NVIDIA Q2 2021 Earnings – Data Center Segment Shines Brighter than the Gaming Business

NVIDIA

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NVIDIA (NASDAQ:NVDA) has become one of the best stock plays in recent times, generating a year-to-date return of 104 percent. Today, the company has come under a fresh spotlight as it gears up to announce earnings for the second quarter of the FY 2021.

For the three months that ended on the 30th of June 2020, NVIDIA earned $3.866 billion in revenue, corresponding to an increase of 49.84 percent on an annual basis.

(All figures are in billions of dollars)

As far as NVIDIA’s business units are concerned, Data Center led the pack with $1,752 million in revenue.

(All figures are in millions of dollars)

NVIDIA also reported $2.18 in non-GAAP EPS, beating consensus expectations by $0.21.

(All figures are in dollars)

For Q3 2021, NVIDIA has provided the following guidance:

Revenue is expected to be $4.40 billion, plus or minus 2 percent.

GAAP and non-GAAP gross margins are expected to be 62.5 percent and 65.5 percent, respectively, plus or minus 50 basis points.

GAAP and non-GAAP operating expenses are expected to be approximately $1.54 billion and $1.09 billion, respectively.

GAAP and non-GAAP other income and expense are both expected to be an expense of approximately $55 million.

NVIDIA also provided the following business highlights in its earnings press release:

Gaming:

Ramped 100+ new GeForce laptops to deliver outstanding performance to students, creators and gamers across a range of price points.

Announced a range of games now supporting NVIDIA RTX ray tracing and DLSS AI super resolution, including, Justice, Cyberpunk 2077 and Death Stranding. Introduced new worlds for Minecraft with RTX.

Data Center:

Made the NVIDIA A100 Tensor Core GPU available on Google Cloud just over a month after its introduction

Provided CUDA GPU-acceleration for Apache Spark, the world’s most popular data analytics application, through the general availability release of Spark 3.0

Unveiled the NVIDIA Mellanox® UFM Cyber-AI Platform, which minimizes downtime in supercomputing data centers by detecting security threats and operational issues and predicting network failures

Professional Visualization:

Launched with Acer, Dell, Lenovo and Microsoft new mobile workstations for professional creators, based on NVIDIA Quadro® graphics. Powered new AI features in the latest releases of Substance Alchemist and Blender, improving material creation and incorporating AI denoising.

Announced that NVIDIA RTX™ has been implemented in the latest application releases from Foundry, Chaos Group and Redshift by Maxon, giving creators access to faster ray tracing and accelerated performance.

Released NVIDIA Quadro View™, the latest application in the NVIDIA Quadro Experience platform, which aids in streamlining workflows with a suite of desktop management tools.

Automotive:

Announced with Mercedes-Benz that the carmaker is integrating into every vehicle in its lineup, beginning in 2024, a new software-defined vehicle architecture that is perpetually upgradeable and built on the NVIDIA DRIVE AV autonomous driving software and NVIDIA AGX Orin™ AV computer.

Investors have reacted negatively to NVIDIA’s Q2 2021 earnings due to the company missing GAAP EPS expectations by $0.02. On a non-GAAP basis, NVIDIA did manage to beat consensus expectations by a solid $0.21. The stock is down 0.33 percent in after-hours trading:

Source

Analysts were expecting NVIDIA’s data center revenue to outpace its gaming haul for the first time ever in Q2 2021. That prediction has certainly panned out today. This momentous development has placed data center as the primary driver of revenue growth for the company.

The upcoming launch of the next-generation Ampere-based GPUs on the 1st of September is the next seminal event on the radar of investors. Of course, the rumored RTX 3090 graphic card, featuring the brand-new GDDR6X memory for the first time, will likely be the star attraction of the launch event.

Additionally, analysts – including Bank of America’s Vivek Arya – expect the launch of the next iteration of gaming consoles from Sony and Microsoft to unleash a GPU upgrade supercycle. Arya scrutinized Steam’s GPU survey back in July and pointed out that just 9 percent of the PC gamers possessed a GPU that could match the performance of the upcoming consoles. The analyst, therefore, concluded that a mass upgrade to newer NVIDIA GPUs carrying higher ASPs may allow the company to breach the relatively “conservative” consensus expectation of “+16% H/H Nvidia gaming sales growth estimate for H2”.

Arya went on to note that the new consoles could "catalyze a major upgrade cycle for NVDA" as users adopt NVIDIA’s Turing or 7nm Ampere GPUs in droves.

We quoted an exlusive report by UK's Evening Standard on the 15th of August. As per the details, NVIDIA is purportedly entering final talks for acquiring ARM, with a potential deal emerging before the end of the current summer season. According to the report, SoftBank’s CEO Masayoshi Son is demanding a price as high as £40 billion ($52 billion) for ARM. This translates to a premium of around $20 billion relative to the $32 billion that SoftBank paid in 2016 to acquire ARM.