NVIDIA Earnings Review: 3 Key Takeaways

It’s safe to say that technology stocks have been hot lately. With the Nasdaq rising close to all-time highs and tons of companies in the sector ripping up off of their March lows, many investors are wondering if the recent momentum is sustainable. When you look at the valuations of some of these companies, it’s a fair question to wonder whether or not they can live up to the potential that the market is pricing in. That’s why we are here to help you sort through the companies that are fool’s gold and identify which ones you can bank on for continued growth.

Last week, one of the strongest performing stocks in the technology sector reported its Q1 earnings and it’s safe to say the chipmaker experienced a very strong quarter. The stock has been absolutely soaring over the last several months and doubled from its March lows, which is why it’s a good idea to dive into the numbers from the earnings report to determine whether or not the stock has more room upwards. Let’s take a look at 3 key takeaways from NVIDIA’s recent earnings report below.

Huge Year-Over-Year Revenue Growth

One of the first things worth mentioning about NVIDIA’s Q1 earnings report is the fact that it grew revenue by 39% year-over-year to $3.08 billion. This is huge growth for the chip-making company and a testament to how their business will likely remain strong even during the uncertain economic environment. Analysts were anticipating $2.98 billion in revenue for the company, which means long-term investors should be pleased with the beat.

This revenue growth highlights the strong performance of one of the most innovative companies in the semiconductor space. If you think about where NVIDIA’s revenue figures will go from here, you have to like their prospects for continued growth thanks to their data center and gaming revenue streams. Data centers are becoming a necessity for almost every major business and more people are gaming than ever before, which means the demand for NVIDIA’s computer processing chips is not going away anytime soon. This company is executing its vision at an extremely high level and the revenue growth reflects that.

Strong Data Center Numbers

A large portion of the revenue growth figures for NVIDIA came from data center sales, which were impressive in Q1, to say the least. The company reported stellar year-over-year data center revenue growth of 80%. When you look at how much revenue NVIDIA’s data center products are pulling in, it’s very encouraging to see this type of growth. Data center revenue came in at a record $1.14 billion for Q1.

You can think of a data center as a facility that stores and shares applications and data. As more and more companies move their operations into the cloud, the need for data center products and services continues to rapidly increase. NVIDIA has some very interesting innovations for data centers such as NVIDIA Data Center GPUs which is an accelerated computing platform that assists with machine learning and high-performance computing processes. The bottom line here is that NVIDIA is well-positioned to continue helping companies advance both their cloud computing and artificial intelligence capabilities. This is a company creating truly fascinating technology that continues to set NVIDIA apart from its competitors.

Forward Guidance

If you’ve been following earnings season over the past month, you probably noticed that the vast majority of companies did not offer forward guidance estimates. That’s why another key highlight from NVIDIA’s Q1 earnings is the fact that they were able to provide forward guidance for Q2. The company expects revenue to come in at $3.65 billion with GAAP gross margins of 58.6% for the second quarter of their fiscal year.

This is worth noting because it signifies that NVIDIA has clarity and confidence in their sales and expenses estimates for Q2, which is not true for the majority of companies in today’s uncertain economy. Although NVIDIA made an acquisition that will be reflected in the Q2 operating expenses, investors have to be excited about the strong revenue growth estimates in Q2.

A Stellar Quarter

You can’t deny that NVIDIA had a stellar first quarter after reviewing the key takeaways from their earnings report. It seems that this cutting-edge tech company is poised to continue their rapid growth and will likely deliver strong results in Q2 as well, which bodes well for their stock price going forward. Although the valuation for NVIDIA might be too high for some investors, don’t be surprised if NVIDIA is trading in the $400’s sometime in the near future.