NVDA Q4 2023 Earnings Review
$NVDA Q4'23 Results:
Financial Results:
⬆️$22.1B rev (+265.3% YoY, +205.5% LQ) beat est by 7.2%
⬆️GM (76.0%, +12.6%pp YoY)🟢
⬆️EBIT Margin (66.7%, +30.0%pp YoY)🟢
⬆️FCF Margin 50.7%, +22.1%pp YoY)🟢
⬆️Net Margin 55.6%, +32.2%pp YoY)🟢
⬆️EPS $5.16 beat est by 11.4%🟢
Segment Revenue
⬆️Data Center $18,404M rev (+409.0% YoY)🟢
➡️Gaming $2,865M rev (+56.5% YoY)🟡
➡️Professional Visualization $463M rev (+104.9% YoY)🟡
↘️Auto $281M rev (-4.4% YoY)🟡
➡️OEM & Other $90M rev (+7.1% YoY)🟡
Operating expenses
↘️S&M+G&A/Revenue 3.2% (3.8% LQ)
↘️R&D/Revenue 11.2% (12.7% LQ)
Dilution
↘️SBC/rev 4%, -0.9%pp QoQ
⬆️Dilution at 0.1% YoаY, +0.7%pp QoQ🟢
Guidance
↗️Q1'24 $24.0B guide (+233.7% YoY) beat est by 8.3%
Key points from NVDA Fourth Quarter 2023 Earnings Call:
Record Revenue and Growth:
NVIDIA announced a record-breaking revenue of $22.1 billion for Q4, marking a 22% increase sequentially and a staggering 265% rise year-over-year. The fiscal year 2024's revenue reached $60.9 billion, showcasing a 126% growth from the preceding year.
Data Center Leadership:
The fiscal 2024 data center revenue soared to $47.5 billion, tripling from the previous year, propelled by the NVIDIA Hopper GPU computing platform and InfiniBand networking. This achievement underscores the industry's shift towards accelerated computing and the burgeoning field of generative AI. Over half of the data center revenue was attributed to large cloud providers, emphasizing the robust demand for NVIDIA’s data center solutions for both internal operations and external cloud services.
Generative AI and Inference Expansion:
AI is fueling growth across NVIDIA's divisions, particularly in data centers where AI inference and training for generative AI and large language models are pivotal. Inference revenue, constituting roughly 40% of the data center revenue, has seen significant growth, driven by generative AI applications. NVIDIA’s comprehensive software stack and AI frameworks are facilitating swift AI adoption and implementation across diverse sectors such as automotive, healthcare, and financial services. The advent of generative AI is forging new computing paradigms and applications, necessitating accelerated computing and specialized AI data centers, dubbed "AI generation factories."
Broad Market Adoption:
NVIDIA's innovations are finding applications across various sectors, demonstrating the widespread demand and utility of NVIDIA's AI and computing solutions.
Software Business Achievement:
NVIDIA's software and services have achieved an annualized revenue rate of $1 billion, highlighting the growing importance and success of NVIDIA's software offerings alongside its hardware products.
Gross Margin Insights:
NVIDIA experienced favorable gross margins in Q4 and anticipates similar trends for Q1, attributed to beneficial component costs. However, the company expects gross margins to normalize to the mid-70s percentage range for the rest of the fiscal year.
Future Opportunity Investments:
NVIDIA is committed to investing in significant future opportunities, projecting mid-30% growth in both GAAP and non-GAAP operating expenses for fiscal 2025.
Chip Development Advances:
NVIDIA is gearing up for the H200 series launch, with initial shipments expected in the second quarter. The upcoming product line is anticipated to face supply constraints due to high demand. Additionally, NVIDIA is venturing into ethernet networking with Spectrum-X, aimed at AI-optimized networking in data centers.
Demand Overview:
NVIDIA's demand continues to outstrip supply across its offerings, including data center GPUs and new products like Spectrum-X. Strong demand for AI infrastructure spans several customer categories, including cloud service providers, consumer internet companies, enterprise software platforms, and various industries. Sovereign AI initiatives and enterprise-wide AI adoption are further driving demand. Despite supply improvements, NVIDIA anticipates its next-generation products will remain supply-constrained due to exceptional market demand for NVIDIA's technologies.
Management comments on the earnings call.
AI, Hopper GPU:
"The world has reached the tipping point of a new computing era. The $1 trillion installed base of data center infrastructure is rapidly transitioning from general purpose to accelerated computing." - Colette Kress
"Fourth quarter data center growth was driven by both training and inference of generative AI and large language models across a broad set of industries, use cases, and regions. The versatility and leading performance of our data center platform enables a high return on investment for many use cases, including AI training and inference, data processing, and a broad range of CUDA accelerated workloads. We are delighted that supply of Hopper architecture products is improving. Demand for Hopper remains very strong." - Colette Kress
Innovations, H200 Chip ramp, Spectrum-X:
"We are on track to ramp H200 with initial shipments in the second quarter. Demand is strong as H200 nearly doubles the inference performance of H100." - Colette Kress
"We're ramping Spectrum-X. We're doing incredibly well with Spectrum-X. It's our brand-new product into the world of ethernet... We're on track to ship Spectrum-X this quarter." - Jensen Huang
Demand:
"We expect the demand will continue to be stronger than our supply provides and through the year and we'll do our best." - Jensen Huang
Future Expectations:
"Supply of Hopper architecture products is improving. Demand for Hopper remains very strong. We expect our next-generation products to be supply constrained as demand far exceeds supply." - Colette Kress
"The computer industry is making two simultaneous platform shifts at the same time. The trillion-dollar installed base of data centers is transitioning from general purpose to accelerated computing... Generative AI has kicked off a whole new investment cycle to build the next trillion dollars of infrastructure of AI generation factories." - Jensen Huang
Leadership:
"NVIDIA's full stack computing platform with industry-specific applications frameworks and a huge developer and partner ecosystem, gives us the speed, scale and reach to help every company -- to help companies in every industry become an AI company." - Jensen Huang