Nvidia beats Wall Street estimates with record quarterly earnings

Shawn Knight

Posts: 12,683   +124
Staff member
Bottom line: Nvidia this week turned in a record earnings report that beat analyst expectations but did little to rouse investors. A solid holiday forecast and the pending acquisition of chip designer Arm, however, could go a long way in changing investors' tune.

For the quarter ending October 25, 2020, Nvidia reported revenue of $4.73 billion, an increase of 57 percent compared to the $3.01 billion brought in during the same period last year and a 22 percent boost versus the $3.87 billion in Q2. Analysts with Refinitiv were expecting closer to $4.41 billion, according to CNBC.

Non-GAAP earnings per diluted share, meanwhile, were $2.91, an increase of 63 percent compared to the year-ago period and up 33 percent sequentially. Refinitiv was expecting a return of $2.57 per share.

Nvidia founder and CEO Jensen Huang said the company is firing on all cylinders, led by record revenues in its gaming and data center divisions. “The new Nvidia GeForce RTX GPU provides our largest-ever generational leap and demand is overwhelming,” Huang added.

In an earnings call with investors, however, Nvidia said it expected its data center revenue to slide in the current quarter, a revelation that has dinged share value by about 1.7 percent as of this writing.

On the bright side, Nvidia said it expects revenue in the range of $4.80 billion, plus or minus two percent, for the holiday quarter. Nvidia and stockholders also have the pending Arm acquisition to look forward to, which, based on what we are seeing from early reviews of Apple's new Arm-based Macs, certainly looks promising.

Image credit: JHVEPhoto, Hairem

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brucek

Posts: 577   +698
TechSpot Elite
Can anyone who follows this space more closely explain where the gaming revenues are coming from?

The quarterly filing breaks those out as $2.27 billion for the quarter ended 10/25/20. Not much of that could be Ampere - I've heard unit volume may be under 100K for the entire 2020, much less those first few weeks. So let's say it's $2 billion from non-ampere, which I had heard had ceased production in this time period. Who is buying all these units of last gen video cards immediately prior to launch of the next gen?
 
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neeyik

Posts: 1,453   +1,611
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Can anyone who follows this space more closely explain where the gaming revenues are coming from?
The thing to really note is that it's a 37% increase over Q3 FY20, a period with no gaming releases from Nvidia (the 2070/2080 Supers appeared in April, for example) and it was all pre-Covid. But it was also a 37% increase on the previous quarter - a Covid period but with no new releases.

So the pertinent question to ask is not why this Q3 was so good, but was the previous one relatively poor or good? If one looks at the Q3 results from other years, the answer becomes clear:

Gaming revenue
Q3 FY21 - $2.27b (Ampere launch)
Q3 FY20 - $1.66b
Q3 FY19 - $1.76b
Q3 FY18 - $1.56b (Turing launch)
Q3 FY17 - $1.25b
Q3 FY16 - $1.11b (quarter after Pascal launch)

So the year-to-year trend, starting with FY17 compared to FY16, goes like this:

12.6% inc > 24.8 inc > 12.8% inc > 5.7% dec > 36.7% inc

Nvidia had been going through a steady decline in revenue growth for a couple of years, partly due to the overall decrease in gaming revenue across all markets and partly due to the overall response to the Turing offerings.

Had Nvidia launched Ampere last year, the Q3 results probably wouldn't have been so high, in comparison to the previous quarter, but thanks to Covid and how Ampere's performance and price compares to Turing's, it's obviously worked out quite well for them.

Who is buying all these units of last gen video cards immediately prior to launch of the next gen?
The thousands of people around the world who wanted a gaming PC or an upgrade to their old one right then - I.e. they weren't willing to wait or were unaware of Ampere coming.
 

brucek

Posts: 577   +698
TechSpot Elite
Thank you for the detailed reply... interesting stuff re: the relative changes year-to-year... I'm still trying to grok how they reached the absolute number.

At $2.27 billion, we're talking about a lot more than "thousands" of people. I don't know what the right average revenue per unit is (wholesale, for the silicon only, after incentives) -- but I'm assuming there's a lot more on the low end, so maybe it's around $250? It would take 8 million units @ $250 each to get to two billion.

One clue would be looking at non-graphics sales in this same period. Are they up a similar amount? (I.e., were people just buying a lot of new gaming PCs, and that included sales of graphics cards inside of them?)

Or maybe there's a way for them to count a lot more Ampere revenue in this quarter than I'm thinking.

Still feels like curious timing for such a spike to arrive.

Also interesting re: the covid economy, which you generally read of as being an economic disaster, but apparently not for some industries...
 
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neeyik

Posts: 1,453   +1,611
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At $2.27 billion, we're talking about a lot more than "thousands" of people. I don't know what the right average revenue per unit is (wholesale, for the silicon only, after incentives) -- but I'm assuming there's a lot more on the low end, so maybe it's around $250? It would take 8 million units @ $250 each to get to two billion.
Indeed it's not 'thousands', but it felt less controversial to say that rather than millions! With regards to what products are generating that kind of revenue, it's difficult to judge precisely, as we're not privy to such information. However, this article by 3Dcenter.org, on graphics sales figures from the German retailer Mindfactory in the first half of 2020, paints an interesting picture:


In that period, they shifted 37300 Nvidia cards, with a mean price tag of 465 euros. The specific product chart is especially interesting, when ranked by revenue:

GeForce RTX 2070 Super € 6,600,569.90
GeForce RTX 2080 Super € 2,722,842.45
GeForce RTX 2080 Ti € 2,016,818.05
GeForce RTX 2060 Super € 1,720,689.75
GeForce GTX 1660 Super € 1,409,748.15
GeForce RTX 2070 € 932,074.10
GeForce RTX 2060 € 606,731.60
GeForce GTX 1660 € 494,360.80
GeForce GTX 1660 Ti € 340,133.20
GeForce GTX 1650 € 166,762.30
GeForce GTX 1050 Ti € 139,554.90
GeForce GTX 1650 Super € 109,131.80
GeForce GT 1030 € 35,347.80
GeForce GT 710 € 29,884.50
GeForce RTX 2080 € 20,970.00
GeForce GTX 1050 € 9,323.00
GeForce GT 730 € 8,479.50

The top 5 Nvidia cards by sales numbers only are:

GeForce RTX 2070 Super 11720
GeForce GTX 1660 Super 5510
GeForce RTX 2060 Super 3920
GeForce RTX 2080 Super 3445
GeForce GTX 1660 2150

Now, this is just one retailer, albeit a very large and popular one, but sub-250 euro cards made up less than 20% of their total revenue (AMD and Nvidia cards together) in that period. Put simply Nvidia has sold an awful lot of quite expensive cards!

One clue would be looking at non-graphics sales in this same period. Are they up a similar amount? (I.e., were people just buying a lot of new gaming PCs, and that included sales of graphics cards inside of them?)
Nvidia has 5 revenue divisions, and these were the reported year-to-year Q3 revenue changes:

  • Gaming = +37%
  • Professional Visualization = -27%
  • Data Center = +162%
  • Automotive = -23%
  • OEM & IP = +36%

Gaming covers all GPUs sold as discrete desktop and laptop gaming GPUs (I.e. RTX ones), and consoles SoCs (I.e. Nintendo Switch and Nvidia Shield); OEM covers the basic GPUs found in laptops, such as the MX range. Now while the Switch has sold in droves over the past few months, Nvidia take very little of the revenue Nintendo brings in from that console. From these figures, I'd say that the Gaming Q3 spike has been helped enormously by laptop sales (the OEM figure backs this up).
 

brucek

Posts: 577   +698
TechSpot Elite
I hadn't seen the MindFactory report before, thank you! Super interesting. I'm not sure how to reconcile its "the volume is at the high end" message with say what I see on the Steam survey results (where the top cards are all *60 and *50) although maybe it's in the choice of retailer -- (I.e., maybe Costco, Target, and HP are moving a lot of lower end volume compared to their higher end volume?)

There's AIB partner & retailer cuts between the retail price Mind Factory is reporting and what Nvidia books as revenue, but you're right, perhaps $250 is too low for Nvidia ARPU.

I had totally forgotten about Nintendo/Switch - maybe not a trivial contributor - there could be other payments there beyond just per unit sold?

Maybe there'll be some interesting analyst reports coming out after this call.
 

Theinsanegamer

Posts: 2,054   +2,602
Indeed it's not 'thousands', but it felt less controversial to say that rather than millions! With regards to what products are generating that kind of revenue, it's difficult to judge precisely, as we're not privy to such information. However, this article by 3Dcenter.org, on graphics sales figures from the German retailer Mindfactory in the first half of 2020, paints an interesting picture:


In that period, they shifted 37300 Nvidia cards, with a mean price tag of 465 euros. The specific product chart is especially interesting, when ranked by revenue:

GeForce RTX 2070 Super € 6,600,569.90
GeForce RTX 2080 Super € 2,722,842.45
GeForce RTX 2080 Ti € 2,016,818.05
GeForce RTX 2060 Super € 1,720,689.75
GeForce GTX 1660 Super € 1,409,748.15
GeForce RTX 2070 € 932,074.10
GeForce RTX 2060 € 606,731.60
GeForce GTX 1660 € 494,360.80
GeForce GTX 1660 Ti € 340,133.20
GeForce GTX 1650 € 166,762.30
GeForce GTX 1050 Ti € 139,554.90
GeForce GTX 1650 Super € 109,131.80
GeForce GT 1030 € 35,347.80
GeForce GT 710 € 29,884.50
GeForce RTX 2080 € 20,970.00
GeForce GTX 1050 € 9,323.00
GeForce GT 730 € 8,479.50

The top 5 Nvidia cards by sales numbers only are:

GeForce RTX 2070 Super 11720
GeForce GTX 1660 Super 5510
GeForce RTX 2060 Super 3920
GeForce RTX 2080 Super 3445
GeForce GTX 1660 2150

Now, this is just one retailer, albeit a very large and popular one, but sub-250 euro cards made up less than 20% of their total revenue (AMD and Nvidia cards together) in that period. Put simply Nvidia has sold an awful lot of quite expensive cards!


Nvidia has 5 revenue divisions, and these were the reported year-to-year Q3 revenue changes:

  • Gaming = +37%
  • Professional Visualization = -27%
  • Data Center = +162%
  • Automotive = -23%
  • OEM & IP = +36%

Gaming covers all GPUs sold as discrete desktop and laptop gaming GPUs (I.e. RTX ones), and consoles SoCs (I.e. Nintendo Switch and Nvidia Shield); OEM covers the basic GPUs found in laptops, such as the MX range. Now while the Switch has sold in droves over the past few months, Nvidia take very little of the revenue Nintendo brings in from that console. From these figures, I'd say that the Gaming Q3 spike has been helped enormously by laptop sales (the OEM figure backs this up).
Honestly that doesnt surprise me. I still remember when Polaris was coming out, and the line being championed was "AMD has the bulk of the market on lockdown, expensive cards are a tiny market" then Nvidia proceeded to sell more 1070s then AMD did 480s, 470s, 460s, and vegas combined according to steam surveys. There was a big market back then for $400-500 cards, and I remember saying that AMD was missing out by not having a 3072 core 1070 competitor back then.

This trend is still showing today with big expensive cards making up a large portion of Geforce sales. Expensive gaming computers are rapidly gaining popularity, and have been for some time. Thankfully AMD seems to have figured that out with RX 6000.
 

terzaerian

Posts: 23   +21
Thank you for the detailed reply... interesting stuff re: the relative changes year-to-year... I'm still trying to grok how they reached the absolute number.

At $2.27 billion, we're talking about a lot more than "thousands" of people. I don't know what the right average revenue per unit is (wholesale, for the silicon only, after incentives) -- but I'm assuming there's a lot more on the low end, so maybe it's around $250? It would take 8 million units @ $250 each to get to two billion.

One clue would be looking at non-graphics sales in this same period. Are they up a similar amount? (I.e., were people just buying a lot of new gaming PCs, and that included sales of graphics cards inside of them?)
Don't forget about crypto miners. Even though Bitcoin has largely become dominated by ASIC mining farms, there are still a lot of altcoins that can be mined with graphics cards. And miners will sometimes buy dozens of cards at a time. I distinctly remember during the last graphics card cycle a lot of PC gamers bellyaching about those 'damn crypto miners' buying up all the graphics cards.

Still feels like curious timing for such a spike to arrive.

Also interesting re: the covid economy, which you generally read of as being an economic disaster, but apparently not for some industries...
That's exactly it. COVID-19 has been as much a godsend for the tech industry as torture for everyone else. Zoom and Microsoft stock have been going absolutely bananas. Granted, now that everyone thinks it's over, they're rotating back out of tech stocks and driving the price down, the potential for new, even more punitive lockdowns will probably drive them right back up.

Imagine if Nvidia was an ethical company...
I can forgive a little artificial scarcity from Nvidia as long as they focus on making cards and not playing politics.
 

Axil00

Posts: 41   +45
The thing to really note is that it's a 37% increase over Q3 FY20, a period with no gaming releases from Nvidia (the 2070/2080 Supers appeared in April, for example) and it was all pre-Covid. But it was also a 37% increase on the previous quarter - a Covid period but with no new releases.

So the pertinent question to ask is not why this Q3 was so good, but was the previous one relatively poor or good? If one looks at the Q3 results from other years, the answer becomes clear:

Gaming revenue
Q3 FY21 - $2.27b (Ampere launch)
Q3 FY20 - $1.66b
Q3 FY19 - $1.76b
Q3 FY18 - $1.56b (Turing launch)
Q3 FY17 - $1.25b
Q3 FY16 - $1.11b (quarter after Pascal launch)

So the year-to-year trend, starting with FY17 compared to FY16, goes like this:

12.6% inc > 24.8 inc > 12.8% inc > 5.7% dec > 36.7% inc

Nvidia had been going through a steady decline in revenue growth for a couple of years, partly due to the overall decrease in gaming revenue across all markets and partly due to the overall response to the Turing offerings.

Had Nvidia launched Ampere last year, the Q3 results probably wouldn't have been so high, in comparison to the previous quarter, but thanks to Covid and how Ampere's performance and price compares to Turing's, it's obviously worked out quite well for them.


The thousands of people around the world who wanted a gaming PC or an upgrade to their old one right then - I.e. they weren't willing to wait or were unaware of Ampere coming.
This comment is better than half the articles on this site. That's not meant to be a jab, while most of these facts are not super hard to find it's rare they are presented so well for people without some rudimentary knowledge of the economics of large businesses.

Also, I'm fairly sure you managed to avoid anything that could be construed as a partisan political stance which deserves extra credit in recent times.