Another Great Quarter for This Chipmaker
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The graphics chip maker NVIDIA (NASDAQ: NVDA) finally came out with its fiscal 2013 second quarter results and the performance surely deserves a round of applause. The company did very well when it came to beating the estimates of Mr. Street and reported a whopping 97% surge in the bottom line compared to the year ago period, and this pushed up the stock price by 5% in after-hours trading. Let’s take a trip down NVIDIA’s recent quarter and see what all happened.
The quarter at a glance
NVIDIA ended the quarter with revenue standing at $1.04 billion, reflecting 3% growth year on year and 13% growth sequentially, while beating analyst estimates of $1.01 billion. While the top line displayed more traditional growth, the bottom line delighted everyone with 97% growth and resulted in a net profit of $119 million and an EPS of $0.19. However, on a non-GAAP basis, the bottom line jumped 75% 'only.' Strong demand for its desktops, notebooks, Tegra processors and GPUs fueled the growth for NVIDIA this quarter.
The Consumer business segment stole the show this time with an impressive 36% growth closely followed by the GPU business segment which improved by 15%, while Professional Business segment growth was in the red, 8% down. Tegra, the world’s first quad-core mobile processor, and Kepler, the till date best GPU built by NVIDIA, acted as huge growth drivers and management expects to keep benefiting from both. However, once NVIDIA launches the Ivy Bridge GPU, the Kepler unit count might fall. But, we don’t need to think about that right now and should focus on the fact that Kepler is likely to do wonders again in the coming third quarter.
The bright sunny morning
The Santa-Clara based company is enjoying a bright sunny morning thanks to the huge success of Kepler and Tegra. Google’s (NASDAQ: GOOG) Nexus 7 tablets, powered by the Tegra 3 processor, have been a huge hit. The $199 tablet has helped NVIDIA sport this brilliant performance in this quarter. And now, Google’s new ultra high-speed internet Google Fiber will be another factor pushing up shipments for NVIDIA as Google plans to give the device for free to the early birds registering for the internet-tv service.
After enjoying huge success thanks to Nexus 7, NVIDIA is preparing itself for another successful ride as even Microsoft’s (NASDAQ: MSFT) Surface Windows RT tablets will be sporting a Tegra processor from NVIDIA. There is a lot of excitement about the Surface tablets and many are waiting for the devices to be launched. The Surface Windows RT tablet will be competing directly with the iPad while Surface Pro will be targeting ultrabooks and personal computers. The whole Windows 8 movement might bring about a revolution which will force other players to launch many new tablets on the Windows platform alongside Android and thus benefit NVIDIA.
The market space where the chip maker functions is in such a position that the competition among the biggies will drive its success. The Tegra processors are being used in tablets and the demand will continue as long as players such as ASUS, Samsung and Acer try to build tablets and compete with the mighty Apple (NASDAQ: AAPL) iPad. Tablets running on Android don’t need to crush the iPad to become successful. Rather they only need volume for success as seen in the case of the Galaxy Tab 10.1, Nexus 7 and the Kindle Fire. In fact, the raging rivalry among Google, Samsung and Apple is enough to fuel many stellar quarters for NVIDIA. The company expects to ship around 25 million Tegra processors by the end of 2012 and thus growing by almost 100% from 2011.
NVIDIA investors are delighted with the better than expected results and now expect more from the company. And it seems they surely are going to get plenty more. The graphics chip maker plans to bring Kepler to the core PC gaming market. NVIDIA has been keeping a track on gamer behavior around the world and data reflects that more than 80% of the gamers play on graphics cards which fall short of recommended specifications. As the PC gaming industry keeps on growing and as exciting new games hit the streets in the second half of 2012, the company expects Kepler to stand up to the task of empowering gamers with suitable graphic cards. What’s more? Very recently NVIDIA entered the automobile accessories space also as Tegra processors started powering up Tesla Motor’s (NASDAQ: TSLA) touch screen infotainment and navigation systems, instrument cluster.
Finally, keeping in mind the forthcoming holiday season and all the device launches that involve NVIDIA, the outlook for the company looks pretty promising. The management is happy about the fact that the investments in mobile and visual computing are paying off big time and expects the next quarter revenue to be in the tune of $1.15 billion to $1.25 billion, reflecting an expected 10%-20% sequential surge. With a strong cash position, stronger external growth drivers and promising products, NVIDIA looks very appealing and surely deserves a position in your portfolio.
analyse360degree has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple, Google, Microsoft, and Tesla Motors. Motley Fool newsletter services recommend Apple, Google, NVIDIA, and Tesla Motors . Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.