NVIDIA's Record-Breaking Revenue and Future Growth in AI and Data Centers
2023-09-08
NVIDIA, a leading technology company, recently held its second-quarter earnings call, where President and CEO Jensen Huang and CFO Colette Kress discussed the company's financial results. The meeting highlighted the record-breaking revenue achieved in Q2 and the strong performance in the data center segment. One of the key topics discussed was the transition from general-purpose computing to accelerated computing and generative AI.
A particularly interesting aspect of the meeting was the discussion on the capabilities of language models. These models, known as "teach-your-student models," are created by compressing vast amounts of human knowledge. The larger models possess a high level of generality and can perform tasks and answer questions they haven't been specifically trained on, referred to as "zero-shot capability." However, the CEO emphasized that while smaller models excel in specific skills, they lack the same level of generalization and zero-shot capabilities. The company's goal is to incorporate these capabilities into all computing devices by condensing the larger models into smaller ones.
From a financial perspective, the meeting addressed the question of incremental supply expected to come online. The market outlook for the company in the third quarter of fiscal 2024 appears positive, with strong demand for their data center platform for AI across various industries and customers. Sequential growth is expected to be primarily driven by the data center segment, with gaming and pro vis also contributing. Gross margins are projected to be 71.5% (GAAP) and 72.5% (non-GAAP), while operating expenses are estimated at approximately $2.95 billion (GAAP) and $2 billion (non-GAAP). The company anticipates a tax rate of 14.5%, plus or minus 1%, excluding any discrete items. Overall, the company's market outlook for the third quarter of fiscal 2024 appears optimistic, driven by strong demand for their data center products and the introduction of the new L40.
During the meeting, several key drivers of the business were highlighted. Data center sales, particularly in the software and complexity segment, were contributing to the growth of gross margins. The company also experienced strong demand for its data center platform for AI across various industries and customers. Additionally, share repurchases and dividends were mentioned, indicating the company's commitment to returning a significant amount of money to shareholders. The introduction of new product offerings, such as the L40S GPU, was also discussed as a way to address the growing demand for various workloads. Expected revenue growth in the upcoming quarter was another positive driver for the company.
In terms of product and service plans, NVIDIA aims to develop and distribute its platform to system makers worldwide. The company plans to integrate its platform into various OEMs and ODMs systems, sustaining a complex stack of software and hardware across different computing environments. They also intend to introduce new architectures and products regularly, allowing the ecosystem to build their business on top of their platform. Specific products like the L40S are designed for fine-tuning pre-trained models and targeted towards hyperscale scale-out and enterprise IT systems. The company has partnerships with HPE, Dell, Lenovo, and other system makers to bring generative AI to the world's enterprise. They highlight the demand for their products and indicate their focus on meeting unfulfilled demand and planning for next-generation infrastructure.
Throughout the meeting, several key performance indicators (KPIs) were discussed. Strong gross margins were reported, indicating profitability and revenue generation. The increase in operating expenses highlighted the company's expenditure on various aspects of its operations. The company also demonstrated its commitment to rewarding shareholders through share repurchases and dividends. Additionally, the company provided an outlook for future revenue, indicating its expectations for future growth.
The participants of the call included Jensen Huang, the President and CEO of Nvidia, Colette Kress, the CFO of Nvidia, and Simona Jankowski, the VP of Investor Relations at Nvidia. In conclusion, Nvidia had a remarkable quarter with record-breaking revenue in Q2. The company experienced significant growth in data center revenue, thanks to the increasing demand for cloud services and AI platforms. Nvidia's supply partners played a crucial role in meeting these demands by increasing capacity. Overall, Nvidia's financial performance in the second quarter of fiscal 2024 exceeded expectations.
The company also highlighted its success in the Ethernet sector with the BlueField-3 DPU, which has been qualified and ramped across major OEMs and multiple CSP and consumer internet companies. In the gaming sector, revenue growth was driven by the GeForce RTX 40 series GPUs for laptops and desktops. The company believes there is a large upgrade opportunity ahead, as only 47% of the installed base has upgraded to RTX. Laptop GPUs, particularly the RTX 4060 GPUs, showed strong growth during the back-to-school season and outpaced desktop GPUs in some regions. In the professional visualization sector, revenue increased due to the Ada architecture ramp and the launch of new RTX systems.
NVIDIA's focus on accelerated computing, generative AI, and its strong financial performance position the company well for future growth and innovation. With a positive market outlook and a commitment to meeting customer demand, NVIDIA continues to be a leader in the technology industry.