 FY2021 Quarterly Earnings Investor Deck