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Leading designer of graphics chips Nvidia (NASDAQ:NVDA) announced better-than-expected results in Q2 CY2024, with revenue up 122% year on year to $30.04 billion. Guidance for next quarter’s revenue was also optimistic at $32.5 billion at the midpoint, 2.3% above analysts’ estimates. It made a non-GAAP profit of $0.68 per share, improving from its profit of $0.27 per share in the same quarter last year.
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Nvidia (NVDA) Q2 CY2024 Highlights:
- Revenue: $30.04 billion vs analyst estimates of $28.75 billion (4.5% beat)
- Adjusted Operating Income: $19.94 billion vs analyst estimates of $18.9 billion (5.5% beat)
- EPS (non-GAAP): $0.68 vs analyst estimates of $0.64 (5.7% beat)
- Revenue Guidance for Q3 CY2024 is $32.5 billion at the midpoint, above analyst estimates of $31.77 billion
- Gross Margin (GAAP): 75.1%, up from 70.1% in the same quarter last year
- Inventory Days Outstanding: 81, down from 148 in the previous quarter
- Free Cash Flow Margin: 44.9%, similar to the same quarter last year
- Market Capitalization: $3.15 trillion
Founded in 1993 by Jensen Huang and two former Sun Microsystems engineers, Nvidia (NASDAQ:NVDA) is a leading fabless designer of chips used in gaming, PCs, data centers, automotive, and a variety of end markets.
Processors and Graphics ChipsThe biggest demand drivers for processors (CPUs) and graphics chips at the moment are secular trends related to 5G and Internet of Things, autonomous driving, and high performance computing in the data center space, specifically around AI and machine learning. Like all semiconductor companies, digital chip makers exhibit a degree of cyclicality, driven by supply and demand imbalances and exposure to PC and Smartphone product cycles.
Sales GrowthNvidia’s revenue growth over the last three years has been incredible, averaging 88.2% annually. As you can see below, this quarter was especially strong, with revenue growing from $13.51 billion in the same quarter last year to $30.04 billion. Semiconductors are a cyclical industry, and long-term investors should be prepared for periods of high growth followed by periods of revenue contractions (which can sometimes offer opportune times to buy).
Nvidia had a fantastic quarter as its 122% year-on-year revenue growth beat analysts’ estimates by 4.5%.
Nvidia’s management team believes its revenue growth will continue, guiding to 79.4% year-on-year growth next quarter. Analysts expect the company to grow its revenue by 53.3% over the next 12 months.
Product Demand & Outstanding InventoryDays Inventory Outstanding (DIO) is an important metric for chipmakers, as it reflects a business’ capital intensity and the cyclical nature of semiconductor supply and demand. In a tight supply environment, inventories tend to be stable, allowing chipmakers to exert pricing power. Steadily increasing DIO can be a warning sign that demand is weak, and if inventories continue to rise, the company may have to downsize production.
This quarter, Nvidia’s DIO came in at 81, which is 23 days below its five-year average. At the moment, these numbers show no indication of an excessive inventory buildup.
Key Takeaways from Nvidia’s Q2 Results
We were impressed by Nvidia’s improvement in inventory levels this quarter. We were also excited its revenue and EPS along with next quarter's revenue guidance topped Wall Street’s estimates. These results were driven by strong performance in its data center segment.
Zooming out, we think this was a solid quarter, but the market was likely expecting an even bigger beat given the momentum in the stock. Nvidia's shares traded down 3% to $121.90 immediately after reporting.
