Nvidia Quarterly Profits Decreased

[brybir]

NOTE: TITLE SHOULD HAVE SAID "NVIDIA QUARTERLY PROFITS DISAPOINT" ....feel free any mods to change it!




Nvidia released quarterly numbers today and the market is not taking it well. Looks like Nvidia shares dropped over 10% today and are down further in aftermarket trading.

However, best as I can tell, Nvidia actually beat analyst expecatations but was punished anyways:

"Adjusted earnings of $0.27 per share were well ahead of analyst expectations, and revenue beat forecasts as well. Despite the beat, shares were getting beaten, down 8%."


Summary Points:

---Revenue increased 8.5 percent to $962.0 million from the previous quarter.

---GAAP net income was $135.2 million, or $0.22 per diluted share. Non-GAAP net income was $165.7 million, or $0.27 per diluted share.

---GAAP gross margin increased to 50.4 percent, a third consecutive quarterly record. Non-GAAP gross margin increased to 50.6 percent.

---Spent $231 million dollars this quarter for R&D

---Revenue by type: GPU: $637 million, Professional Solutions (Tesla, Quaddro): $201 million, Consumer products (Tegra): $122 million



The only thing that really jumped out at me is Nvidia's R&D budget, my understanding from reading AMD's press release is that they dont spend anywhere near this on R&D, as the whole of AMD spent $367 million in the same quarter.

 

[footballrunner800]

<<------- P&N

 

[gorobei]

actually this is relevant, assuming there is a link for verification.

This is the first hard number breakdown of gpu/hpc/soc valuations i've seen in a while.

 

[iCyborg]

It seems the outlook is of more concern than the previous quarter results, at least market-wise. nVidia shares fell >10% just today, that's really steep.

 

[notty22]

On May 4th Nvidia stock closed @ about what it finished today. 18.40
This past week it had climbed up over 20.
Today's trading volume was up 250% on Nvidia.
IMO, this was a simple correction of people selling and taking a quick profit. Overall, revenue and earnings beat estimates, quarterly results.
Nvidia stock has been one of the most active stocks on NasdaQ, some of the highs/lows /movement , unexplained.
Some of the upswing, is thanks to the Intel settlement / Tegra line and the movement to tablet / smartphone computing. Some of the upswing probably unwarranted based on public confidence in those sectors.


edit: chart of Nvida / AMD / against Nasdaq - the last 6 months.
http://www.google.com//finance?chdn...NASDAQ:.IXIC&cmptdms=0;0&q=NASDAQ:NVDA&ntsp=0

This article /web site runs on a script, and quickly stops user from reading without subscribing.
I saved a copy from a google cache.

http://online.barrons.com/article/SB50001424052970203425804576321312457731644.html Barron's Take

| FRIDAY, MAY 13, 2011
Nvidia Chipped But Not Broken

By MIRIAM GOTTFRIED | MORE ARTICLES BY AUTHOR
Though concerns about the graphic chip maker's quarterly results are hurting shares, we'd be buyers.


http://online.barrons.com/article/SB50001424052970203425804576321312457731644.html
Nvidia Chipped But Not Broken



Nvidia's quarterly results aren't impressing investors, but we think today's sell-off represents a buying opportunity.

The graphic chip maker reported late yesterday a 1.7% drop in fiscal first-quarter earnings as revenue declined. But the results and the company's guidance exceeded analyst estimates as the mobile business continues to gain momentum.

Investors evidently expected more from the company's core graphics business as Nvidia (ticker: NVDA) shares were down 8.5% at $18.75 in midday trading.

Barron's recommended shares in January, highlighting the considerable potential of the company's Tegra chips for tablets and smartphones. Indeed, Nvidia saw strong sales of Tegra chips during the quarter with sales for the division that includes them surging 78.2%. Analysts say strength in that division should continue as new mobile devices are rolled out.

And while sales of Nvidia's graphics-processing units (GPU) for notebooks may not have met lofty expectations, sales rose 3.8% sequentially.

The company forecasted that current-quarter revenue would rise 4% to 6% sequentially to $1 billion to $1.02 billion. That's considerably better than the 3.1% increase to $992 million that analysts were expecting.

After today's fall, shares trade at roughly 17 times forward earnings— reasonable for a fast-growing company that could surprise to the upside in future quarters.

The quarter featured a "solid beat and raise with a stronger gross margin, GPU-share gains in notebooks, Tegra2 for tablets and smart-phones seeing strong momentum; and with inventories at the company and in the channel at benign levels (within a seasonal framework)," wrote Raymond James analyst Hans Mosesmann in a research note.

Mosesmann rates Nvidia at Strong Buy with a $40 price target.

For the quarter, ended May 1, Nvidia earned $135.2 million, or 22 cents a share, down from $137.6 million, or 23 cents a share, a year earlier. Excluding stock-based compensation and other impacts, adjusted per-share earnings fell to 27 cents from 29 cents. Analysts polled by Thomson Reuters expected a profit of 19 cents a share.

Revenue fell 4% to $962 million. In February, the company projected revenue would rise 6% to 8% from the fourth quarter, placing the range at about $939.6 million to $957.3 million.

One month of revenue from a patent cross-license agreement with Intel (INTC) boosted results. Intel will pay Nvidia $1.5 billion over five years as part of a deal that also ended litigation between the companies.

Gross margin widened to 50.4% from 45.6%.

To be sure, many analysts saw the beat and increased guidance as insufficient to dispel concerns about the company's increasing reliance on Tegra for its growth.

Nvidia has limited room to revise GPU estimates upward, according to Glen Yeung, an analyst with Citigroup. Current consensus forecasts imply GPU-sales growth of about 6% year-over-year, compared to some third-party estimates of 12% growth, Yeung wrote in a research note. This leaves room for 6% upside. But when taking into account potential share-loss estimates of 2% to 2.5%, this leaves a less impressive incremental upside potential of 3.5% to 4%.

Sales growth at Nvidia's professional solutions division has been flat for the last six quarters, suggesting another major profit engine has stalled.

But the most recent quarter's strong results helped build the company's cash balance to $2.7 billion, a level at which management could more than afford to execute on a $1 billion buyback program (8% of shares in the first quarter).

Already positive-margin guidance for July could represent a low considering it will be the first full quarter including the Intel royalty stream. And Tegra growth may be enough to help Nvidia outperform in the next few quarters.

"There are no limits to Nvidia's ambitions to grow content in mobile as management did not refute the possibility of additional acquisitions in connectivity," wrote Doug Freedman, an analyst with Gleacher & Co. "As such, limited visibility into newer initiatives (including Project Denver) could prove current buy-side operating expense assumptions in fiscal 2013 and fiscal 2014 to be very conservative."

Smart investors will buy up Nvidia shares while they are cheap enough to make the risks worthwhile. After all, the rewards could be significant for a company so levered to the booming business of tablets and smartphones.

 

[Imp]

On May 4th Nvidia stock closed @ about what it finished today. 18.40
This past week it had climbed up over 20.
Today's trading volume was up 250% on Nvidia.
IMO, this was a simple correction of people selling and taking a quick profit. Overall, revenue and earnings beat estimates, quarterly results.
Nvidia stock has been one of the most active stocks on NasdaQ, some of the highs/lows /movement , unexplained.
Some of the upswing, is thanks to the Intel settlement / Tegra line and the movement to tablet / smartphone computing. Some of the upswing probably unwarranted based on public confidence in those sectors.

I think of the stock as another AIG right now (except with a lot less risk of losing it all). It bounces up 5% and down 5% in the same week. It's P/E is exhorbitant at 47.6, and it's still trending up. Compare this with AMD at ~13-14, INTC at ~11, and AAPL at 16.6.

Last I checked, they make videocards and mobo chipsets. "Investors" are expecting a lot of growth, but I don't know from what.

 

[OCGuy]

Well that sure is one way to spin it...

It seems to me they are on the way to recovering from that Q12010 downturn that rocked everybody in the tech sector. Seems like healthy gross and net to me.

 

[OILFIELDTRASH]

Pc gaming is dying. Expect this trend to continue especially since even a $100 modern graphics card can play most games really well at 1080p. Also there are no demanding pc games coming down the pike. Its a tough sell for nvidia or amd to expect gamers to fork over more cash whenever most already have a decent card that plays games well. I expect record low sales for amd and nvidia the last half of the year.

 

[tviceman]

Pc gaming is dying. Expect this trend to continue especially since even a $100 modern graphics card can play most games really well at 1080p. Also there are no demanding pc games coming down the pike. Its a tough sell for nvidia or amd to expect gamers to fork over more cash whenever most already have a decent card that plays games well. I expect record low sales for amd and nvidia the last half of the year.

I don't think PC gaming is dying. I think we are experiencing a shift in what kind of hardware is needed to run modern games. Just because a $100-150 GPU can run many games at high graphical settings, it doesn't mean PC gaming is dying. On the contrary, Ubisoft, Valve, 2K, THQ, Blizzard, and other companies continue to invest heavily in the PC digital download market.

What I think is happening is the demand for $500 GPU's is dying. Nvidia is going to have to play catch up in the performance per mm^2 department because the days of $500 single GPU's are coming to an end.

 

[Raghu]

Tegra hitting $100M is a huge milestone. Its going to compensate well for the lost MCP business within the next few Q. Intels quarterly payout already compensates well for the next 3 years.

Last I checked, they make videocards and mobo chipsets. "Investors" are expecting a lot of growth, but I don't know from what.

Tegra. The Icera acquisition is clear indication that NVIDIA wants to become a major player in the mobile chipset business.

 

[bryanW1995]

I don't think PC gaming is dying. I think we are experiencing a shift in what kind of hardware is needed to run modern games. Just because a $100-150 GPU can run many games at high graphical settings, it doesn't mean PC gaming is dying. On the contrary, Ubisoft, Valve, 2K, THQ, Blizzard, and other companies continue to invest heavily in the PC digital download market.

What I think is happening is the demand for $500 GPU's is dying. Nvidia is going to have to play catch up in the performance per mm^2 department because the days of $500 single GPU's are coming to an end.

I joined here in 2007, and I've seen/heard this sort of post more times than I can count. I think that it's better to say that console gaming is growing so rapidly that the devs spend more time/effort on it, and right now the consoles are not getting any more graphically demanding. When the next gen consoles come out we'll have a flurry of high-end releases that will remind all of us why we actually do need $500 video cards.

 

[smartpatrol]

I think of the stock as another AIG right now (except with a lot less risk of losing it all). It bounces up 5% and down 5% in the same week. It's P/E is exhorbitant at 47.6, and it's still trending up. Compare this with AMD at ~13-14, INTC at ~11, and AAPL at 16.6.

Last I checked, they make videocards and mobo chipsets. "Investors" are expecting a lot of growth, but I don't know from what.

1. Tegra mobile SOCs
2. Project Denver, which will be targeting servers as well as mobile devices (Don't forget Windows 8 will have an ARM version, so Nvidia CPUs will be powering Windows laptops/tablets in the future)
3. HPC with their Tesla lineup

There is ENORMOUS potential for growth. I don't see how you can deny that. Whether that potential will be realized is another question, but if you see Nvidia as a company that just makes video cards and motherboard chipsets, you must've been living under a rock for the last 5 years.

 

[shangshang]

1. Tegra mobile SOCs
2. Project Denver, which will be targeting servers as well as mobile devices (Don't forget Windows 8 will have an ARM version, so Nvidia CPUs will be powering Windows laptops/tablets in the future)
3. HPC with their Tesla lineup

There is ENORMOUS potential for growth. I don't see how you can deny that. Whether that potential will be realized is another question, but if you see Nvidia as a company that just makes video cards and motherboard chipsets, you must've been living under a rock for the last 5 years.

You got it. Seriously the notion "NV makes graphic cards and mobo chipset last I checked" is just retarded.

Going forward it's clear that NV is

1) heading into mobile/ARM computing (yeah, ZERO potential here!)

2) interested in high end GPU market application only (AMD and Intel will fight for the low-end GPU scraps)

But NV will need to go through a transition phase where profits will not grow because they'll need R&D money to grow the ARM business. Jeez, I would think all the "tech savy" folks in here would see this as a source of profit sapping. I'd say NV is doing quite damn well considering the need to transition (R&D spenditure) and at the same time keeping profits reasonable to the investors. That's a damn good job commendable job by the CEO. But instead, we have savy tech folks in here posting drama-queen-ish stuff like "PROFITS FALL!!!" while disregarding the big picture. That's why traders and speculators on Wall St. are what they are, not heading a tech company on the bleeding edge.

Quarterly profits decreased by 1.7% is apparently is enough to bring out the drama queens on Wall St and then on Anandtech. Amazing. I wonder how many wives would flip out if their hubbies bring hom 1.7% less? lol.

 

[shangshang]

I don't think PC gaming is dying. I think we are experiencing a shift in what kind of hardware is needed to run modern games. Just because a $100-150 GPU can run many games at high graphical settings, it doesn't mean PC gaming is dying. On the contrary, Ubisoft, Valve, 2K, THQ, Blizzard, and other companies continue to invest heavily in the PC digital download market.

What I think is happening is the demand for $500 GPU's is dying. Nvidia is going to have to play catch up in the performance per mm^2 department because the days of $500 single GPU's are coming to an end.

once the mobile/Tegra/ARM thing takes off,.. AND if high end PC gaming dwindle down to a handle of Anandtech posters... NV will probably leave the gaming market completely and let AMD fight it out with Intel. NV would be stupid to stay in the dwindling desktop gaming market when mobile/ARM can take it to the next level.

 

[SirPauly]

Interesting take! It's odd that Intel spent billions trying to enter the discrete market.

 

[Imp]

1. Tegra mobile SOCs
2. Project Denver, which will be targeting servers as well as mobile devices (Don't forget Windows 8 will have an ARM version, so Nvidia CPUs will be powering Windows laptops/tablets in the future)
3. HPC with their Tesla lineup

There is ENORMOUS potential for growth. I don't see how you can deny that. Whether that potential will be realized is another question, but if you see Nvidia as a company that just makes video cards and motherboard chipsets, you must've been living under a rock for the last 5 years.

You got it. Seriously the notion "NV makes graphic cards and mobo chipset last I checked" is just retarded.

Going forward it's clear that NV is

1) heading into mobile/ARM computing (yeah, ZERO potential here!)

2) interested in high end GPU market application only (AMD and Intel will fight for the low-end GPU scraps)

Sorry for touching a nerve, I know how much you guys wub your Nvidia... lol

Dude...

Who's denying anything? Clearly I don't keep up with the company's business plan if all I know about them is that they make is mobos and chipsets (not even sure they do the latter anymore). And when I said that "I don't know", I meant that "I don't know, please fill me in, but try not to be a prick about it?".

 

[dust]

Interesting take! It's odd that Intel spent billions trying to enter the discrete market.

Spot on

 

[brybir]

You got it. Seriously the notion "NV makes graphic cards and mobo chipset last I checked" is just retarded.

Going forward it's clear that NV is

1) heading into mobile/ARM computing (yeah, ZERO potential here!)

2) interested in high end GPU market application only (AMD and Intel will fight for the low-end GPU scraps)

But NV will need to go through a transition phase where profits will not grow because they'll need R&D money to grow the ARM business. Jeez, I would think all the "tech savy" folks in here would see this as a source of profit sapping. I'd say NV is doing quite damn well considering the need to transition (R&D spenditure) and at the same time keeping profits reasonable to the investors. That's a damn good job commendable job by the CEO. But instead, we have savy tech folks in here posting drama-queen-ish stuff like "PROFITS FALL!!!" while disregarding the big picture. That's why traders and speculators on Wall St. are what they are, not heading a tech company on the bleeding edge.

Quarterly profits decreased by 1.7&#37; is apparently is enough to bring out the drama queens on Wall St and then on Anandtech. Amazing. I wonder how many wives would flip out if their hubbies bring hom 1.7% less? lol.

Well, the point being is that Nvidia is clearly attempting to enter new markets in the future and is in the process of doing so right now. But to simply imply like you do that they are going to be successful is disingenuous as is making statements like the CEO has done a great job, when you and I have no idea how the long term plan will execute. Nvidia is and does face significant competition from a variety of large and well funded companies in the markets they are attempting to enter (mobile, application, consumer etc) including Samsung, Apple, TI, Qualcomm, and Intel plus any unknown number of disruptive startups. In the past it was Nvidia vs. ATI for the consumer market (remember, Nvidia still makes the bulk of its revenue from consumer graphics) and appears to be shifting toward a very crowded market where its long term success is anything but certain. To claim anything more would imply either inside knowledge or wishful thinking. The bottom line is we do not know what the market will look like in five years nor what all of the potential competition will have to offer in five years, and therefore can make only vague predictions about future success.

AMD has the same problem, it competes again Intel in the CPU market and against Nvidia in the graphics market, but over the longer term, those markets are going to continually change and redefine what is valuable and who makes better products. Certainly as ARM based many core architectures start to compete in the consumer space, it is going to be a very crowded marketplace. I would not be bullish on AMD or Nvidia. We are definitely in a period of significant redefinition of some key markets with a lot of new, innovating, and interesting technology from a lot of companies.


As for the guy talking about market ratings and price targets, as with all things relating to the stock market, opinions are divergent:

UBS AG analysts raised their EPS on shares of NVIDIA. They now have a &#8220;neutral&#8221; rating and a $20.00 price target on the stock.

Goldman Sachs analysts reiterated a &#8220;neutral&#8221; rating on shares of NVIDIA. They now have a $17.00 price target on the stock.

Needham & Company analysts downgraded shares of NVIDIA from a &#8220;buy&#8221; rating to a &#8220;hold&#8221; rating.

ThinkEquity analysts raised their price target on shares of NVIDIA to $20.00. They now have a &#8220;hold&#8221; rating on the stock.

Brean Murray analysts cut their price target on shares of NVIDIA from $30.00 to $26.00.

Sterne Agee analysts reiterated a &#8220;neutral&#8221; rating on shares of NVIDIA.

Deutsche Bank analysts reiterated a &#8220;hold&#8221; rating on shares of NVIDIA. They now have a $20.00 price target on the stock.

Bank of America Merrill Lynch analysts cut their price target on shares of NVIDIA from $30.00 to $26.00. They now have a &#8220;buy&#8221; rating on the stock.

Citigroup analysts cut their price target on shares of NVIDIA from $27.00 to $22.00. They now have a &#8220;hold&#8221; rating on the stock.

 

[notty22]

Nvidia is indeed pushing in to new area's, but I lol at people suggesting gpu's are less important to their business.
Those statements might apply to AMD.

AMD Gains In Discrete Graphics Market Share, So What? Forbes

Despite this headway in the mobile GPU market, we see the upside value limited for the time being given the low relative importance of graphics to AMD’s overall business. AMD competes with Intel and Nvidia in microprocessor and graphics business. Our price estimate for AMD of $9.63 is slightly above the current market price.

Amd has to succeed in server/consumer cpu's or it all starts to crumble.

 

[OCGuy]

Nvidia is indeed pushing in to new area's, but I lol at people suggesting gpu's are less important to their business.
Those statements might apply to AMD.

AMD Gains In Discrete Graphics Market Share, So What? Forbes



Amd has to succeed in server/consumer cpu's or it all starts to crumble.

Yep, if bulldozer doesnt come thorough in both performance and marketing, it might be lights out for AMD as we know it.

 

[Firestorm007]

AMD is doing Great! I guess it doesn't hurt having the worlds fastest graphics card!

 

[exar333]

I don't think PC gaming is dying. I think we are experiencing a shift in what kind of hardware is needed to run modern games. Just because a $100-150 GPU can run many games at high graphical settings, it doesn't mean PC gaming is dying. On the contrary, Ubisoft, Valve, 2K, THQ, Blizzard, and other companies continue to invest heavily in the PC digital download market.

What I think is happening is the demand for $500 GPU's is dying. Nvidia is going to have to play catch up in the performance per mm^2 department because the days of $500 single GPU's are coming to an end.

This is actually a great trend for us, the consumers. I remember in the mid to late 90's when most people would balk at anything over $200 for a GPU, and most spent a decent amount less than this. For a lot of people, choosing a $300 GPU versus getting a PS3 is a no-brainer. A single component vs. an entire computer? More choices at the $100-200 price point will help sustain PC gaming and let more users play anything they want. If you want bigger/better graphics then you have options to get better hardware. That is the beauty of PC gaming! There is no way it will survive if everyone is required to spend >$300 on a GPU to play modern titles, there just are not enough people willing to do this.

 

[notty22]

Nvidia CEO: Android tablets will overtake iPad in 30 months

WOW.........

Nvidia has a vested interest in Android gaining market share. The maker of graphics chips for PCs launched its Tegra 2 processors this year, establishing itself as a major player in high-end smartphones and tablets by manufacturers like Samsung and Motorola. This is only the beginning.
For example, we recently just learned that Amazon may have chosen Nvidia to power its rumored tablets. The entry-level tablet is codenamed Coyote and will be based on the dual-core Nvidia Tegra 2 platform. The second one is codenamed Hollywood and will be based on the quad-core Nvidia codename Kal-El platform (likely to be called Tegra 3).

 

[OCGuy]

Nvidia CEO: Android tablets will overtake iPad in 30 months

WOW.........

That deserves its own thread....!


The Quad-core Tegra 3 may be my first tablet that I actually purchase for myself!

 

[notty22]

If and when that becomes official. Nvidia and Amazon collaboration, will be 'big' financial news. I just bought a Ipad2, because I wasn't sold on the price/performance of anything Android right now.
But I'm sure Amazon is going to design something nice.