Nvidia’s Earnings report and call

Nvidia reported another great quarter. Revenue was up and growth rates continued to be strong although slightly lower than earlier.

Operating income followed.

And for the first time Nvidia was able to generate over 1B$ in operating cashflow and in free cashflow.

The earnings release and conference call revealed the following:

  • The cryptocurrency mining impact on the business is hard to quantify but is reported as OEM revenue. Although significant in size, it is not going to distract Nvidia from the strategic business areas. It remains an opportunistic opportunity for the company. The revenue was 70m$ in Q3 vs 150m$ last quarter. Whenever a currency becomes too large or too difficult to mine it become viable to optimise it in an ASIC. 
  • The newly introduced Volta processor is delivering 10x performance in deep learning applications, far outpacing Moore’s law. Volta is already ramping significantly in all major cloud data centres.
  • The TensorRT platform suggests a Nvidia move into a more software-based approach in the hyper-scale data centre.
  • Three major Chinese customers have adopted the Volta V100. Alibaba, Baidu and Tencent will join Amazon, Facebook, Google and Microsoft in using the GPU for AI in their datacenters.
  • Volta has also penetrated the main server customers enabling server-based AI.
  • The attendance and downloads of AI-related conferences and software has increased by 5 to 10x over the last couple of years
  • Within the data centre, the main areas for GPU’s are
    • Supercomputing or high-performance computing. This is a 11B$ market in which Nvidia has a 15% (733m$) market share.
    • Deep Learning Training
    • Inference – the queries made by billions of internet users to the data centre. Today this is supported by CPU’s but GPU’s can increase the network speed by 100x
    • AI as a Service or Public Cloud AI Services – multi-billion dollar opportunity for Nvidia.
    • Vertical Industries: Automotive ADAS, Healthcare Diagnostics, Manufacturing, Robotics, Logistical industries
  • Nvidia sees the vertical industries as the largest opportunity and they are now ready to address them with the GPU capabilities in the cloud.
  • Volta is only in its infancy and the expectation is that it will continue to grow while the graphics part of the business is seasonal.
  • Cloud customers either have Volta capability or has announced it and the customer need is expected to be high.
  • GPU for graphics is sold one at the time, heavily influenced by seasonality and game launches. E-sports is becoming increasingly attractive and having the best gear drives down latency and impacts a players ability to win. The other element is high graphically attractive content. The last element is social – people want to share their brightest moments and that requires performance.
  • Volta is the single biggest processor that humanity has ever made. 20B transistors, 3D packing, the fastest memories available,  a couple of hundred watts replacing hundreds of CPU’s.
  • Nvidia is a one architecture company. This is not a limiting factor as there is so much software, numerical libraries, inference software, compilers and other. Jen-Hsun believes this is a massive advantage for Nvidia and makes the company perform at a level that requires much more people if you use multiple architectures.
  • Customers have many choices on what architecture to select. Jen-Hsun believes that the strong commitment that Nvidia has to a single architecture is convincing customers that Nvidia is a safe bet.
  • The world is experiencing computing problems on a scale we have not seen before and High-Performance Computing and AI have never been more attractive.
  • On the cooperation and announcements of AMD and Intel, Jen-Hsun believes Rodger leaving AMD is a great loss for the company. The Modern GPU is not a (G)PU’s anymore. They are not limited to graphical.

You can get the Q4-17 Strategic Factbook on Nvidia here