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The Secret behind Nvidia’s Fiscal 1Q18 Earnings Beat

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Riding the cloud computing wave

Nvidia (NVDA) did the unexpected in its fiscal 1Q18 (calendar 1Q17), with revenue and profit numbers that expanded from one year ago, handily topping expectations. But what’s really powering Nvidia?

Nvidia, long known as a provider of GPUs (graphics processor units), is getting support from multiple sources. The company is riding technology waves in areas like cloud computing, artificial intelligence, and autonomous driving. Its graphics chips are being used by Amazon.com (AMZN), Microsoft (MSFT), and IBM (IBM) to power their artificial intelligence systems and cloud data centers.

Nvidia’s 1Q18 results showed that the company’s branching out of its primary gaming business is both fueling growth and supporting revenue diversification.

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Revenue by segment

The company reported revenue of $409.0 billion in its data center division in fiscal 1Q18, implying a ~100% increase from one year ago. On average, analysts were expecting revenue of $318.2 million from this segment.

The company’s automotive business posted annual revenue growth of 24% to $140.0 million. Nvidia’s automotive unit produces self-driving systems like DRIVE PX 2, which has been adopted by Tesla (TSLA). Its gaming business, on the other hand, posted a 50.0% revenue increase to $1.03 billion, accounting for 53.0% of the company’s overall revenue.

Revenue surges 48%

Nvidia’s overall revenue of $1.94 billion represented a 48.4% annual rise and surprised analysts, who were expecting revenue of $1.91 billion. Its adjusted EPS (earnings per share) of $0.85 also topped the consensus estimate of $0.66.

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