Nvidia zooms by earnings targets thanks to graphics chip demand from cars and games

Graphics chip maker Nvidia reported earnings for its fIrst fiscal quarter ended April 30 that beat Wall Street’s expectations.

Nvidia’s results are a bellwether for the PC industry, as the company is one of the largest makers of graphics chips. Its results are also indicators of the health of sectors such as PC gaming hardware, graphics-enhanced data center computing, deep learning, and car computing. The PC market isn’t growing like it once did, but Nvidia still did well.

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The Santa Clara, California-based company reported non-GAAP earnings of 46 cents a share (up 39 percent from a year ago) on revenue of $1.30 billion, up 13 percent from a year ago.

Analysts had expected non-GAAP earnings of 31 cents a share on revenue of $1.27 billion. Nvidia has an estimated 81 percent share of the discrete graphics card market, according to Jon Peddie Research. Nvidia’s stock is up 4.8 percent to $37.30 a share in after-hours trading. Nvidia’s outlook for the second fiscal quarter is revenue of $1.35 billion and gross profit margins of 58 percent.

“We are enjoying growth in all of our platforms — gaming, professional visualization, data center and auto,” said Jen-Hsun Huang, CEO of Nvidia, in a statement “Accelerating our growth is deep learning, a new computing model that uses the graphics processing unit’s (GPU’s) massive computing power to learn artificial intelligence algorithms. Its adoption is sweeping one industry after another, driving demand for our GPUs.”

He added, “Our new Pascal GPU architecture will give a giant boost to deep learning, gaming and VR. We are excited to bring a new wave of innovations to the markets we serve. Pascal processors are in full production and will be available later this month.

Gaming revenue was $687 million, up from $587 million a year ago, thanks in part to interest in virtual reality headsets. Professional visualization was $189 million, up from $181 million a year ago. Data center revenues were $143 million, up from $88 million a year ago. Auto revenue was $113 million, up from $77 million a year ago. And original equipment manufacturer and intellectual property revenue was $173 million, down from $218 million a year ago.

Nvidia grew up as a PC graphics chip company, and it is the last stand-alone maker of such chips, in competition with microprocessor makers Intel and AMD. But Huang has dedicated most of the time in Nvidia’s recent press conferences to Nvidia’s attempts to create supercomputers for cars, which could fuel innovations such as dashboard electronics, infotainment systems, and self-driving cars. He also recently announced its new consumer PC graphics chips based on its Pascal architecture.

The company unveiled the graphics processing units (GPUs) at a live event in Austin, Texas, on Friday night. The Nvidia GeForce GTX 1080 and 1070 GPUs represent the newest generation of graphics for consumer computers, and they come at a time when 3D graphics is being pushed to its limit by virtual reality headsets.

The consumer GPUs come a month after Nvidia unveiled the very first Pascal-based GPU, the P100, which was targeted at deep learning neural networks. Pascal is a new master design, dubbed an architecture, for a whole generation of chips that also come with a new manufacturing process. The process, based on the Taiwan Semiconductor Manufacturing’s 16 nanometer FinFET node technology, represents a new spin of Moore’s Law, or the prediction that the number of transistors on a chip doubles every couple of years. This process will enable chips that are faster, smaller, and cheaper than previous generations.

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The previous generation of chips used the 28-nanometer TSMC process that has been available to Nvidia and rival Advanced Micro Devices since 2012. With the new process, Nvidia was able to create the P100 with 15 billion transistors on a single chip. The GTX 1080 and 1070 are expected to be slimmed-down versions of the P100. The GPUs are expected to have about 3,584 CUDA cores.

Patrick Moorhead, analyst at Moor Insights & Strategy, said in an email, “Nvidia again crushed it this quarter and we’re finally seeing the revenue and profit dollars come from their investments in deep neural networks for cognitive computing and artificial intelligence. These cards for the datacenter just started shipping and I believe we will see even more growth in future quarters. I’m also liking what they have done with automotive, where they are shipping infotainment today and also taking services revenue for self-driving cars. This specialization is margin-rich, too, the farther up the value chain they go.”

He added, “Going forward, it’s important that the company flawlessly executes consumer Pascal, the GeForce GTX 1080 and 1070, and even more importantly, the lower price points, where the majority of the consumer revenue is driven from. I’m interested to see how quickly Pascal goes into the mainstream price points, as that’s exactly where I expect AMD to bring in Polaris.”