With the bell ringing on Wall Street, nVidia [NASDAQ:NVDA] reported their 3Q earnings for 2009. Despite various reports that believed this graphics giant would take a hit as a result of rumors regarding their inventory - the rumors could not have been further from the truth. nVidia’s 3Q 2009 earnings stood at $903.2 Million, with profits passing the $100M mark for the first time in several quarters. The company achieved a profit to the tune of $107.6 Million(GAAP) and $110.3 Million(non-GAAP). If we compare this to last year's 3Q results, the company achieved growth in both revenue and profit with 74% profit increase of over last year [$61.1 Million].
These results are quite spectacular the moment you compare them to Street estimates. Analysts polled by Thomson Reuters reported that they had expected revenues at $835.1 Million. Even Wedbush Morgan, known for its more optimistic and more right-on-target approach estimated $865 million revenue. However, nVidia beat out analysts by a huge sum spurring the huge jump in nVidia’s stock price. At the close of trading, NVDA was up 2.34% at $12.26, and in after hours trading NVDA climbed another 3.7% to $13.00 - a 6.04% daily gain. This puts nVidia’s current Market Cap at $6.72B compared to AMD’s $3.22B. One can also compare these numbers against our Q2'09 report and see that Nvidia has made quite a jump in both revenue and profit quarter over quarter turning a large loss($105M GAAP) into a huge profit.
So, what does this all mean? It means that Nvidia has been able to stay the course and continue to chase the business aspects that bring in the money and work with the right partners in order to attain profitability consistently even when the skies are cloudy. For example, Jen-Hsun Huang often said that bulk of GPU volume goes to GeForce, but the bulk of profitability comes from Quadro line. This came very true in the past quarter - the ability to follow the workstation market and to continue to hold their dominance there allowed nVidia to increase their profit margins.
In addition to that, they have also begun to sell many TESLA based products which are already beginning to gain market wide adoption within their respective target market. The conference call didn't go in depth on the amount of Tesla orders in the actual quarter, but we learned of several deals which meant that instead of creating a $175 GeForce card, the company opted to sell that GPU inside a $1499 Tesla C1060 card. One of the reasons we can expect to see nVidia’s profits to continue to grow can potentially be from their newer technologies which have only recently begun to see market adoption, such as Tegra.
In the future, we would expect nVidia to continue to make all of the products that they do now, but with a shift of the profitability going from discrete graphics cards and shifting more towards cGPUs and SoC solutions like Fermi and Tegra.
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