NVIDIA Corp. Exceeds Fourth-Quarter Guidance Targets

By Anders Bylund Markets Fool.com

Graphics processor veteran NVIDIA (NASDAQ: NVDA) reported earnings on Thursday, covering the fourth quarter of fiscal year 2017. Here's what you need to know.

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Nvidia's fourth-quarter results: The raw numbers

Metric

Q4 2016

Q4 2015

Year-Over-Year Change

Revenue

$2.17 billion

$1.40 billion

55%

Net income

$655 million

$207 million

216%

GAAP EPS (diluted)

$0.99

$0.35

183%

Data source: Nvidia.

What happened with Nvidia this quarter?

This was another broad-based success story, with double-digit sales growth in six out of eight reportable business segments and platforms.

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  • Sales and gross margins came in above the midpoint of official guidance given three months ago, while operating costs and tax rates fell below management's targets.
  • As usual, graphics processors accounted for the lion's share of Nvidia's fourth-quarter revenue. Broken down by end markets, data-center sales rose 145% year over year.
  • In the fourth quarter, Nvidia struck up new partnerships with automakers and auto parts suppliers, aiming to put Nvidia-powered artificial intelligence behind the wheel in production vehicles.
  • The company returned $1.0 billion to shareholders during fiscal 2017, including fourth-quarter buybacks of $230 million and dividend payouts of $126 million. Next year, these capital returns are seen accelerating to $1.25 billion.

The company issued the following financial guidance for the first quarter of fiscal year 2018, currently in progress:

  • Revenue should land close to $1.90 billion, approximately 46% above the first quarter of 2017.
  • Gross margins should increase from 57.5% to roughly 59.5%.
  • Doing the math on Nvidia's guidance for operating costs and tax rates, GAAP (generally accepted accounting principles) net income should stop near $421 million, or $0.84 per diluted share. That would be up from $196 million and $0.33 per share, respectively, in the year-ago period.

Image source: Nvidia.

What management had to say

Nvidia CEO Jen-Hsun Huang said in a prepared statement:

We had a great finish to a record year, with continued strong growth across all our businesses. Deep learning on NVIDIA GPUs, a breakthrough approach to AI, is helping to tackle challenges such as self-driving cars, early cancer detection and weather prediction. We can now see that GPU-based deep learning will revolutionize major industries, from consumer internet and transportation to healthcare and manufacturing. The era of AI is upon us.

Looking ahead

Nvidia's number-crunching tools are finding serious footholds in unfamiliar markets such as enterprise-grade server systems and automotive computing. Gaming products still remain the company's largest revenue source, but the times they are a-changing. Come back in five years, or perhaps just three, and things will be different.

These trends are increasing the profitability of Nvidia's product mix, while providing brand new target markets to pick up the slack if gaming products ever fall out of favor.

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Anders Bylund has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Nvidia. The Motley Fool has a disclosure policy.