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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  • Gigaplex - Saturday, August 8, 2015 - link

    GTX 970 "stunt"? It was a good product with good performance at a good price. There was an initially undocumented performance limitation with memory, but that generally didn't affect real world performance. It still compared favourably to AMD hardware even when the limitation was announced.

    GameWorks on the other hand, they need to stop pushing that mess.
    Reply
  • Oxford Guy - Saturday, August 8, 2015 - link

    Let me know in what universe 28 GB/s + XOR contention in an enthusiast-grade card constitutes "a good product with good performance at a good price".

    Oh, and the midrange 8800 GT of 2007 had double that performance in its VRAM.
    Reply
  • TheJian - Sunday, August 9, 2015 - link

    Because most users know it's still 4GB, and even AMD loving anandtech can't find where it hurts 970. Would you have been happy if they just left off 512MB? I'd rather have them put it in there and optimize drivers to only stick stuff in there that isn't speed dependent. They seem to be doing a great job if nobody can find it's weak spot right?

    At the end of the day did the card perform ANY different than reviews said? NOPE. That is WHY customers couldn't care less. Spec sheets don't matter if you win anyway...LOL.
    Reply
  • xenol - Wednesday, August 12, 2015 - link

    If you buy hardware based on paper specs, you're setting yourself up for disappointmnet. Sure, it may mean the GTX 970 isn't going to be useful as long as you'd like, but really, that's more than likely 3+ years down the road when the 900 series becomes a footnote in the back of everyone's minds for being obsolete.

    The GTX 970 delivered even without knowing about this issue. Even if we did know of this issue and we saw the results, then we'd only add a caveat that when 4K gaming finally takes off, the GPU may not be as suited as those with more memory. But then again, 4K gaming (the PCMR requirement of 4K@60FPS with maxed out settings on Crysis 3 level) isn't poised to take off for at least two generations at the rate things are going.
    Reply
  • prisonerX - Friday, August 7, 2015 - link

    You bought the hype. Nvidia consistently lags in OpenCL performance and tries to push its own proprietary tools. It's already Intel, and it will also suffer the same fate: irrelevancy.

    What Intel, Nvidia and other don't get is the computing industry hasn't changed in 50 years: lower cost with greater performance has always driven the industry.
    Reply
  • The_Assimilator - Friday, August 7, 2015 - link

    Intel, irrelevant? Hahahahahaha. My god you AMD fanboys are hilarious. Oh man. I haven't laughed this hard in a while. Reply
  • Samus - Friday, August 7, 2015 - link

    Yeah he acts like x86 is dead or something because it's proprietary. Intel sets a lot of industry standards. Ever heard of USB? Reply
  • Michael Bay - Saturday, August 8, 2015 - link

    OpenCL is irrelevant, so nV sees no need in pursuing it. Call it lobbying if you want. Reply
  • medi03 - Saturday, August 8, 2015 - link

    Xbox One & PS4, cough. Reply
  • austinsguitar - Friday, August 7, 2015 - link

    is this based on the future or something? last i checked it was 2015.... really anandtech? Reply

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