What’s it About?

NVIDIA reported third quarter 2017 earnings yesterday, which blew past Wall Street estimates. Revenue and earnings grew 32% and 41% respectively compared to last year as the company reported solid growth numbers across all major segments.

Why is it Important?

NVIDIA’s stock price has more than tripled in the last 12 months, and the stock has been trading at a lofty +40 times earnings.The high valuation multiples at which NVIDIA trades shows that the market keeps expecting NVIDIA to continue its double digit growth for the foreseeable future. The earnings beat, therefore, has added significance because it allows NVIDIA’s stock price to keep moving north instead of south.

The Details

  • Earnings per share came in significantly higher than the expected 94 cents, at $1.33.

  • Revenue came in at $2.64 billion actual vs. $2.362 billion expected.

  • Overall revenues grew on the back of a 108% increase in data center revenues on strong demand from AI projects at large companies. This division accounted for 19% of NVIDIA’s revenues in Q3.

  • Gaming revenue was up 25% to $1.56 billion on a YoY basis. The segment accounts for 60% of total revenues as of Q3.

  • Key drivers in gaming were the growing E-Sports market and strong market demand for GeForce GTX 10 series GPU products.

What Else?

Q4 revenue is expected to hit within a one to two percent margin of $2.65 billion. A midpoint achievement would equate to 22% YoY growth. It’s a bit of a slowdown, but not overly conservative.