Nvidia First Quarter Fiscal 2018 Financials - Double Profits due to Nintendo Switch

by Hilbert Hagedoorn on: 05/10/2017 08:55 AM | source: | 22 comment(s)

Nvidia published it's financial results of Q1 2017 (in the financial world that is listed as the financial year of 2018 hence the title). They achieved a higher revenue and profit mainly due to the Nintendo Switch (Nvidia fabs the SoC) and data-center activities.

NVIDIA (NASDAQ: NVDA) today reported revenue for the first quarter ended April 30, 2017, of $1.94 billion, up 48 percent from $1.30 billion a year earlier, and down 11 percent from $2.17 billion in the previous quarter.

GAAP earnings per diluted share for the quarter were $0.79, up 126 percent from $0.35 a year ago and down 20 percent from $0.99 in the previous quarter. Non-GAAP earnings per diluted share were $0.85, up 85 percent from $0.46 a year earlier and down 25 percent from $1.13 in the previous quarter.

"The AI revolution is moving fast and continuing to accelerate," said Jensen Huang, founder and chief executive officer of NVIDIA. "NVIDIA's GPU deep learning platform is the instrument of choice for researchers, internet giants and startups as they invent the future.

"Our Datacenter GPU computing business nearly tripled from last year, as more of the world's computer scientists engage deep learning. One industry after another is awakening to the power of GPU deep learning and AI, the most important technology force of our time," he said.

Capital Return
For fiscal 2018, NVIDIA intends to return $1.25 billion to shareholders through ongoing quarterly cash dividends and share repurchases. During the first quarter of fiscal 2018, NVIDIA paid $82 million in cash dividends.

NVIDIA will pay its next quarterly cash dividend of $0.14 per share on June 14, 2017, to all shareholders of record on May 23, 2017.

Q1 FY2018 Summary

GAAP
($ in millions except earnings per share)	Q1 FY18	Q4 FY17	Q1 FY17	Q/Q	Y/Y
Revenue	$1,937	$2,173	$1,305	down 11%	up 48%
Gross margin	59.4%	60.0%	57.5%	down 60 bps	up 190 bps
Operating expenses	$596	$570	$506	up 5%	up 18%
Operating income	$554	$733	$245	down 24%	up 126%
Net income	$507	$655	$208	down 23%	up 144%
Diluted earnings per share	$0.79	$0.99	$0.35	down 20%	up 126%

Non-GAAP
($ in millions except earnings per share)	Q1 FY18	Q4 FY17	Q1 FY17	Q/Q	Y/Y
Revenue	$1,937	$2,173	$1,305	down 11%	up 48%
Gross margin	59.6%	60.2%	58.6%	down 60 bps	up 100 bps
Operating expenses	$517	$498	$443	up 4%	up 17%
Operating income	$637	$809	$322	down 21%	up 98%
Net income	$533	$704	$263	down 24%	up 103%
Diluted earnings per share	$0.85	$1.13	$0.46	down 25%	up 85%

NVIDIA's outlook for the second quarter of fiscal 2018 is as follows:

Revenue is expected to be $1.95 billion, plus or minus two percent.
GAAP and non-GAAP gross margins are expected to be 58.4 percent and 58.6 percent, respectively, plus or minus 50 basis points.
GAAP operating expenses are expected to be approximately $605 million. Non-GAAP operating expenses are expected to be approximately $530 million.
GAAP other income and expense is expected to be an expense of approximately $8 million, inclusive of additional charges from early conversions of convertible notes. Non-GAAP other income and expense is expected to be an expense of approximately $3 million.

GAAP and non-GAAP tax rates for the second quarter of fiscal 2018 are both expected to be 17 percent, plus or minus one percent, excluding any discrete items.
Weighted average shares used in the GAAP and non-GAAP diluted EPS calculations are dependent on the weighted average stock price during the quarter.
Capital expenditures are expected to be approximately $55 million to $65 million.

First Quarter Fiscal 2018 Highlights
During the first quarter, NVIDIA achieved broad progress.

Gaming:

Announced GeForce® GTX 1080 Ti, the world's fastest gaming GPU.
Announced TITAN Xp for enthusiasts and researchers requiring extreme performance.

Datacenter:

Announced with Microsoft that it is bringing NVIDIA® Tesla® P100 and P40 GPUs to the Azure cloud.
Announced that NVIDIA Tesla accelerators designed for datacenter AI capabilities were added to Google Cloud, Tencent Cloud,IBM Cloud, and Baidu Cloud.
Announced that Tokyo Institute of Technology will use NVIDIA's accelerated computing platform to create Japan's fastest AI supercomputer, TSUBAME3.0.
Announced that Fujitsu is using 24 NVIDIA DGX-1™ AI systems to build a new AI supercomputer for RIKEN, Japan's largest research center.
Announced together with Facebook the Caffe2 deep learning framework and Big Basin servers with Tesla P100 GPUs.
Announced plans to train 100,000 developers this year, a 10x increase over 2016, through the NVIDIA Deep Learning Institute.
Announced NVIDIA Jetson™ TX2, a high-performance, low-power computer platform for delivering AI at the edge, with deep learning and computer vision capabilities for robots, drones and smart cameras.

Automotive:

Announced with Bosch, the world's largest auto supplier, plans to create a new Bosch-branded AI self-driving car computer.
Announced a collaboration with PACCAR, one of the world's largest truck makers with brands including Peterbilt, Kenworth and DAF, to develop solutions for autonomous trucks.

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Maddness
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#5430084 Posted on: 05/10/2017 09:02 AM

Geez, they just keep getting stronger. Would love to see AMD as strong as that.

Chillin
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Posts: 6814
Joined: 2006-01-18

#5430087 Posted on: 05/10/2017 09:14 AM

Pretty incredible results when you take into account that their core business market is shrinking.

And that's exactly why Nvidia has been a runaway success compared to AMD: Diversification, platforming and support.

Here is an example:
http://nvidianews.nvidia.com/news/nvidia-to-train-100-000-developers-on-deep-learning-in-2017

GPU Technology Conference -- To meet surging demand for expertise in the field of AI, NVIDIA (NASDAQ: NVDA) today announced that it plans to train 100,000 developers this year -- a tenfold increase over 2016 -- through the NVIDIA Deep Learning Institute.

These are the data scientists that will be working in the major corporations in the coming years, and guess which hardware and software platform they will be familiar with and request? Nvidia.

Nvidia's management deserves high praise for their foresight and their willingness to adapt. Their Tegra program had a good run until around Tegra 3, after which they pretty much had no clients for it. Now instead of what a lot of companies might have done and either closed it and/or sold off the pieces, they turned it around to be their Automotive and Console push, and have reaped the rewards in return instead of the losses. Their diversification into the datacenter also proved to be a runaway success.

And while they might have some of the best hardware around, what really drives their success is their focus on the software platforms surrounding their products.

robintson
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#5430089 Posted on: 05/10/2017 09:17 AM

Nvidia practically has a monopoly where their Graphic Card prices go up to the Sky. Regarding graphics card market these years, AMD/ATI can't get even close to Nvidia and therefore we have the "Golden Years" of Nvidia all thanks to AMD only.

rl66
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#5430096 Posted on: 05/10/2017 09:43 AM

Denial
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Joined: 2004-05-16

#5430126 Posted on: 05/10/2017 12:07 PM

not only, they have near monopole:

-In ProGPU (outside of some Hyped event AMD are always "aviable on demand" or "not aviable" for Pro).

-In car computer (they are the only one now exept some startup...).

There are multiple companies involved in car computing. Intel being a fairly large one especially now with their purchase of mobileye. Tesla has it's own hardware/software division and while they are currently using Nvidia hardware, they aren't using Nvidia's driving package - they can switch at any point. In fact Elon said that AMD was considered:

This is a Tesla developed neural net. Although it’s somewhat hardware independent, it can be; we can actually run this on Nvidia, AMD or Intel. We did pick the Nvidia titan GPU as the main chip for the neural net. But it was pretty tight call between particularly between AMD and Nvidia. But ultimately we felt that Nvidia had the better hardware.

nz3777
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#5430127 Posted on: 05/10/2017 12:26 PM

Yeah there is a reason they are Number 1 in the market, they must be doing something right! Ever since I got my Gtx 580 I never once looked back at amd radeon nor do I plan to.

Stormyandcold
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#5430128 Posted on: 05/10/2017 12:30 PM

Little off-topic;

Volvo auto-braking system!

https://www.youtube.com/watch?v=-47utWAoupo

PrMinisterGR
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#5430132 Posted on: 05/10/2017 12:56 PM

There are multiple companies involved in car computing. Intel being a fairly large one especially now with their purchase of mobileye. Tesla has it's own hardware/software division and while they are currently using Nvidia hardware, they aren't using Nvidia's driving package - they can switch at any point. In fact Elon said that AMD was considered:

Intel will drive Mobileye to the ground, as prophesized. I don't believe that they can touch anything that NVIDIA will do there.

The only danger for NVIDIA in the car space is Jim Keller being the head of Tesla's hardware department, but it will take at least 3-4 years before anything comes to fruition there.

AMD is a current zero in that market, which is very weird considering that the traditional strengths of their architecture have been in compute performance and their experience with custom chips. I hope that Ryzen and Vega do well and that they manage to invest more in the software ecosystem which is the only place they seem to lack.

pharma
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#5430133 Posted on: 05/10/2017 12:58 PM

Tesla has it's own hardware/software division and while they are currently using Nvidia hardware, they aren't using Nvidia's driving package - they can switch at any point. In fact Elon said that AMD was considered:

Tesla Motors and NVIDIA have partnered since the early development of the revolutionary Model S. Today, all Tesla vehicles—Model S, Model X, and the upcoming Model 3—will be equipped with an NVIDIA-powered on-board “supercomputer” that can provide full self-driving capability.
...
This in-vehicle supercomputer is powered by the NVIDIA DRIVE™ PX 2 AI computing platform. It’s an end-to-end AI computing system that uses groundbreaking approaches in deep learning to perceive and understand the car’s surroundings. - See more at: http://www.nvidia.com/object/tesla-and-nvidia.html#sthash.upDKsteY.dpuf

http://www.nvidia.com/object/tesla-and-nvidia.html

Denial
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#5430147 Posted on: 05/10/2017 01:20 PM

http://www.nvidia.com/object/tesla-and-nvidia.html

They have a PX2 for inferencing and a Titan X for training, but they don't use Nvidia's software.

This is a Tesla developed neural net. Although it’s somewhat hardware independent, it can be - we can actually run this on Nvidia, AMD or Intel. We did pick the Nvidia titan GPU as the main chip for the neural net. But it was pretty tight call between particularly between AMD and Nvidia. But ultimately we felt that Nvidia had the better hardware.

https://electrek.co/2016/10/21/all-new-teslas-are-equipped-with-nvidias-new-drive-px-2-ai-platform-for-self-driving/

schmidtbag
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#5430182 Posted on: 05/10/2017 03:24 PM

Pretty incredible results when you take into account that their core business market is shrinking.

And that's exactly why Nvidia has been a runaway success compared to AMD: Diversification, platforming and support.
Did you not read the article? How is their "core business" market shrinking when datacenters, mobile devices (including the Switch), and automotive are all getting more attention? If you think PC gamers are their core market, you're very mistaken. As with Intel, their main source of profits are not everyday at-home consumers.

The only additional profitable markets Nvidia has over AMD are machine learning, mobile, and automotive. Meanwhile, AMD has access to x86 and game consoles besides the Switch. Claiming Nvidia has better diversification and platforming may be true but an overstatement and not a reason for their runaway success.

Nvidia's success has more to do with more polished products, faster and more distinct evolution of their products, better marketing, and a fanbase loyal enough to fund stupidly high and arbitrarily priced Titans.

Nvidia's management deserves high praise for their foresight and their willingness to adapt. Their Tegra program had a good run until around Tegra 3, after which they pretty much had no clients for it. Now instead of what a lot of companies might have done and either closed it and/or sold off the pieces, they turned it around to be their Automotive and Console push, and have reaped the rewards in return instead of the losses. Their diversification into the datacenter also proved to be a runaway success.
Do you not realize you contradicted yourself within the first 2 sentences? How can someone have good foresight when their product loses clients? But, what makes you think a product is losing clients when one of the main contributors to their boost in revenue was the Switch (which uses a Tegra chip)?

Even excluding the Switch, I would argue the Tegra program is fantastic and exciting. I strongly approve of Nvidia's work put into it. If they were priced better, I'd be buying into their Jetson platforms ASAP.

And while they might have some of the best hardware around, what really drives their success is their focus on the software platforms surrounding their products.
Nvidia's software is excellent and may be attractive to consumers, but, it's also their downfall. Nvidia is extremely greedy with their IP, and as a result it greatly hinders their products. Just look at what happened to hardware-accelerated PhysX. With Vulkan released, people's interest in CUDA is also greatly threatened.

vbetts
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#5430186 Posted on: 05/10/2017 03:32 PM

The Switch prints money(But since it uses flash carts it can only print coins)!

Bleib
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#5430194 Posted on: 05/10/2017 03:56 PM

Yeah there is a reason they are Number 1 in the market, they must be doing something right! Ever since I got my Gtx 580 I never once looked back at amd radeon nor do I plan to.

Intel sold very well even when they had crappy P4s to sell, it doesn't mean the products are better. Heck elections are won with good PR too even though the candidate(s) can be crap.

Solfaur
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#5430202 Posted on: 05/10/2017 04:30 PM

Good for them, good leadership and foresight (I wonder how much of this is due to Jensen Huang). And the fact that they also pretty much dominate in what made them big to begin with (GPUs), is another achievement.

Noisiv
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#5430211 Posted on: 05/10/2017 04:46 PM

Told ya AI is the sh1t.

Why is everyone still rallying behind VR and autonomous driving is beyond me.

Did you not read the article? How is their "core business" market shrinking when datacenters, mobile devices (including the Switch), and automotive are all getting more attention?

PC graphics is the core of the core, and its shrinking in units shipped (OEMs, low end graphics), but in high-end and gaming is growing.

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