Drill Down Earnings, Ep. 470: NVIDIA Q2 earnings – ($NVDA) – A Deep Dive with Cory Johnson

Cory Johnson (0:04)

Welcome to Drill Down Earnings. We have quarterly results out from Nvidia, an exciting fiscal second quarter for this all-important company, the largest company in the world by market cap. I'm Cory Johnson. I'm the largest technology analyst by height. Probably, period, I'm six foot five. You wouldn't know that, but I'm the event technology and the chief market strategist for Epistrophy Capital Research. We do look at the 50 most important companies of technology and Nvidia, obviously, is one of those companies. It's a very important quarter for Nvidia because I think there's, you know, these concerns that tend to raise their head every few months about whether or not data center growth is slowing down and what Nvidia can do to kind of tell us it's going to continue and or not. And in this quarter, they beat the estimates. Wall Street loves to know if that's going to be a beat. And it was a good beat. Ninety six point two billion dollars in revenues in the quarter. These numbers are just incredible. Two dollars and forty six cents in earnings.

When we look a little bit deeper beyond the miss or the beat, what we see is a company that is very big, growing really fast and also gave us longer term guidance that we've ever seen before telling us that while revenues grew in the last quarter, an incredible one hundred and six percent, they also promised that over the next year, revenues are going to grow at a 70 percent clip. And while that might be less and it is less, think about what that means. I mean, you've got a company that's doing nearly a hundred billion dollars in quarterly revenues, saying that's nothing. It's going to be 70 percent more in a year.

Very impressive numbers here. Ridiculous gross margins of 75 percent for this company. Gross margins for a semiconductor business, just great.

And yet selling everything that they possibly can, saying if they could get more capacity, could sell more chips here. So as a result, they're charging a lot for those. And their operating margins also just fantastic. 66.2 percent, they are staying hot. How? Well, the Vera Rubin Intervolume Production expected to be 20 percent of data center revenue in the quarter, the next quarter.

And they think that one of the really interesting conversations on the conference call was the notion that for every gigawatt of usage in a data center, Nvidia is getting more and more money. So what they say is, well, they were normal, they had been at like $20 billion in revenues for every gigawatt of compute. Now we're looking at $40 billion with the Vera Rubin chip and everything around that, all their networking, all the other things that they sell into the data center. Again, it was $18 billion, roughly, for Hopper. And then when they moved up to the Grace Blackwell, it was $25 billion. Now they say, with Vera Rubin, it's going to be $40 billion in revenue for every gigawatt built. Really impressive.

The great business and their networking business, Spectrum XE, Ethernet, up 2.6 times in a year over year basis. They don't break out the numbers, but they give us that in the commentary. And their great CPU, passing $5 billion in trailing revenues. Now, what they do give us in terms of a revenue blend is three categories. They give us what they sell in a hyperscaler. So the Googles, the Metas, the Amazon Web Services, perhaps Oracle is probably in that group as well.

And then we look at the Neoclouds, the AI Clouds, Industrial, Enterprise, Sovereigns. That was actually 42% of their business. Really impressive. And then their edge computing business, that would be like robotics, drones, and other things around the edge, not in the data center. Now, the hyperscale business is still cranking, growing at 104% in a year over year basis. We don't have numbers going back more than 12 quarters here, so which is why if you're looking at my charts on YouTube or Spotify, you're seeing a weird percentage line with some consistent columns on how big the business is. But the business is huge, and again, growing at 104%. But their non-hyperscalar business, again, the Sovereigns, NeoClouds, it's growing faster at 134%.

I'm working on a research report about this. Anyone watching this wants to give me some info on that?

Hit me up, because I've got a lot to learn here. But that business of the Sovereigns and the non-hyperscalers is really positive for them, not least of which, the hyperscalers are talking about developing other chips or using competitors. The non-hyperscalers just want more and more Nvidia, apparently. Now their edge computing growth, that business has slowed, but it's still growing at a 27% clip.