It has been about a month since the last earnings report for Nvidia (NVDA). Shares have lost about 5.8% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Nvidia due for a breakout? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
NVIDIA Q4 Earnings & Revenues Beat Estimates, Up Y/Y
NVIDIA delivered fourth-quarter fiscal 2021 non-GAAP earnings of $3.10 per share, beating the Zacks Consensus Estimate by 10.7%. The reported figure also surged 64% year over year and 7% sequentially.
Revenues of $5 billion beat the consensus mark by 3.6% and jumped 61% year over year as well. The top line also climbed 6%, quarter on quarter.
The COVID-19 pandemic negatively impacted the company’s professional visualization and automotive businesses during the reported quarter. Nevertheless, robust data-center and gaming performances offset these negatives to a large extent.
Segment Details
Beginning first-quarter fiscal 2021, NVIDIA started reporting revenues under two segments — Graphics and Compute & Networking.
Graphics include GeForce GPUs for gaming and PCs, the GeForce NOW game streaming service and related infrastructure, and solutions for gaming platforms; Quadro GPUs for enterprise design; GRID software for cloud-based visual and virtual computing; and automotive platforms for infotainment systems.
Graphics accounted for 61% of the fiscal fourth-quarter revenues. The segment’s top-line figure grew 47% year over year and 10% sequentially.
Compute & Networking represented 39% of the fiscal fourth-quarter revenues. The segment comprises Data-Center platforms and systems for AI, HPC, and accelerated computing; DRIVE for autonomous vehicles; and Jetson for robotics and other embedded platforms.
Compute & Networking revenues soared 91% from the year-ago quarter but remained flat sequentially.
Market Platform Top Line Details
Based on the market platform, Gaming revenues (50% of revenues) climbed 67% year over year and 10% sequentially to $2.50 billion on higher sales across the company’s notebook and desktop gaming GPUs and game console SOCs.
Revenues from Data Center (38% of revenues) soared 97% year over year and marginally from the previous quarter to $1.9 billion. This year-on-year upswing was chiefly driven by revenue contribution from the Mellanox acquisition, and strong chip demand from hyperscale and large consumer Internet customers.
From a sequential perspective, double-digit growth in the data-center compute’s business was more than offset by the expected decline in Mellanox revenues. Notably, in the fiscal third quarter, Mellanox sales included a large non-recurring network sale to a single OEM.
Professional Visualization revenues (6% of revenues) slid 7% year over year to $307 million. However, the segment’s revenues improved 30%, quarter on quarter, primarily on the rebound in desktop workstations as consumers are returning to offices and organizations are resuming purchases which were earlier deferred due to the pandemic.
Automotive revenues (3% of revenues) in the reported quarter totaled $145 million, down 11% on a year-over-year basis on decline in legacy infotainment module revenues. Nonetheless, the division’s sales increased 16% sequentially on higher sales of AI (artificial intelligence) cockpit solutions and continued recovery in the global automotive production volumes.
OEM and Other revenues were almost flat year on year at $153 million. However, the segment’s revenues declined 21.1% on a quarter-over-quarter basis.
Operating Details
NVIDIA’s non-GAAP gross margin expanded 10 basis points (bps) from the year-ago quarter to 65.5%, but remained flat sequentially.
Non-GAAP operating expenses flared up 47% year over year and 8% sequentially to $1.19 billion on increased headcount, the Mellanox acquisition-related costs, and expenses from an additional week in the quarter.
Non-GAAP operating income soared 71% year over year and 5% sequentially to $2.09 billion.
Balance Sheet and Cash Flow
As of Jan 31, 2021, NVIDIA’s cash, cash equivalents and marketable securities were $11.56 billion, up from $10.14 billion as of Oct 25, 2020.
As of Jan 31, 2021, total long-term debt (including current maturities) was $5.96 billion, down from $6.96 billion as of Oct 25, 2020.
The company generated $2.07 billion in operating cash flows, up from the year-ago quarter’s $1.46 billion and the previous quarter’s $1.28 billion. Free cash flow was $1.77 billion, up from the prior-year period’s $1.32 billion as well as the last quarter’s $806 million.
In fiscal 2021, the company generated operating and free cash flows of $5.82 billion and $4.68 billion, respectively.
During the fiscal fourth quarter, NVIDIA paid dividends of $99 million. During fiscal 2021, the company returned $395 million in dividend to shareholders.
Guidance
For the first quarter of fiscal 2022, NVIDIA anticipates revenues of $5.3 billion (+/-2%).
Non-GAAP gross margin is projected at 66% (+/-50 bps). Non-GAAP operating expenses are estimated to be $1.20 billion.
Capital expenditures are expected to be approximately $300-$325 million.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 40.17% due to these changes.
VGM Scores
At this time, Nvidia has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren’t focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Nvidia has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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