Today NVIDIA released its quarterly results for the second quarter of their fiscal year 2016 (yes, 2016) and they had excellent sales of their GeForce GPUs, but have decided to write down their Icera modem business, which hit their operating expenses to the tune of around $90 million. Revenue for the quarter was up 5% though as compared to Q2 2015, and came in at $1.153 billion for the quarter. On a GAAP basis, gross margin was 55%, down 110 bps over last year and down 170 bps since last quarter. Net income was just $26 million, down 81% sequentially and 80% year-over-year. This resulted in diluted earnings per share of $0.05, down 77% from Q2 2015’s $0.22.

NVIDIA Q2 2016 Financial Results (GAAP)
  Q2'2016 Q1'2016 Q2'2015 Q/Q Y/Y
Revenue (in millions USD) $1153 $1151 $1103 flat +5%
Gross Margin 55.0% 56.7% 56.1% -1.7% -1.1%
Operating Expenses (in millions USD) $558 $477 $456 +17% +22%
Net Income $26 $134 $128 -81% -80%
EPS $0.05 $0.24 $0.22 -79% -77%

A big factor in this was the write down of their Icera modem division. NVIDIA had been looking for a buyer for their modem unit, but was unable to find a suitable buyer for the business and is therefore winding down operations in this unit. This caused a hit of $0.19 per diluted share. Also during the quarter, NVIDIA announced a recall of their SHIELD tablets due to overheating batteries, and there have been two cases of property damage due to this. This caused another hit of $0.02 per diluted share. They also had $24 million in expenses related to the Samsung and Qualcomm lawsuit.

NVIDIA Q2 2016 Financial Results (Non-GAAP)
  Q2'2016 Q1'2016 Q2'2015 Q/Q Y/Y
Revenue (in millions USD) $1153 $1151 $1103 flat +5%
Gross Margin 56.6% 56.9% 56.4% -0.3% +0.2%
Operating Expenses (in millions USD) $421 $425 $412 -1% +2%
Net Income $190 $187 $173 +2% +10%
EPS $0.34 $0.33 $0.30 +3% +13%

NVIDIA’s non-GAAP results “exclude stock-based compensation, product warranty charge, acquisition-related costs, restructuring and other charges, gains and losses from non-affiliated investments, interest expense related to amortization of debt discount, and the associated tax impact of these items, where applicable” which means that they do not reflect either the Icera write-down, nor the tablet recall. On a non-GAAP basis, gross margin was up 20 bps to 56.6%, with net income up 10% to $190 million. Diluted earnings per share were $0.34, up 13% from Q2 2015’s $0.30 non-GAAP numbers. Despite a significant write-down and a recall, the core business is still doing very well.

For the quarter, NVIDIA paid out $52 million in dividends and repurchased $400 million in stock.

What is driving growth right now is its GPU business. Revenue for GeForce GPUs grew 51%, and NVIDIA has continued to see strength in the PC gaming sector. Fueled by the release of the GTX 980 and GTX 980 Ti, sales of high-end GTX GPUs “grew significantly” year-over-year. The Titan X would certainly fall in there as well, although unlikely at as high of volume. Maxwell has been a very strong performer, and gamers tend to go where the performance is. Souring the results somewhat is a decline in Tesla GPU sales, as well as Quadro GPU sales. Overall, GPU revenue was up 9% year-over-year to $959 million. Even as NVIDIA has tried to diversify with SoCs, their GPU business is still almost 85% of the company.

NVIDIA has found a niche in the automotive infotainment world, and that that area is still strong for them. Tegra has not taken off in the tablet or smartphone space in any meaningful way, but there was still growth in the automotive sales for Tegra. Overall Tegra processor revenue was down 19% year-over-year, which is mainly due to Tegra OEM smartphones and tablets. NVIDIA’s own Tegra sales in the Shield helped offset this loss somewhat, but as the recall filings showed, they only sold 88,000 SHIELD tablets. Margins are likely helped by the fact that they run their own SoC in it though.

NVIDIA’s “Other” segment is a fixed 66 million licensing payment from Intel, and as always, that is flat and does not change. This is from the 2011 settlement of a licensing dispute, and will end in 2017.

NVIDIA Quarterly Revenue Comparison (GAAP)
In millions Q2'2016 Q1'2016 Q2'2015 Q/Q Y/Y
GPU $959 $940 $878 +2% +9%
Tegra Processor $128 $145 $159 -12% -19%
Other $66 $66 $66 flat flat

For Q3 2016, NVIDIA is expecting revenue to be $1.18 billion, plus or minus 2%, with margins of 56.2% to 56.5%.

NVIDIA is obviously a giant in the GPU space, and that is going very well for them. Sales are very strong, and PC gaming has been a strong point in an otherwise weakening PC market. They are attempting to diversify to mobile, but have found out just how difficult that can be, and had to write down their modem division completely. Without a good integrated modem, it will be difficult to gain traction in the smartphone space, but NVIDIA’s current SoC offerings don’t seem well suited to smartphones anyway. Their strength in GPU knowledge has certainly helped them with the GPU side of the equation, but their first attempt at CPU design has not been as strong. We shall see what their plans are for the SoC space going forward, but for now they are riding a wave of strong GPU sales, and that is a good thing for NVIDIA.

Source: NVIDIA Investor Relations

 

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  • Michael Bay - Saturday, August 8, 2015 - link

    >970
    >enthusiast

    I like your desperation.
    Reply
  • Oxford Guy - Sunday, August 9, 2015 - link

    Go back to 4Chan where you belong. Reply
  • Nagorak - Saturday, August 8, 2015 - link

    Actually you have that reversed. One is a real issue. The other is just cards that are still competitive being renamed. Reply
  • Michael Bay - Saturday, August 8, 2015 - link

    Competitive with room heating, sure. For intended use literally everybody sane prefers nV now. Reply
  • silverblue - Sunday, August 9, 2015 - link

    I wasn't aware that Pitcairn was that warm; the other products were only really an issue in reference form.

    How's chizow, by the way?
    Reply
  • Gigaplex - Saturday, August 8, 2015 - link

    NVIDIA do rebrands too. A crazy example is the GT 640. There were at least 5 different variations, with a minimum of 3 separate chips powering those variations. One of them was a rebranded Fermi. At least with the current AMD lineup, you know you're buying a rebrand. A more well known example of NVIDIA rebranding is the 8800GTS, it was rebranded across several generations. Reply
  • Samus - Friday, August 7, 2015 - link

    What stunt? Even with 500MB less VRAM, the benchmark results speak for themselves. The GPU isn't powerful enough for 4K gaming anywhere, which is the only area more than 3.5GB VRAM is necessary.

    If NVidia should be punished for something, it should be their back and forth with locking down overclocking capability of mobile GPU's, but in the end they did listen to the community and re-introduce the functionality.

    Overall, NVidia is doing ok, but everyone here is right...it's important they do not become a monopoly and frankly AMD's latest and greatest is competitive on performance and especially price. The only problem is NVidia is substantially more power efficient, which speaks well to many people who consider efficiency a sign of superior engineering.
    Reply
  • Crunchy005 - Friday, August 7, 2015 - link

    It is an issue with SLI and it can game at 1440p or 4k in SLI mode. How the RAM is managed in SLI it easily reaches the 4GB cap and causes issues. Reply
  • Samus - Friday, August 7, 2015 - link

    That's the problem with SLI, you always increase your GPU power beyond VRAM capacity. SLI 970's are going to be memory limited at 3.5GB or 4GB, no matter how you look at it. Even 6GB isn't enough in most cases to balance the raw GPU resources of 2x970's, which together are more powerful than a GTX980Ti (which comes with...you guessed it, 6GB VRAM.)

    I ran into this problem on my last two SLI setups, which is why I gave up SLI. On both my GTX460 and GTX570 SLI's, I hit the (1GB and 1.25GB) memory bottlenecks in SLI when enabling higher quality textures. To scale, the GTX970 with 3.5GB is very balanced, but by no means appropriate for SLI if your goal is to run higher resolutions or higher quality textures (which is usually the ideal goal of SLI)

    The counter arguement is most AAA DX12 games are going to be optimized for more than 4GB VRAM going forward due to the PS4 and XBOX having 8GB RAM, the vast majority of which is used for textures and GPU resources. But that doesn't mean the GTX970 isn't futureproof for at least another two years.
    Reply
  • Oxford Guy - Friday, August 7, 2015 - link

    People specifically purchased the 970 in pairs in large numbers because it was supposed to have the same amount of useful VRAM as the 980.

    Fraud. Period.

    Stuffing dummy data into that partition so they game never uses it (to avoid stutter but make it look like all 4 GB is beign used) or caching data that rarely gets accessed are both cute but they aren't adequate.
    Reply

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