Examining Nvidia's financial results for 1 neighborhood 2023 of the year

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NVIDIANVDA145,48 $

Nvidia (NASDAQ: NVDA) is an American manufacturer of computer components and one of the world's largest developers of graphics processors..

At the end of May, Nvidia presented financial results for the first quarter., which exceeded analysts' expectations:

• revenue increased by 46%, up to $8.288 billion, vs market forecast $8.1bn;
• operating profit decreased by 4%, up to $1.868 billion, against the backdrop of a multiple increase in operating expenses;
• net earnings per share decreased by 16%, with 0,76 to 0,64 $, due to an increase in taxes on 42%. The adjusted figure was 1,36 $ when forecasting 1,29 $;
• management announced the payment of dividends in the amount of 0,04 $. Register Closing Date - 9 June.

Sales structure

The report divides the company's business according to two principles: segments and markets.

Segments. The company has two major segments:

1. Graphics - Includes GeForce GPUs for gaming and PC, GeForce NOW gaming service, Quadro GPUs / Nvidia RTX for enterprise workstations, vGPU software for design and visualization and other products.
2. Computing and networking - within this segment, the company provides solutions for data centers, artificial intelligence, high performance and accelerated computing, as well as networking and internetworking solutions from Nvidia Mellanox, Nvidia Jetson robotics systems and more.

In the first quarter, total revenue increased by 46%, from 5.661 billion to 8.288 billion dollars, against the background of growth of income of a segment "computations and networks", which added 66%, up to $3.672 billion. The main segment "graphics" also showed a decent result.: growth amounted to 34%, up to $4.616 billion.

Markets. Nvidia operates in five growing markets:

1. Games.
2. Data Centers.
3. Professional visualization.
4. Automotive industry.
5. Other.

The following markets performed best in the first quarter:

1. Games - Growth 31% quarter to quarter.
2. Data Centers - Growth by 83%.
3. Professional visualization - growth on 67%.

To a greater extent, this was influenced by high sales of GeForce GPUs and high demand for the company's products with the Nvidia Ampere architecture..

The results of other divisions did not have a significant impact on the overall results - their share is small. The automotive direction decreased by 10% against the background of industry problems with supplies. "Other" decreased by 52% due to weak sales of Crypto Mining Processor - a series of products, designed for cryptocurrency mining.

Sales structure of the company, billion dollars

Segments	1к2022	1k2023	The change
Graphics	3,451	4,616	34%
Computing and networks	2,210	3,672	66%
total revenues	5,661	8,288	46%

Sales structure of the company by segments, billion dollars

Company sales structure by markets, billion dollars

Markets	1к2022	1k2023	The change
Games	2,760	3,620	31%
Data Centers	2,048	3,750	83%
Professional visualization	0,372	0,622	67%
Automotive industry	0,154	0,138	−10%
Other	0,327	0,158	−52%
total revenues	5,661	8,288	46%

Profit

Nvidia's first-quarter net income fell by 15%, from $1.912 billion to $1.618 billion, because of the broken deal to buy Arm. The loss amounted to 1.35 billion dollars. But if you look at the adjusted figure excluding one-time items, then he grew up on 49%, up to $3.443 billion, — the highest quarterly result in the history of the company.

Cash flow from operating activities remained virtually unchanged at $1.731 billion. The main reason is loss., which was offset by receiving large upfront payments from buyers of Nvidia products. Free cash flow decreased by 13%, up to $1.348 billion, due to rising capital costs.

Key financial results of the company, billion dollars

	1к2022	1k2023	The change
Revenue	5,661	8,288	46%
EBITDA	2,237	2,202	−2%
EBITDA margin	40%	27%	-13 p. P.
Net profit	1,912	1,618	−15%
Adjusted net income	2,313	3,443	49%
FCF	1,557	1,348	−13%
net debt	5,985	7,060	18%

Deal with Arm

Nvidia's biggest setback for the past quarter was a $66bn deal to buy British microchip developer Arm Limited from Japanese group SoftBank due to problems with US and European regulators..

Who was against. Major Qualcomm corporations, Microsoft, Intel and Amazon, who use Arm technology, did not support the takeover. Companies feared, that the developments of a British company will become proprietary and this will cause serious damage to competition in the industry.

What's the bottom line?. 7 February 2022 Nvidia and SoftBank reach a definitive agreement, under which the Japanese holding will keep $1.35 billion in prepayments, and Nvidia will keep a 20-year license for Arm.

Management forecasts

After the publication of financial results, management announced the forecast for the second quarter. Basic moments:

• revenue will rise by 24%, from 6.507 billion to 8.1 billion dollars. The company expects, that sales will be $0.5 billion short due to the difficult geopolitical situation and covid restrictions in China;
• gross profit margin will rise to 65,1%, and the adjusted figure is up to 67,1%. Current result for the first quarter - 65,5%;
• operating expenses will decrease from 3.563 billion to 2.46 billion dollars. The adjusted figure will be at the level of 1.75 billion dollars;
• other income and expenses, excluding profits and losses from unaffiliated investments, will amount to $0.04 billion;
• tax rate will be 12,5%, adjusted figure - up to 13,5%.

Comparison with competitors

	EV / EBITDA	P / E	net debt / EBITDA
Nvidia	41,60	48,42	0,63
Intel	6,54	7,33	0,96
AMD	33,16	48,34	−0,61
Broadcom	15,79	27,14	1,82
QUALCOMM	11,41	14,05	0,59

What's the bottom line?

Nvidia Posts Record First Quarter Financial Results: revenue increased by 46%, adjusted net profit — on 49%.

In addition, management provided a good forecast for the next quarter., which was better than market expectations, if you do not take into account geopolitical losses. All this led to an increase in quotations for 5% the day after publication.