Nvidia delivers solid second quarter, ups sales outlook

Nvidia sees a good quarter ahead and touts its Tegra chips for mobile devices.
Written by Rachel King, Contributor

Nvidia turned in a strong second quarter and projected better-than-expected sales for the third quarter.

The company reported second quarter earnings of $151.6 million, or 25 cents a share (statement). The non-GAAP net income was $193.5 million with 32 cents a share on a revenue of $1.02 billion. For the second quarter, Wall Street was expecting Nvidia to report earnings of 25 cents a share on revenue of $1 billion.

Jen-Hsun Huang, NVIDIA president and chief executive officer, said in a statement:

We grew solidly this quarter. Consumer demand for notebooks powered by our GeForce GPU, with its unique Optimus technology, resulted in record revenue for these products.

The future of computing is mobile and visual. With Tegra's momentum and our growing GPU businesses, we are ideally positioned to lead the industry forward.

Although described as "relatively flat " by interim CFO Karen Burns, Nvidia execs pointed to its GPU business as a driver for growth as workstations, desktops, and notebooks this technology have increased.

Rob Csongor, Nvidia's vice president of investor relations, explained during the company's quarterly investors call:

The Sandy Bridge transition continues to drive growth for our discrete GPU business. According to Mercury Research, integrated CPU eroded integrated graphics chip set market share while discrete GPU attach rates remain constant overall. GPU attach rates actually increased in notebook from 33% to 36%. Notebook discrete GPU shipments were up 6.7%. Industry press is confirming what we had expected that while Sandy Bridge graphics still won't come anywhere near the performance of a discrete GPU, according to Toms Hardware, the combination of Sandy Bridge with NVIDIA GPU, delivers the best price performance solution for the PC market.

For the outlook, Nvidia is predicting that GAAP and non-GAAP gross margins will stay flat, but that revenue growth will grow by four to six percent in the third quarter. That revenue growth should top estimates with sales of $1.06 billion to $1.08 billion. Analysts are expecting earnings of 27 cents a share on revenue of $1.048 billion.

For 2011, Wall Street is expecting earnings of $1.02 a share on revenue of $4.08 billion.

Key points:

  • Completed acquisition of soft modem chipsets maker Icera in June
  • Launched the GeForce GTX 580M for gaming notebooks
  • Tesla processors power the fastest supercomputer in Russia
  • Optimus laptop power-saving technology now available on GPUs, top to bottom, and across three generations
  • Six new smartphones (up from two in the previous quarter) using Tegra processors started shipping, including the Motorola Photon 4G and Samsung Galaxy R
  • Four new Tegra-based tablets also launched in the second quarter, including the Samsung Galaxy Tab 10.1

By the numbers:

  • Estimates depreciation and amortization for Q2 2011 to be approximately $53 million to $57 million
  • Capital expenditures are expected to be in the range of $25 to $35 million


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