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What’s Driving NVIDIA’s Revenue in Fiscal 2018?

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Semiconductor industry revenue

NVIDIA’s (NVDA) stock has been one of the top-performing stocks in the S&P 500 Index (SPY), and investors and analysts remain optimistic about its future growth prospects. Semiconductor peers Micron (MU) and Advanced Micro Devices (AMD) have performed well for the same reason.

This increased optimism came as the global semiconductor industry’s quarterly revenue crossed $100 billion for the first time in calendar 2Q17. The industry’s revenue rose 6.1% sequentially to $101.4 billion, according to IHS Markit—the highest second quarter growth the industry has witnessed since 2014—driven by AMD’s and NVIDIA’s strong sequential revenue growth of 24.7% and 14.6%, respectively.

However, AMD and NVIDIA did not make it to the top five semiconductor companies by revenue. This segment is dominated by Intel (INTC) and Samsung (SSNLF), which together account for 30% of the market.

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NVIDIA’s revenue

Over the past five years, NVIDIA’s revenue has grown at a CAGR (compound annual growth rate) of 12%, with the majority of the growth coming in fiscal 2017 and 2018. The biggest growth driver was the introduction of Pascal GPU (graphics processing unit) in gaming and data center. Now, its next-generation Volta architecture should deliver a significant performance boost over that of Pascal.

In fiscal 2Q18, NVIDIA’s revenue rose 15% sequentially to $2.23 billion, surpassing its own guidance of $1.95 billion, of which about $150 million came from crypto cards. The second-biggest growth came from gaming and professional visualization, with both segments growing 15% sequentially.

The biggest disappointment was the slowdown in the data center segment. Fiscal 2Q is normally a slow quarter for the data center, but the growth in fiscal 2Q17 was slower than normal, matching the growth rate of Intel.

Fiscal 3Q18 revenue guidance

Fiscal 2Q and 3Q are seasonally strong quarters for NVIDIA. For fiscal 3Q18, the company expects to report revenue of $2.35 billion, representing a sequential growth of 5%—way below the fiscal 3Q17 sequential growth of 40% it saw when it launched its Pascal gaming GPU.

Although NVIDIA has not launched any new gaming GPUs, it has launched Volta data center GPU, which is witnessing strong demand. Notably, the demand for crypto cards remains strong.

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