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Can Nvidia (NVDA) Keep Up Its Massive Growth?

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Shares of Nvidia (NVDA - Free Report) have dipped slightly since the GPU power reported yet another quarter of impressive top and bottom line growth last week. Now the question is will Nvidia continue to expand at its current pace, or are its days of rapid growth numbered.

Q1

Nvidia posted adjusted first quarter earnings of $2.05 per share, which crushed our Zacks Consensus Estimate and marked a 141% surge from the year-ago period. The Santa Clara, California-based company’s Q1 revenues soared 66% to $3.21 billion. This also topped our Zacks consensus estimate.

Investors were also likely pleased to see that Nvidia’s highly important Gaming revenues skyrocketed 68% to $1.72 billion. It is this outsized top and bottom line expansion that has helped shares of Nvidia skyrocket over 101% during the last year.

Nvidia’s main GPU business has helped fuel the company’s overall growth. And GPUs will become even more important as high-resolution gaming expands. But aside from the transition to 4K likely benefiting Nvidia down the road, the company also looks poised to become a major player in everything from artificial intelligence to self-driving vehicles.  

Another key growth area, the company’s Datacenter unit, saw its revenues climb by 71% in the first quarter. “Our datacenter business achieved another record and gaming remained strong,” CEO Jensen Huang said in a company statement.

“At the heart of our opportunity is the incredible growth of computing demand of AI, just as traditional computing has slowed. The GPU computing approach we have pioneered is ideal for filling this vacuum.”

Looking Ahead

With all that said, investors must assess Nvidia’s future growth prospects in order to make a more informed decision about its stock.

Nvidia expects to report second quarter revenue of $3.10 billion, plus or minus 2%. Nvidia’s midpoint top line outlook comes in above our current consensus estimate that calls for Q2 revenue of $2.97 billion.

On its face this revenue estimate doesn’t provide much information at all, so let’s dive a bit deeper. If Nvidia reports Q2 revenues of $3.10 billion it would mark a 39% surge from the prior-year period.

Investors will also want to understand how some of Nvidia’s key business units are expected to perform. Luckily, we can turn to our exclusive non-financial metrics consensus estimate file to prepare. The Zacks Consensus NFM file contains detailed estimate data for business segment metrics and non-financial metrics reported by companies.

Based on our latest consensus estimates, Nvidia’s GPU revenues are expected to hit $2.76 billion in the second quarter, which would mark a roughly 46% climb from $1.89 billion. Meanwhile, the company’s Datacenter business is projected to surge 85% from $416 million to reach $771.1 million.

Furthermore, Nvidia’s Automotive business is expected to reach $152.25 million. This would mark just a 7% expansion from the $142 million the company reported in the second quarter last year. But investors should remember that the self-driving and connected vehicle age has barely begun.

Bottom Line

Investors can clearly see that Nvidia’s growth isn’t expected to slow down, based on these second quarter estimates. They should also be pleased to note that Nvidia is projected to see its earnings climb by over 67% in the second quarter and nearly 45% in the current full-year.

Furthermore, while Nvidia waits for some up-and-coming industries to become more viable and popular, its vital Gaming unit is projected to surge nearly 50% to touch $1.77 billion in the second quarter.

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