NVIDIA Corp. (NVDA) reported third quarter 2012 adjusted earnings per share of 31 cents, significantly beating the Zacks Consensus Estimate of 26 cents.
The company reported third quarter 2012 revenue of $1.07 billion, up 4.9% from the previous quarter and 26.4% from the year-ago quarter.
Within business segments, GPU business inched up 1.0% compared with the prior quarter. Desktop GPU revenue surged 23.0% in the quarter. This gain was posted despite a $47.3 million decline in the company’s chipset revenue, which the company intends to dispose going forward. Notebook GPU revenue decreased as compared with the prior quarter.
The Professional business delivered revenues of $230.3 million, up 9.5% sequentially and was largely driven by the growth in Quadro professional graphics products.
The Consumer business increased 14% over the prior quarter, primarily due to growth in Tegra sales as well as seasonal strength in game console revenue.
Operating Results
Gross margin on a GAAP basis was 52.2%, up from 51.7% in the previous quarter and 46.4% in the year-ago quarter. Gross margin exceeded the company’s expectations during the quarter, primarily on the back of strong demand in the high-end segments of the company’s desktop GPU products, and record sales in the company’s Quadro professional graphics products. On a non-GAAP basis, gross margin improved to 52.5% from 51.9% reported in the previous quarter.
GAAP operating expense in the quarter stood at $359.6 million versus $351.3 million in the previous quarter and $288.3 million in the year-ago quarter.
The company reported net income of $178.3 million or 29 cents per diluted share on a GAAP basis, compared with a net income of $151.6 million or 25 cents in the previous quarter and $84.8 million or 15 cents per share in the year-ago-quarter.
Excluding special one-time items but including stock-based compensation expenses, adjusted net income was $188.5 million or 31 cents per diluted share compared with $82.5 million or 14 cents per share in the year- earlier quarter.
Balance Sheet & Cash Flow
The company exited the quarter with cash, cash equivalents and marketable securities balance of $2.75 billion, up from $2.47 billion in the previous quarter. Balance for inventories during the quarter stood at $319.6 million, down from $361.9 million.
Guidance
For the fourth quarter of fiscal 2012, the company expects revenue is expected to be relatively flat or two percent on either side from the third quarter. GAAP and non-GAAP gross margin are expected to be flat to up 0.5% from the previous quarter. GAAP operating expenses are expected to be approximately $372 million while non-GAAP operating expenses are expected to be approximately $330 million.
Our Take
Nvidia Corp. is a worldwide leader in visual computing technologies. The company reported decent third quarter results and is optimistic about its long-term growth with the gradual recovery in demand for graphic chips. The company launched Tegra 3, the world’s first quad-core processor for super phones and tablets.
Moreover, the recent acquisition of data chip manufacturer Icera will add value to its product portfolio. The newly introduced NVIDIA PhysX technology will likely attract more gaming customers. However, NVIDIA’s performance may be tempered slightly by the economic slowdown in Europe and increased competition.
Currently, NVIDIA holds a Zacks #3 Rank, implying a short-term Hold rating.
