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Nvidia (NVDA) Up 24% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Nvidia (NVDA - Free Report) . Shares have added about 24% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Nvidia due for a pullback? 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 drivers.

NVIDIA Crushes Q1 Earnings Estimates on Solid Revenue Growth

NVIDIA delivered first-quarter fiscal 2022 non-GAAP earnings of $3.66 per share, beating the Zacks Consensus Estimate $3.28. The reported figure also jumped a whopping 103% year over year and 18% sequentially.

Revenues of $5.66 billion beat the consensus mark of $5.4 billion and surged 84% year over year as well. The top line also climbed 13%, quarter on quarter.

The company reported revenue growth across its entire end markets except for Auto which has been impacted by business disruptions caused by the COVID-19 pandemic. Moreover, the company’s Gaming, Data Center and Professional Visualizationmarkets registered record revenues during the quarter.

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 first-quarter revenues. The segment’s top-line figure surged 81% year over year and 13% sequentially to $3.45 billion.

Compute & Networking represented 39% of the fiscal first-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 88% year over year and 14% sequentially to $2.21 billion.

Market Platform Top Line Details

Based on the market platform, Gaming revenues (49% of revenues) shot up 106% year over year and 11% sequentially to $2.76 billion on higher sales across the company’s notebook and desktop gaming GPUs and game console SOCs.

Revenues from Data Center (36% of revenues) soared 79% year over year and 8% from the previous quarter to $2.05 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.

Professional Visualization revenues (7% of revenues) increased 21% year over year as well as sequentially to $372million. This increase mainly resulted from record sales of notebook workstation GPUs, while quarter-on-quarter growth reflects higher GPU sales for both desktop and notebook workstations.

Auto revenues (3% of revenues) in the reported quarter totaled $154 million, down 1% on a year-over-year basis. Nonetheless, the division’s sales increased 6%, sequentially. This quarter-on-quarter rise was primarily aided by continued recovery in the global automotive production volumes.

OEM and Other revenues (5% of revenues) skyrocketed 137% year on year and 114% sequentially to $327 million. This uptick reflects inclusion of Cryptocurrency Mining Processors (CMP) revenues under the market platform, which generated sales of $155 million.

Operating Details

NVIDIA’s non-GAAP gross margin expanded 40 basis points (bps) year over year and 70 bps sequentially to 66.2%.

Non-GAAP operating expenses flared up 45% year over year to $1.19 billion on higher compensation related expenses, including headcount increase, the Mellanox acquisition-related costs, and infrastructure costs. Sequentially, non-GAAP operating expenses were flat as higher compensation-related costs offset by the additional week in the fourth quarter of fiscal 2021.

Non-GAAP operating income jumped an an astounding 112% year over year and 22% quarter on quarter to $2.56 billion.

Balance Sheet and Cash Flow

As of May 2, 2021, NVIDIA’s cash, cash equivalents and marketable securities were $12.67 billion, up from $11.56 billion as of Jan 31, 2021.

As of May 2, 2021, total long-term debt (including current maturities) was $5.96 billion, flat with the previous quarter ended on Jan 31, 2021.

The company generated $1.87 billion in operating cash flows, up from the year-ago quarter’s $909 million but down from the previous quarter’s $2.07 billion. Free cash flow was $1.56 billion, up from the prior-year period’s $754 million but down from the last quarter’s $1.77 billion.

During the fiscal first quarter, NVIDIA paid dividends of $99 million.

Guidance

For the second quarter of fiscal 2022, NVIDIA anticipates revenues of $6.3 billion (+/-2%).

Non-GAAP gross margin is projected at 66.5% (+/-50 bps). Non-GAAP operating expenses are estimated to be $1.26 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 36.07% due to these changes.

VGM Scores

Currently, Nvidia has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. However, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. 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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