Why NVIDIA Corporation Jumped on Thursday

By Markets Fool.com

Source: NVIDIA.

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What: Shares of NVIDIA jumped as much as 12% higher on Thursday morning. The designer of graphics processors, mobile chips, and enterprise number crunchers reported fourth-quarter results on Wednesday night, and the company beat its own guidance on several levels.

So what: Three months ago, NVIDIA's management set a fourth-quarter revenue target at $1.3 billion. Adjusted gross margins were seen near 57%.

Instead, sales rushed 12% higher year over year to land at $1.4 billion. Adjusted gross margins stopped at 57.2% -- a smaller surprise than the large revenue beat, but still a positive sign.

On the bottom line, GAAP earnings held steady year over year at $0.35 per diluted share, but adjusted earnings rose 21% to $0.52 per share. The difference was largely explained by backing out a greater amount of stock-based compensation expenses and a restructuring expense related to the recently halted Icera operation. Icera was once NVIDIA's largest buyout, but the mobile data modems never took off the way NVIDIA had hoped.

Now what: To make up for the iced Icera division, all four of NVIDIA's remaining business segments reported positive sales growth.

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The Tegra product line, once intended for smartphones and tablets, is making quick inroads into the booming automotive computing market. Automotive sales rose 68% from the year-ago quarter, followed by 21% higher sales of gaming-oriented graphics processors.

That being said, Tegra sales remain lumpy and actually fell 3% in fiscal year 2015, compared to the 2014 tally. It's also a far smaller operation than NVIDIA's graphics specialty, which pulled in full-year sales of $4.2 billion versus Tegra's $559 million.

"NVIDIA is at the center of four exciting growth opportunities -- PC gaming, VR, deep learning, and self-driving cars," said NVIDIA CEO Jen-Hsun Huang in a press statement. "Our strategy is to create specialized accelerated computing platforms for large growth markets that demand the 10x boost in performance we offer."

After this quick boost, NVIDIA shares have gained more than 30% over the last six months, but still trade well below the multi-year highs that were set to $34 in late December.

The article Why NVIDIA Corporation Jumped on Thursday originally appeared on Fool.com.

Anders Bylund has no position in any stocks mentioned. The Motley Fool recommends Nvidia. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.