It has been about a month since the last earnings report for Nvidia (NVDA Quick QuoteNVDA - Free Report) . Shares have added about 14.9% 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 its most recent earnings report in order to get a better handle on the important catalysts.

NVIDIA Q4 Earnings and Sales Top Estimates, Down YoY

NVIDIA reported better-than-anticipated results for the fourth quarter of fiscal 2023, wherein both the bottom line and the top line surpassed  the Zacks Consensus Estimate. However, the quarterly earnings and revenues, each declined significantly on a year-over-year basis.

For the fourth quarter, NVIDIA reported non-GAAP earnings of 88 cents per share, which beat the Zacks Consensus Estimate by 8.6%. Moreover, the reported figure plunged 33.3% year over year while increasing 51.7% sequentially. The year-over-year decline in earnings was mainly due to lower revenues and increased operating expenses.

Fourth-quarter revenues plunged 20.8% year over year while climbing 2% sequentially to $6.05 billion, primarily because of continued weakness across its Gaming, Professional Visualization, OEM and Other market segments. However, the top line beat the consensus mark of $6.01 billion.

Segment Details

NVIDIA reports revenues under two segments — Graphics and Compute & Networking.

Graphics includes GeForce GPUs for gaming and personal computers, the GeForce NOW game-streaming service and related infrastructure. The segment also offers 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 39.3% of fiscal fourth-quarter revenues. The segment’s top line plunged 46% year over year while increased 12% sequentially to $2.38 billion.

Compute & Networking represented 60.7% of fiscal fourth-quarter revenues. The segment comprises Data Center platforms and systems for artificial intelligence, high-performance computing and accelerated computing, the DRIVE development platform for autonomous vehicles and Jetson for robotics and other embedded platforms.

Compute & Networking revenues soared 14% year over year to $3.67 billion. However, the segment’s revenues declined 4% sequentially.

Market Platform’s Top Line Details

Based on the market platform, Gaming revenues plunged 46% year over year while going up by 16% sequentially to $1.83 billion and accounted for 30.3% of total revenues. The year-over-year decline was primarily due to a lower sell-in of Gaming products. This reflected a reduction in channel partner inventory levels amid weak demand due to macroeconomic headwinds and lockdowns in China, which weighed on consumer demand.

Revenues from Data Center (59.8% of revenues) jumped 11% year over year but slashed 6% from the previous quarter to $3.62 billion. This year-over-year rise was driven by the strong demand for its chips across U.S. cloud service providers, consumer internet companies and other vertical industries, while the sequential change reflected lower sales in China.

Professional Visualization revenues (3.7% of revenues) decreased 65% year over year but increased 13% sequentially to $226 million. The decline was primarily due to a lower sell-in to partners to help align channel inventory levels with the current demand expectations.

Automotive sales (4.9% of revenues) in the reported quarter totaled $294 million, up 135% on a year-over-year basis and 17% sequentially. The increase was mainly driven by the increased revenue contribution from self-driving solutions, computing solutions for electric vehicle makers, strength in sales of AI cockpit solutions and growth in automotive development arrangements.

OEM and Other revenues (1.4% of revenues) plunged 56% year over year while rising 15% sequentially to $84 million. The decline was mainly due to the weak performance of Cryptocurrency Mining Processors, which generated nominal sales in the quarter compared with the year-ago quarter. Moreover, lower notebook OEM sales also negatively impacted the overall unit’s performance in the fourth quarter.

Operating Details

NVIDIA’s non-GAAP gross margin contracted by 90 basis points (bps) year over year to 66.1%, mainly due to lower Gaming margins and a higher contribution from Automotive, partially offset by a higher contribution from Data Center.

Non-GAAP operating expenses flared up 23% year over year and down 1% sequentially to $1.78 billion on higher compensation-related expenses associated with employee growth and increased data center infrastructure-related expenses.

The non-GAAP operating income slumped 40% year over year to $2.22 billion.

Balance Sheet and Cash Flow

As of Jan 29, 2023, NVDA’s cash, cash equivalents and marketable securities were $13.30 billion, up from $13.14 billion as of Oct 30, 2022.

As of Jan 29, 2023, the total long-term debt (including current maturities) was $9.70 billion, down from the previous quarter’s $10.95 billion.

NVIDIA generated $2.25 billion in operating cash flows, down from the year-ago quarter’s $3.03 billion but up from the previous quarter’s $392 million.

The free cash flow was an inflow of $1.74 billion compared with year-ago quarter’s $2.74 billion and the previous quarter’s outflow of $156 million.

In the full fiscal 2023, the company generated operating and free cash flows of $5.64 billion and $3.75 billion, respectively.

In the fourth quarter, the company returned $1.15 billion to shareholders through dividend payouts and share repurchases. In fiscal 2023, NVIDIA paid out $10.44 billion in dividends and common stocks. At the end of the quarter, it had a remaining share-repurchase authorization of $7.23 billion through December 2023.

NVIDIA announced a quarterly cash dividend of 4 cents per share payable on Mar 29, 2023, to the shareholders of record on Mar 8, 2023.

Guidance

For the first quarter of fiscal 2024, NVIDIA anticipates revenues of $6.50 billion (+/-2%).

The GAAP and non-GAAP gross margins are projected at 64.1% and 66.5%, respectively (+/-50 bps). GAAP and non-GAAP operating expenses are estimated at $2.53 billion and $1.78 billion, respectively.

GAAP and non-GAAP other income and expenses, excluding gains and losses from non-affiliated investments, are anticipated at approximately $50 million.

The GAAP and non-GAAP tax rate for the quarter is estimated at 13% (+/- 1%).

The company projects to make capital expenditures between $350 million and $400 million during the quarter.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review.

VGM Scores

Currently, Nvidia has a nice Growth Score of B, a grade with the same score on the momentum front. However, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Nvidia has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.