NVIDIA (NASDAQ: NVDA) investors have been laughing all the way to the bank for the past few years, while the share price of the graphics card specialist has risen by more than 240% due to the tremendous growth in its video game and data center businesses.
This year is unlikely to be any different, given NVIDIA’s latest results and guidance. The company delivered everything in the fourth quarter of fiscal 2021 to deliver outstanding numbers, and it did. Revenues and earnings rose the highest time, reaching consensus estimates by large margins. What’s more, NVIDIA delivered excellent guidance for the current quarter, requiring 72% growth in the previous year to $ 5.3 billion, dropping Wall Street’s estimate of just $ 4.51 billion.
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The company left fiscal 2021 with $ 16.7 billion in revenue, up 53% from the previous year. Its fourth-quarter fiscal revenue rose 61% year-on-year to $ 5 billion. NVIDIA is thus kicking off the new financial year with a bang, and there are some solid growth modes that can help it maintain its impressive run.
NVIDIA’s biggest catalyst thrives
The video games delivered an excellent performance for NVIDIA last quarter. Gaming revenue rose 67% year-on-year to $ 2.5 billion, accounting for half of the company’s sales. NVIDIA said it’s an incredible demand for its latest graphics cards from the RTX 30 series, based on the Ampere architecture. On the latest conference call on earnings, Colette Kress, chief financial officer, said: “The whole series of the 30 series was difficult to keep in stock and we left the fourth quarter with the channel stock even lower than when we started “Although we increase supply, channel inventory is likely to remain low during the first quarter.”
Clearly, NVIDIA expects the huge demand for its graphics processing units (GPUs) to continue. This is not surprising, as demand for gaming hardware is holding up well after last year’s pandemic-driven boom. What’s more, NVIDIA’s RTX 30 series cards have given its large installed base of old GPU users a good reason to upgrade.
The Ampere maps are nearly twice as efficient as the previous generation Turing maps, which provide a large increase in frame rates while consuming much less power. More importantly, they are aggressively priced. This caused a stir among customers for the latest NVIDIA cards, which led to a strict offer.
In addition, the demand for cryptocurrency is also increasing NVIDIA’s gaming business. Citing analysts’ estimates, the company says cryptocurrency miners bought $ 100 million to $ 300 million worth of graphics cards last quarter.
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While not a huge number compared to the company’s revenue from games, it is noteworthy that the demand for cryptocurrency has historically contributed to a shortage of GPUs and higher prices. In addition, it should be noted that NVIDIA hit nearly $ 2 billion in revenue from cryptocurrency-related sales a few years ago, allowing it to profit from this market again due to the growing interest in digital currencies.
NVIDIA wants to make the most of the cryptocurrency-related opportunity. It recently released dedicated cryptocurrency miners (CMPs) that are planned to be sold to industrial miners. The company forecasts $ 50 million in CMP revenue this quarter. While it will not make NVIDIA’s needle move significantly, it may help the company free up supply to satisfy the demand of the real players and increase sales.
Mordor Intelligence estimates that the demand for gaming GPUs could increase by an annual rate of 14% by 2026. This is good news for NVIDIA, as it dominates the discrete GPU market for the game by 80%, according to Jon Peddie Research, and it could gain more share of the competition Advanced micro-devices by improving the supply chain.
The data center business is crushing it
There were concerns about the slowdown in sales of NVIDIA’s data center three months ago. The company calmed the issues in the last quarter as revenue from the data center nearly doubled year-over-year to $ 1.9 billion, accounting for 38% of its total revenue.
Such massive growth has been driven by an increase in sales of NVIDIA’s A100 data center GPU. The A100 platform was a hit with top cloud computing companies, and NVIDIA says it’s still in the early stages of adoption. It is not surprising that the disc maker expects this product to drive ‘continued growth this year’.
CEO Jensen Huang also added that the company’s new BlueField 2 data processing unit (DPU) could see an increase in the second half of the year, driven by customer adoption and engagement trends the company has seen so far. has. Huang believes that “every single data center mode will one day be equipped with a DPU.” As such, you should not be surprised to see that this product is booming fast and will eventually become a major revenue opportunity for NVIDIA within a few years.
Analysts expect NVIDIA to deliver only 20% growth in the new financial year, but the company could easily exceed the estimate, given the way it started the year. Therefore, investors who have not yet jumped on the NVIDIA bandwagon may still be considering buying this high-growth stock, as it looks like it will continue its hot streak.
This article represents the opinion of the author, who may not be in agreement with the ‘official’ recommendation position of a Motley Fool premium advisory service. We are furry! Questioning an investment thesis – even one of our own – helps us all to think critically about investments and to make decisions that help us become smarter, happier and richer.