- At $1.1 billion, Q4 2013 revenue declined by 8.1%
sequentially but grew 16.1% y-o-y.
- Fiscal 2013 revenue stood at $4.3 billion, or 7.1% higher
compared to fiscal 2012.
- Owing to the introduction of its Kepler architecture,
Nvidia grew its market share in GPUs and notebooks to 65% and
- Growing Tegra processor shipments led to a higher
proportion of non-PC sales.
- Tegra 4 to start sampling later this year. Nvidia claims to
have already scored more design wins compared to Tegra
) registered 7% annual growth in its fiscal 2013 revenues while
many of its competitors including Intel (
), AMD (
) and Texas Instruments (
) posted annual declines in their calendar 2012 earnings. At $1.1
billion, its Q4 2013 earnings declined by 8.1% sequentially though
this represented 16.1% y-o-y growth on account of higher Tegra
sales and its growing GPU business.
Despite macro headwinds and a sluggish PC market, fiscal 2013
was a record year for Nvidia as it reached $4.3 billion in sales
and increased its gross margin to 52.3%, compared to 51.9% in
Nvidia claims to have increased its GPU market share from 53% to
65% and its notebooks market share from 47% to 66% last year.
It remains committed to investing in new growth opportunities and
has a gamut of products that will sample in 2013 - Tegra 4, i500 4G
LTE modem and Project Shield.
With the increasing revenue contribution from the non-PC
business segment and its dominance in the GPU market, we feel that
Nvidia has strong fundamentals to support a higher valuation.
Additionally, the company has a solid balance sheet with a strong
cash position and no debt.
See our complete analysis for Nvidia
GPU Division Continues To Grow Despite A Sluggish PC
In March 2012, Nvidia launched its new Kepler graphics
processing unit (GPU) architecture, which is the first architecture
to include virtualization technology built right into the
GPU. The company claims that Kepler is its most efficient GPU
architecture to date, and the introduction of the same has
translated into higher market share and margins. Despite flat
global PC shipments, Nvidia's GPU revenue grew by 2% in its fiscal
Nvidia transitioned its Kepler architecture across its GPU
portfolio and started shipping Kepler into its Quadro products last
quarter, which translated into a 10% sequential increase in Quadro
revenue. Weak demand for Quadro products led to a 4.2% y-o-y
decline in Nvidia's professional solution business in Q3 2013.
We believe that the lower demand was on account of enterprise
weakness and feel that the introduction of Kepler architecture will
help the company retain its dominance in the professional graphics
market in the future.
Last year, Nvidia introduced the world's first cloud-based
GPU built on the Kepler architecture. Driven by growing acceptance
of the Kepler architecture, Nvidia reported record revenues from
its notebooks products and managed to gain additional market share
in notebooks as well as desktops.
Tegra 4 Could Bring In Higher Revenues Compared To Tegra
Nvidia's saw a 29.3% increase in its Tegra processors sales in
fiscal 2013. Within this, Tegra products for smartphones and
tablets grew by 50% from $181 million in fiscal 2012 to $541
million in fiscal 2013. Non-PC revenue account for around 30%
of Nvidia's overall revenue, compared to 7% three years
ago. Tegra 3 quad-core processors powered many of the world's
popular devices in 2012 - Google's Nexus 7, Microsoft's
Windows RT Surface tablet, Lenovo's IdeaPad Yoga 11, Fujitsu's
ARROWS X, World first RT device by Asus, etc.
At Consumer Electronics Show 2013, Nvidia introduced the Tegra 4
processor, which it believes to be the world's fastest mobile
processor. Tegra 4 offers six times the GPU horsepower of
Tegra 3, and unlike its predecessor, it
is also LTE compatible. With an optional chipset,
Tegra 4 offers worldwide 4G LTE voice and data support. We
believe that the LTE compatible chipset will better equip
Nvidia to challenge Qualcomm's (
) growing dominance in smartphones, helping it increase its
penetration in the market.
In its Q4 2013 earnings call transcript, Nvidia highlighted that
it has already scored more design wins for Tegra 4 compared to the
total design wins for Tegra 3. In addition to mobile devices,
Tegra 4 is gaining popularity for use in embedded devices such as
cars and gaming devices.
Q1 2014 Outlook
$940 million in revenue, +/-2%
- Lower GPU sales in line with overall expectation in the PC
- Lower Tegra sales as customers reduce demand ahead of Tegra 4
- Gross margins of 52.9%, flat from Q4 2013
- $430 million in operating expenses
- Tax rate of approximately 16%, +/- 1%
- Depreciation & Amortization: $59 to $61
- Capex: $55 to $65 million
We are in the process of updating
our price estimate of $19.14 for Nvidia
See our complete analysis for Nvidia's stock