Strengthening Positions In The Segment Of Professional Visualization Leads NVIDIA Shares To New Heights

In its Q2 report, Nvidia Inc. NVDA beat expectations for revenue and earnings growth. Management has given a strong forecast for July-September 2021.

NVIDIA sales increased 68% YoY, 3% above analyst consensus. Adjusted diluted EPS, on the other hand, fell 52%, beating the market-wide forecast by 2%. The gaming segment remains a key growth driver: revenue from this segment increased by 85% YoY to $ 3.06 billion. Management highlighted strong demand dynamics for the recently unveiled GeForce RTX 3080 Ti and RTX 3070 Ti solutions (RTX, DLSS performance boosts, Reflex and Broadcast), which have expanded the product line to the high end and complemented flagship products.

Also, NVIDIA CEO Jensen Huang pointed to a record increase in the number of laptops with the issuer's graphics cards, noting that RTX (ray tracing) technology continues to drive the laptop update cycle (currently only 20% of laptops are based on the latest Turing and Ampere architectures). In addition, the number of games that support the latest NVIDIA technologies is increasing, which creates an additional boost in demand. At the same time, a factor of uncertainty for the company remains the demand from cryptocurrency miners, the share of which Huang did not indicate.

Sales from the segment of solutions for data centers amounted to $ 2.37 (+ 35% YoY) amid strong demand for server GPUs from cloud providers and high demand for solutions for the A30 - GPU and DPU chips ConnectX-6 (products, manufactured by Mellanox, which NVIDIA bought earlier). The CEO also noted the expansion of the SaaS offering, including NVIDIA Base Command and NVIDIA Fleet Command, for the DGX SuperPOD computing platform.

Growth in the professional visualization segment accelerated to 156%: revenue from it amounted to $ 0.52 billion amid strong demand for the previously presented platform for collaboration and 3D modeling Omniverse, which was integrated with Blender. The sales of the automotive sub-segment show approximately the same dynamics as that of competitors (Qorvo Inc. QRVO, QUALCOMM Inc. QCOM. The growth was driven by the continued recovery momentum in demand.

CMP mining solutions provided revenue of only $ 266 million against the forecasted $ 400 million against the backdrop of a decrease in mining profitability. The head of NVIDIA noted the increase in the number of games in the GeForce NOW library up to 1000.

According to management, negotiations with regulators on the acquisition of ARM have been delayed compared to initial expectations, but NVIDIA CFO Colette Kress is confident of a positive outcome. Management expects third-quarter revenue to reach $ 6.80 billion (+ 43.7% YoY), higher than the consensus forecast of many analysts.

The company presented a very strong report, an important element of which is a significant strengthening of its positions in the professional visualization segment, a steady dynamics of demand for server solutions, and an increase in the volume of deliveries of automotive products. I am forecasting growth in these segments. At the same time, I believe that the issuer is vulnerable to fluctuations in the mining market and a slowdown in momentum in the gaming segment, which could put pressure on the company's valuations.