Professional visualization growth slows
Earlier in the series, we looked at NVIDIA’s (NVDA) high-growth segments, namely gaming, data center, and automotive. All three reported double-digit growth in fiscal 1Q17, with the data center space leading the way.
These three segments are likely to grow further as trends in the virtual reality, deep learning, and autonomous car spaces pick up. Amid strong growth comes a more mature market of professional visualization, which has been reporting single-digit growth.
In fiscal 1Q17, NVIDIA’s professional visualization segment’s revenue rose 4% YoY (year-over-year) to $189 million, accounting for 14.5% of the company’s revenue. Its growth was driven by higher-end products and mobile workstations.
The segment’s high-end products included the recently launched M6000 GPU (graphics processing unit), which was received well by customers. Some of the early adopters of the M6000 were Toyota (TM), Pixar, and Roche. However, the segment’s YoY growth slowed from 7% in fiscal 4Q16 to 4% in fiscal 1Q17.
Iray: A new hope
NVIDIA is looking to boost its revenue by enhancing its Quadro platform with VR (virtual reality). The company has launched Iray, a rendering tool that can help designers, artists, and scientists to effectively make predictive designs and make real-time changes. Iray has been adopted by Siemens and SolidWorks for predictive design.
Iray takes VR technology a step ahead, to AR (augmented reality). Even Intel (INTC) and Advanced Micro Devices (AMD) are entering the AR market. Intel is powering Microsoft’s (MSFT) AR headset HoloLens, and AMD is powering the Sulon Q headset. Digi-Capital has forecast that VR revenue will reach $30 billion by 2020 and AR revenue will reach $120 billion by 2020.
OEM and IP
While NVIDIA’s professional visualization segment’s revenue growth slowed, its OEM (other equipment manufacturers) and IP (intellectual property) revenue fell.
In fiscal 1Q17, the company’s OEM and IP revenue fell 21% YoY to $173 million, accounting for 13.3% of total revenue. The segment’s revenue has fallen continuously as the company has reduced its exposure to the OEM space.
NVIDIA’s revenue from IP remained constant at $66 million in fiscal 1Q17. However, this revenue will also vanish after its licensing deal with Intel expires in fiscal 1Q18. We’ll look at NVIDIA’s licensing business in the next part of the series.
The VanEck Vectors Semiconductor ETF (SMH) has exposure to 26 semiconductor stocks, including 4.4% in NVDA.