Nvidia Blows Through Q1 Expectations, Raises Q2 Guidance

Thursday, May 27, 2021 | Kate Stalter
Nvidia Blows Through Q1 Expectations, Raises Q2 Guidance

Semiconductor maker Nvidia (NASDAQ: NVDA) slipped in pre-market trade Thursday, following a better-than-expected earnings report for fiscal 2022’s first quarter. 

Shares fell $2.70, or 0.43%, to $625.30 ahead of the bell. 

The company, which specializes in graphics chips, earned $3.66 per share on revenue of $5.66 billion. Wall Street had pegged net income at $3.28 a share on revenue of $5.41 billion. 

Those results marked year-over-year gains of 103% and 84%, respectively. 

In the earnings statement, Nvidia founder and CEO Jensen Huang said, “We had a fantastic quarter, with strong demand for our products driving record revenue.”

He added that data center business continues to expand on the back of the company’s artificial intelligence chips, which process computer vision, conversational AI, natural language understanding and recommender systems. 

Huang noted that Nvidia’s RTX chip “reinvented computer graphics and is driving upgrades across the gaming and design markets. Our partners are launching the largest-ever wave of Nvidia-powered laptops. Across industries, the adoption of Nvidia computing platforms is accelerating.”

Mellanox Acquisition Exceeding Expectations

Huang also mentioned Mellanox, maker of high-speed Ethernet high-performance computing chips. Nvidia completed its acquisition of Mellanox in April 2020. 

“Mellanox, one year in, has exceeded our expectations and transformed Nvidia into a data-center-scale computing company,” said Huang. 

Nvidia is planning to acquire U.K.-based chipmaker Arm in a transaction valued at approximately $40 billion. The deal is facing regulatory challenges, but Huang said he remains optimistic. 

“We continue to make headway with our planned acquisition of Arm, which will accelerate innovation and growth for the Arm ecosystem. From gaming, cloud computing, AI, robotics, self-driving cars, to genomics and computational biology, Nvidia continues to do impactful work to invent a better future,” he said.

The company paid quarterly cash dividends totaling $90 million in the quarter. Its current per-share rate is $0.64 per share, for a yield of 0.10%

Nvidia is slated to issue the next quarterly dividend of $0.16 per share on July 1 to shareholders of record as of June 10.

Drilling down to business segments, the company reported that gaming revenue in the quarter more than doubled, to $2.76 billion. Data-center revenue grew 79% to $2.05 billion.

Raising Q2 Revenue Guidance

The company guided toward revenue of $6.3 billion in the current quarter. That’s well above the $5.5 billion Wall Street had expected. In the quarter ended in Jul 2020, Nvidia’s revenue totaled $3.87 billion.

Analysts on the earnings call asked about the impact of the global semiconductor shortage. 

In response, chief financial officer Colette Kress said the company has “made a deliberate effort on the gaming perspective to supply to our gamers the cards that they would like given the strong demand that we see. So that will also support the sequential growth that we’re receiving.”

With Wednesday’s results, Nvidia notched its fourth quarter in a row of accelerating revenue growth. It’s the third quarter of earnings acceleration. 

On May 21, the company declared a four-for-one split, payable in the form of a stock dividend. Nvidia expects to distribute the additional shares on July 19, pending approval at the shareholders’ meeting on June 3. The move would increase the number of common shares from 2 billion to 4 billion. 

Nvidia returned 80.28% over the past year, and 14.51% in the past three months. Shares closed Wednesday at $628, up $2.09, or 0.33%. The stock has been consolidating below its April 15 high of $648.57. Upside volume has been above average recently, as the stock advanced 12% over the past six sessions. 

Institutional ownership has grown over the past three quarters, a signal of confidence in the stock’s future prospects - even before Wednesday’s blowout results. 

Return on equity of 43% is another strong point for would-be investors.

NVIDIA is a part of the Entrepreneur Index, which tracks some of the largest publicly traded companies founded and run by entrepreneurs.

7 Semiconductor Stocks Set to Gain From the Chip Shortage

Who knew that something so tiny could create such a big problem? However, that’s the case with the semiconductor industry. Chip manufacturers are facing supply chain disruptions due to the Covid-19 pandemic.

Semiconductors are in high demand for the big tech companies who need the chips to power the servers for their data centers. But they are also needed for much of the technology we take for granted including laptops, tablets, mobile phones, gaming consoles, and automobiles – a sector that seems to be at the root of the current crisis.

Any weekend mechanic knows that even traditional internal combustion cars are heavily reliant on electronics. In fact, electronic parts and components account for 40% of a new, internal combustion vehicle. That’s more than doubled since 2000.

However as it turns out, some manufacturers may have overestimated how soon consumers would be ready for an “all-electric” future. And that meant that they didn’t forecast how much demand there would be for the kind of chips needed to do the mundane, but vital tasks of steering, braking, and even powering windows up and down.

Part of the problem is that U.S. businesses are heavily reliant on countries like China and Taiwan for their semiconductors. In fact, only about 12.5% of semiconductor manufacturing is done in the United States.

Of course, this creates a tremendous opportunity for the companies that manufacture these chips. And it comes at a good time. The semiconductor sector is notoriously cyclical and was coming down from the elevated demand for the 5G buildout.

In this special presentation, we’ll give you a list of seven semiconductor companies that you can invest in to take advantage of this opportunity.

View the "7 Semiconductor Stocks Set to Gain From the Chip Shortage".

Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
NVIDIA (NVDA)1.7$745.55flat0.09%88.23Buy$670.32
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