NVIDIA (NVDA) is a trusted chip supplier for various gadgets. The processor and cards manufactured by NVIDIA are used in various high end PC gaming, mobile processors, notebooks, and tablets. As an investor, the company’s stock prices might have not been witnessing strong growth, but the financial growth recorded by the company has been strong.
The company recently declared a structured repurchase agreement for $500 million. Moreover, the company also paid $47 million in cash dividends in the first quarter. In totality, the company executed a total of $547 million in the first quarter 2015.
The company recently declared its Q1-2015 results. Revenue was $1.1 billion, up 16% year-on-year and significantly higher than the company’s anticipated outlook. The growth in the revenue was primarily due to the gaming market and exceptional demand of GeForce GTX, desktop, and notebook GPU sales. EPS was up 85% year-on-year driven by the outstanding performance PC gaming supported by growth in Tesla, Quadro GRID, and in Tegra. GTX 750 series that is based on Maxwell GPU further fueled the growth in high end gaming segment for NVIDIA.
The company recorded growth of 83% in operating income to $151 million as compared to a year ago. This was mainly due to strong revenue growth and curtailed operating expense. The gross margins continue to reflect the growth in volumes with stable average selling prices of higher margin, GeForce, GTX, GPUs and continued focus on costs.
The notebook gaming segment of the company has grown at a 51% CAGR for the past three years. The growing demand of graphic chips in PC gaming has helped NVIDIA record strong sales. The global PC gaming market is anticipated to generate revenue of around $20 billion in 2014. NVIDIA is certain to gain from this voluptuous market as the launch of games will increase sales of NVIDIA GeForce GTX. Building on its gaming notebook momentum, NVIDIA launched a new family of notebook gaming GPUs, including the first based on the Maxwell architecture.
Earlier this year, NVIDIA launched two desktop graphics processors based on its new Maxwell architecture. These processors are more cost effective as compared to its competitor AMD (AMD). It has also outperformed AMD’s Radeon R9270 on parameters like power consumption. NVIDIA’s Maxwell based netbook GPU is a catalyst to increase NVDIA’s share in the gaming notebook segment, as it is becoming popular among the cost conscious gamers. Products are shipping now and will be available from every major OEM in the current quarter. This year, NVIDIA expects to steep growth in gaming netbooks.
Furthermore, not just the low cost gaming, but even in the high end PC gaming market NVIDIA's GeForce GTX Titan Black graphics card has gained impetus. This, again, as compared with AMD’s Radeon 295X2 GPU is more cost effective. It can be undeniable to say that this feature rich card is a leader in the high end gaming market. It is a leader benchmarked on one to one performance test and graphical performance.
Automotive instrumentation a key for growth
NVIDIA also eyes the mobile device market and automotive instrumentation by launching its next generation Tegra K1 mobile processors. These processors provide high quality graphics to mobile devices. It also anticipates a wider market for this processor which can be embraced by instrumentation in automotive as these chips can be used for driver assistance and self parking systems.
Tegra showed its third consecutive quarter of growth powered by strength in automotive. Automobile giant Volkswagen has already declared that it will be using NVIDIA’s Tegra visual computing module to power three new in car systems and will also use Tegra K1 processors in its upcoming driving assistance instrumentations.
Audi launched its Tegra-powered A3 in the U.S. this quarter, and is fueling the ecosystem with Jetson TK1, a development platform aimed at automotive, embedded and robotics applications.
NVIDIA now also claims to be strongly growing in the workstation business and the recent quarter’s results endorsed this claim. The company now has the highest market share level since 2010.
The company anticipates its revenue to be in the tune of $1.1 billion +/- 2% in the second quarter. It expects seasonality in the consumer PC industry and foresees a greater strength in data center, CoD solutions, and mobile markets to assist in sequential growth.
The company’ strategy and paradigm shift to visual computing system and solution will enable its success story in consumer PC and mobile gaming market. It also expects a strong growth in diversified segments like data centers, super computers and automotive market
Looking into the fact that the company has posted strong first quarter 2015 results that posted growth in top and bottom line, the company is on the growth path. The upcoming quarters should also witness similar growth based on the demand of the GPU in the low end and high end gaming market.
Investors’ interest is also safeguarded by the company’s share repurchase programs and regular dividend with a planned payback of $1 billion to be executed in fiscal 2015.