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Can Nvidia Break Its $2 Billion Revenue Record in Fiscal 4Q17?

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Nvidia’s revenue on a growth trajectory

In the previous part of this series, we saw that Nvidia (NVDA) reported record earnings in fiscal 3Q17,[1. quarter ended October 30, 2016] driven by strong demand for its Pascal GPUs (graphics processing units).

These earnings were significantly better than the analysts’ and the company’s own expectations. The company expects its revenue to grow further in fiscal 4Q17 as it witnesses strong growth in three of its four growth segments.

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Nvidia’s quarterly revenue crosses $2 billion mark

Fiscal 3Q and fiscal 4Q are seasonally strong quarters for Nvidia, as its core Gaming business gets a significant boost from holiday season sales. However, fiscal 3Q17 has been a special quarter for the company as it reported 63% YoY (year-over-year) growth, as its revenue reached $2 billion, 25% higher than the analysts’ consensus estimate of $1.5 billion.

Revenue by product

Nvidia (NVDA) earns 85% of its revenue from GPUs. These record earnings resulted from a 53% YoY increase in GPU sales, mostly driven by demand for Pascal GPUs.

According to data from Jon Peddie Research, Nvidia’s GPU shipments rose 39% sequentially in the September 2016 quarter, whereas Advanced Micro Devices (AMD) and Intel’s (INTC) GPU shipments rose 20% and 18%, respectively.

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Revenue by business segment

Nvidia (NVDA) has been diversifying its GPU technology from its Gaming segment to other fast-growing businesses such as its Data Center, Automotive, and Professional Visualization sectors. The company has increased its exposure in these markets from 81% in fiscal 1Q16 to 91% in fiscal 3Q17.

It reported 59% sequential growth in its Gaming and Data Center segments, driven by Pascal GPUs.

Revenue guidance for fiscal 4Q17

Nvidia (NVDA) expects to maintain this growth momentum and report even higher revenue of $2.1 billion in fiscal 4Q17 as it continues to ramp up production of all versions of its Pascal GPU. Its fiscal 4Q17 earnings would reflect the sales of:

  • Tesla P40 and P4 GPUs: Data Center segment
  • GeForce GTX 1050 and 1050 Ti GPUs: Gaming segment
  • DRIVE PX 2 orders from Tesla Motors (TSLA): New Car segment
  • Tegra processors for Nintendo

Nvidia stated that Pascal is one of its most successful launches to date. According to Nvidia’s 2016 Investor Day, it took gamers three years to switch to Maxwell GPU and still, 70% have not yet upgraded. This indicates that growth in Pascal sales is here to stay for a few years.

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