Nvidia (NVDA, Financial) posted impressive financial results for the third-quarter 2015 that topped consensus estimates on revenue and earnings. The chip maker witnessed strong demand for its graphic chips used in personal computers and mobile, processor for data center and automotive sectors that enhanced its performance for the quarter.
Quarterly performance
Its revenue for the third-quarter rose 16% to $1.22 billion as compared to $1.05 billion in the same quarter a year ago, beating analysts’ estimates of $1.20 billion for the quarter. Also, its net income for the quarter increased 45% to $173 million or earnings of $0.31 per share from $119 million or earnings of $0.20 per share in the corresponding period last year. The consensus was estimating earnings of $0.35 per share for the quarter.
Looking ahead, the company should benefit from the strong growth momentum in its PC gaming and mobile platforms, data center, cloud solutions and automobile. It expects the launches of new games to supplement growth for its GPUs this year. Also, Chief Executive Officer Jen-Hsun Huang said,
"Growth drivers have kicked in for us on several fronts. High-performance computing, virtualization and web service providers have created demand for our GPU-accelerated datacenter platforms. Automakers are using Tegra to help reinvent the driving experience. And our new Maxwell architecture is a giant leap forward that has triggered a major upgrade cycle by PC gamers."
New flagship GeForce GTX to advance its gaming prospects
Nvidia is seeing terrific growth momentum in the gaming platform for personal computers, desktop and notebook. The graphic chip maker has recently launched a new flagship GeForce GTX gaming processor for PC. This gaming processor is built on Maxwell that has outstanding 10th generation GPU architecture. Moreover, this GTX gaming processor has been integrated with the Maxwell’s new standards set for performance and power efficiency, including new features for gamers and developers. This investment should fetch incremental market share for the company as it solidifies games at higher frame rates coupled with very low power, heat and noise.
In addition, the company has observed great response for the GTX 980 and GTX 970 processors for desktop and notebook. These processors are expected to enhance performance on gaming platform for desktop and notebook going forward. These processors should carry a competitive edge against its peers as they have comparatively higher performance and greater power efficiency as against the previous generation graphic chips. Its revenue from GeForce GPU for gaming desktop and notebook grew approximately 36% on the back of solid strength for PC gaming in the reported quarter.
A look at the Shield tablet
Meanwhile, its mobile platform has picked up the pace with the expansion of its SHIELD tablet and family of devices in the market. Its Tegra K1 mobile processor is enhancing sales for its SHIELD tablet. Further, the company has recently launched 32 gigabyte LTE model for its SHIELD tablets that should assist the company capturing additional market worldwide. Moreover, the company remains on track to bring SHIELD tablet into Google’s latest OS, Android 5.0 Lollipop that should certainly win market share for the company in the future. Tegra K1 is also included in Cromebooks from Acer and HP that should enhance its sales going forward.
Additionally, Tegra K1 continues to win many design wins in the automotive market as well. Honda has recently announced that it will launch three of its popular models in the European market integrated with Tegra based infotainment and navigation system. Also, the company should benefit from its NVIDIA GRID graphics virtualization that is winning tremendous traction in the datacenter market. Besides, the company has recently launched a program in collaboration with VMware for initial customer access to GRID virtualized GPUs that should help the company to gain market globally.
It expects its revenue for the fourth-quarter to be approximately $1.20 billon, with plus or minus margin of 2%. The analysts as a whole expect Nvidia to post revenue of $1.19 billion for the fourth-quarter 2015. Also, the company expects its GAAP and non-GAAP gross margins of 55.2% and 55.5% respectively with plus or minus 50 basis points.
Conclusion
Nvidia looks a great investment. It is experiencing strong demand for its PC gaming and mobile platforms, data center, cloud solutions and automobile that should drive its growth in the long-run. The analysts have estimated CAGR of 8.28% for the next five years that demonstrates reasonable growth for the company in the future. However, its short term returns looks even more attractive with CAGR of 45.20% this year and 9.16% next year respectively.
