5 Things NVIDIA Corporation Management Wants You to Know

By Timothy GreenFool.com

Graphics-chip company NVIDIA reported strong fourth-quarter results on Feb. 17, easily besting analyst estimates for both revenue and earnings. Robust demand for the company's gaming graphics cards, as well as solid performance from NVIDIA's enterprise and automotive segments, drove revenue to record levels. In fiscal 2016, for the first time, NVIDIA surpassed $5 billion in annual revenue.

Continue Reading Below

There's a lot going on at NVIDIA these days, and management provided a more detailed look at the company's various businesses during the company's earnings conference call. Here are five key quotes from management, taken from the transcript provided by Thomson Reuters, that investors need to see.

Source: NVIDIA.

No longer a chip companyNVIDIA designs graphics processors, competing with Advanced Micro Devices in the PC gaming market. But according to NVIDIA CEO Jen-Hsun Huang, the company is no longer simply a seller of chips:

NVIDIA has been building an ecosystem around its graphics cards for years. GeForce Experience, the company's software suite for GeForce owners that provides a variety of features, now has 76 million users. GameWorks, the company's suite of code libraries and tools aimed at game developers, has found its way into various blockbuster PC games, providing advanced visual effects optimized specifically for NVIDIA's graphics cards. NVIDIA's Shield devices, including the Shield Android TV console, allows owners of GeForce cards to stream PC games directly to their TVs.

This software effort, along with the extremely successful GTX 970, launched in late 2014, has led NVIDIA to run away with the graphics-card market. During the third quarter of 2015, NVIDIA shipped more than 80% of discrete graphics cards, with AMD a distant second. Just a couple of years ago, NVIDIA's market share was closer to 60%, with AMD a strong No. 2 player, with a 40% share. NVIDIA's strategy of building a platform, introducing switching costs that keep GeForce users from moving to AMD, has so far paid off nicely for the company.

Datacenter momentumNVIDIA's datacenter business, which consists of the company's Tesla GPUs and its GRID graphics virtualization platform, is still a small part of the overall company, generating $97 million of revenue during the fourth quarter, 7% of the total. NVIDIA is already the leading provider of accelerators in the high-performance computing and cloud-computing markets, but the company's focus on deep learning is starting to pay off. NVIDIA CFO Colette Kress explains:

Just a few years ago, NVIDIA was working with 100 companies in the area of deep learning. That number has now ballooned to 3,500, ranging from web-services providers to industrial companies. IBM announced late last year that Watson, its cognitive computing platform, will integrate NVIDIA's Tesla GPUs, providing a 1.7 times performance boost. As the amount of data being generated, as well as the need to analyze that data, continues to grow, NVIDIA is in a good position to capitalize on these trends.

Virtual reality in the enterpriseNVIDIA managed to grow all of its major businesses during the fourth quarter, including its professional visualization segment, which consists of its Quadro GPUs. When it comes to virtual reality, NVIDIA believes that the enterprise could be a major opportunity for the company. Kress explains:

Virtual reality is graphics intensive, requiring powerful graphics processors to ensure that the frame rate remains both high enough and stable enough to not induce discomfort. It's impossible to predict all of the ways that VR technology will be used 10 years from now, but it's safe to say that NVIDIA's graphics processors have a good chance at playing a critical role.

Looking to the futureA mass-market self-driving car is likely still many years away, but Huang believes that NVIDIA's DRIVE PX platform is well positioned to provide the necessary computational horsepower:

NVIDIA's DRIVE PX 2 platform, announced earlier this year, is extremely powerful. The deep-learning platform supports two discrete GPUs based on NVIDIA's upcoming Pascal architecture, as well as two next-gen Tegra SoCs, and is able to perform 8 trillion single-precision floating-point calculations per second. This kind of power is necessary to track a large number of objects, from other cars to pedestrians, as well as to generate a plan based on that information.

What the self-driving car of the future will ultimately look like remains uncertain, and there's no guarantee that NVIDIA's strategy in the area will pay off in the long run. But the DRIVE PX 2 platform is unique, and with NVIDIA already working with 70 companies that are developing self-driving car technologies, the company is laying the groundwork for what could be a very lucrative business.

A strong automotive pipelineWhile NVIDIA's DRIVE PX platform is being used to develop self-driving cars, the company's Tegra chips are already being used to power in-car displays in millions of cars. According to Huang, the company also has a strong pipeline of cars coming to market that include NVIDIA's technology:

This pipeline gives investors a bit of visibility when it comes to NVIDIA's automotive business. During the fourth quarter, automotive sales grew by 68% year over year, to $93 million. With plenty of additional design wins already in the bag, NVIDIA's automotive business should continue to grow going forward.

The article 5 Things NVIDIA Corporation Management Wants You to Know originally appeared on Fool.com.

Timothy Green owns shares of International Business Machines and Nvidia. 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.

Copyright 1995 - 2016 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.