A month has gone by since the last earnings report for Nvidia (NVDA Quick QuoteNVDA - Free Report) . Shares have added about 13.3% 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 Q1 Earnings and Sales Top Estimates

NVIDIA reported better-than-anticipated results for the first quarter of fiscal 2024, wherein both the bottom line and the top line surpassed the Zacks Consensus Estimate. For the first quarter, NVIDIA reported non-GAAP earnings of $1.09 per share, which beat the Zacks Consensus Estimate by 18.5%. Moreover, the reported figure plunged 20% year over year while increasing 24% sequentially. The quarter-on-quarter increase in earnings was mainly due to higher revenues, improved gross margin and lower operating expenses.

First-quarter revenues tanked 13% year over year while climbing 19% sequentially to $7.19 billion. The sequential growth in the top line was mainly driven by record sales in Data Center end market while its Gaming and Professional Visualization platforms continue to emerge from channel inventory corrections. The top line beat the consensus mark of $6.52 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 38% of fiscal first-quarter revenues. The segment’s top line plunged 41% year over year while increasing 15% sequentially to $2.73 billion.

Compute & Networking represented 627% of fiscal first-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 21% year over year and sequentially to $4.46 billion.

Market Platform’s Top Line Details

Based on the market platform, Gaming revenues plunged 38% year over year while going up 22% sequentially to $2.24 billion and accounted for 31.1% of total revenues. The year-over-year decline was primarily due to a lower sell-in of Gaming products. This reflected reduced channel partner inventory levels amid weak demand due to macroeconomic headwinds. On the other hand, the quarter-on-quarter growth was primarily driven by increased sales of its 40 series GeForce RTX GPUs (graphics processing units) for notebooks and desktops.

Revenues from Data Center (59.6% of revenues) jumped 14% year over year and 18% from the previous quarter to $4.28 billion. This year-over-year and sequential rise was mainly driven by the growing demand for generative AI and large language models using GPUs based on NVIDIA Hopper and Ampere architectures. Strong demand for its chips from large cloud service and consumer internet companies aided the segment’s top-line growth.

Professional Visualization revenues (4.1% of revenues) decreased 53% year over year but increased 31% sequentially to $295 million. The year-over-year decline was primarily due to a lower sell-in to partners to reduce channel inventory. However, increased demand for desktop and workstation GPUs led to the segment’s sequential revenue growth.

Automotive sales (4.1% of revenues) in the reported quarter totaled $296 million, up 114% on a year-over-year basis and 1% sequentially. The rise was mainly driven by the increased revenue contribution from self-driving platforms and AI cockpit solutions.

OEM and Other revenues (1.1% of revenues) plunged 58% year over year and 8% sequentially to $77 million. The decline was mainly due to lower notebook OEM sales in the first quarter.

Operating Details

NVIDIA’s non-GAAP gross margin contracted 30 basis points (bps) year over year to 66.8%, mainly due to lower Gaming margins and a higher contribution from Automotive, partially offset by a higher contribution from Data Center. Sequentially, non-GAAP gross margin improved 70 bps due to lower costs in Gaming and higher Data Center margin as the company ramped up its Hopper architecture.

Non-GAAP operating expenses increased 9% year over year while declining 1% sequentially to $1.75 billion. The year-on-year increase was due to employee growth and related costs. The sequential decline reflects the timing of engineering development investments and reduced depreciation expense related to the extension of certain fixed asset useful lives, partially offset by employee growth and related costs.

The non-GAAP operating income slumped 23% year over year but increased 37% sequentially to $3.05 billion.

Balance Sheet and Cash Flow

As of Apr 30, 2023, NVDA’s cash, cash equivalents and marketable securities were $15.32 billion, up from $13.30 billion as of Jan 29, 2023. As of Apr 30, 2023, the total long-term debt was $9.70 billion, flat sequentially.

NVIDIA generated $2.91 billion in operating cash flows, up from the year-ago quarter’s $1.73 billion and the previous quarter’s $2.25 billion.

The free cash flow was an inflow of $2.64 billion compared with the year-ago quarter’s $1.35 billion and the previous quarter’s outflow of $1.74 billion.

In the first quarter, the company returned $99 million to shareholders through dividend payouts while not repurchasing stocks. At the end of the quarter, it had a remaining share-repurchase authorization of approximately $7 billion through December 2023.

NVIDIA announced a quarterly cash dividend of 4 cents per share, payable on Jun 30, 2023, to the shareholders of record on Jun 8, 2023.

Guidance

For the second quarter of fiscal 2024, NVIDIA anticipates revenues of $11 billion (+/-2%).

The GAAP and non-GAAP gross margins are projected at 68.6% and 70%, respectively (+/-50 bps). GAAP and non-GAAP operating expenses are estimated at $2.71 billion and $1.90 billion, respectively.

GAAP and non-GAAP other income and expenses, excluding gains and losses from non-affiliated investments, are anticipated at approximately $90 million.

The GAAP and non-GAAP tax rate for the quarter is estimated at 14% (+/- 1%).

The company projects to make capital expenditures between $300 million and $350 million during the second quarter, including principal payments on property and equipment. For the full fiscal, the company estimates capital expenditure to be between $1.10 billion and $1.30 billion, including principal payments on property and equipment.

How Have Estimates Been Moving Since Then?

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

The consensus estimate has shifted 127.3% due to these changes.

VGM Scores

At this time, Nvidia has an average Growth Score of C, 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 F. 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 #1 (Strong Buy). We expect an above average return from the stock in the next few months.