NVIDIA Corp. (NVDA) reported fourth-quarter 2010 earnings per share on a non-GAAP basis (excluding one-time items) of 23 cents, exceeding the Zacks Consensus Estimate of 15 cents per share. 10 out of 25 analysts have raised their estimates for the fourth quarter 2010 in the last 30 days.
Despite the upward revision, the quarterly profit beat the analysts’ expectation on higher than expected revenue, which has more than doubled in the quarter from the year-ago period.
Revenue
NVIDIA reported revenue of $982.5 million, up 8.8% from the previous quarter and up 104.2% from the year-ago quarter, marking the fourth consecutive quarter of strong revenue growth. Revenue increased as a result of improvement in the company’s PC, professional solutions and workstation businesses.
The core GPU business showed strength in this quarter, up almost 22.0% sequentially and 97% year over year. In this segment, desktop and notebook GPU segments were up 19% and 27%, respectively, quarter over quarter. Workstation graphics revenue was also up 25% sequentially. Demand was strong, although the company witnessed some supply constraints. Graphics processors accounted for NVIDIA’s largest revenue increase in the quarter. The company expects to benefit from growing mobile computing.
Operating Results
Gross margin on a non-GAAP basis was 44.7%, up 400 basis points from 40.7% in the previous quarter and up 1,660 basis points from 28.1% a year ago. Gross margin improved sequentially as a result of cost reductions due to yield improvements and reduced waste, favorable mix resulting from a stronger professional business, better mix within the PC GPU business and increased volumes.
The company reported net income on a non-GAAP basis of $131.1 million, or 23 cents per share, compared with a net income of $77.4 million, or 13 cents in the previous quarter. Earnings rose from a loss of $145.3 million or 27 cents reported in the year-ago period.
Inventory at the end of the quarter was up 19% to $330.7 million. Inventory days on hand were 60 at the end of the quarter. Inventory in the channel remained low at around five weeks. Cash, and cash equivalents and marketable securities at the end of the quarter were approximately $1.73 billion, up approximately $94 million from the third quarter.
Guidance
For the first quarter of fiscal 2011, the company expects revenue to be flat from the fourth quarter due to supply constraints. GAAP gross margin is expected to be in the range of 44.0% to 45.0%. GAAP operating expenses are expected to be flat sequentially at $305.0 million. The tax rate is expected to be 12% to 14% assuming a renewal of the U.S. R&D tax credit, or 14% to 16% otherwise. The guidance reflects the better-than-expected yield due to the shift to its 40nm process.
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