Nvidia(US:NVDA)2024-08-29 01:04Financial Data and Key Metrics - Revenue for Q2 was $30 billion, up 15% sequentially and 122% year-on-year, exceeding the outlook of $28 billion [162] - Data center revenue reached a record $26.3 billion, up 16% sequentially and 154% year-on-year, driven by strong demand for NVIDIA Hopper GPU computing and networking platforms [162] - Gaming revenue was $2.88 billion, up 9% sequentially and 16% year-on-year, with strong demand across consoles, notebooks, and desktops [102] - Automotive and robotics revenue was $346 million, up 5% sequentially and 37% year-on-year, driven by new customer ramps in self-driving platforms and AI cockpit solutions [124] - GAAP gross margins were 75.1%, and non-GAAP gross margins were 75.7%, down sequentially due to a higher mix of new products within the data center and inventory provisions for low-yielding Blackwell material [109] - Cash flow from operations was $14.5 billion [109] Business Line Data and Key Metrics - Ethernet for AI revenue, including the Spectrum-X platform, doubled sequentially, with hundreds of customers adopting the offerings [2] - Pro visualization revenue was $454 million, up 6% sequentially and 20% year-on-year, driven by AI and graphic use cases, including model fine-tuning and Omniverse-related workloads [3] - Networking revenue increased 16% sequentially [57] - The NVIDIA gaming ecosystem continues to grow, with over 2,000 titles in the GeForce NOW library, the most content of any cloud gaming service [59] - Automotive is expected to drive multi-billion dollars in revenue across on-prem and cloud consumption as next-generation AV models require significantly more compute [126] Market Data and Key Metrics - Data center revenue in China grew sequentially in Q2 and remains a significant contributor, though it is below pre-export control levels [56] - Sovereign AI revenue is expected to reach low-double-digit billions this year, driven by countries recognizing AI expertise and infrastructure as national imperatives [10][18] - The enterprise AI wave has started, with most Fortune 100 companies working with NVIDIA on AI initiatives across industries and geographies [10] - Cloud service providers represented roughly 45% of data center revenue, with more than 50% stemming from consumer Internet and enterprise companies [134] Company Strategy and Industry Competition - NVIDIA is transitioning from general-purpose computing to accelerated computing, with every data center expected to have GPUs in the future [45][46] - The Blackwell platform, set to ramp in Q4, is a step-function leap over Hopper, offering 3 to 5 times more AI throughput in power-limited data centers [83][98] - NVIDIA is focusing on sovereign AI opportunities, with countries investing in their own AI infrastructure to incorporate local language, culture, and data [18][41] - The company is driving the generational performance of its products to reduce energy consumption and computing costs [49] - NVIDIA is expanding its networking footprint with NVLink, Quantum InfiniBand, and Spectrum-X, which is on track to become a multi-billion dollar product line [38][100] Management Commentary on Operating Environment and Future Outlook - Management highlighted the strong demand for Hopper and the anticipation for Blackwell, with Blackwell expected to be a game-changer for the industry [72][120] - The enterprise AI wave is accelerating, with companies leveraging NVIDIA's AI Enterprise platform to transform their businesses [159] - Generative AI momentum is accelerating, with frontier model makers racing to scale to the next AI plateau [154] - Management expects Q3 revenue to be $32.5 billion, plus or minus 2%, with continued growth in Hopper architecture and Blackwell sampling [33] - Full-year operating expenses are expected to grow in the mid-to-upper 40% range as the company develops its next generation of products [60] Other Important Information - NVIDIA announced a new AI Foundry service to supercharge generative AI for enterprises, leveraging Meta's Llama 3.1 models [39] - The company is working with Foxconn to power digital twins of physical plants producing Blackwell systems [40] - NVIDIA's software, SaaS, and support revenue is expected to approach a $2 billion annual run rate exiting this year [115] - The company repurchased $7.4 billion in shares and paid cash dividends in Q2, with a new $50 billion share repurchase authorization approved [127] Q&A Session Summary Question: Shape of revenue growth and Blackwell ramp [13] - Answer: Blackwell offers multiple configurations, including air-cooled and liquid-cooled options, with significant demand for liquid cooling in data centers [29] Question: Geographic revenue dynamics [15] - Answer: The U.S. was down sequentially, while several Asian geographies were up, with China performing well due to gaming, data center, and automotive contributions [15] Question: Sovereign AI growth outlook [51] - Answer: Sovereign AI is a unique and growing opportunity, driven by countries' desires to have their own generative AI incorporating local language and culture [18] Question: Hopper and Blackwell demand [155] - Answer: Hopper demand remains strong, with Blackwell expected to ramp in Q4, offering significant performance improvements [21][150] Question: Blackwell product cycle and NVLink dynamics [95] - Answer: Blackwell is designed as a rack but sold as disaggregated components, with integration handled by OEM and ODM partners [70][71] Question: Gross margin drivers [91] - Answer: Gross margins are expected to remain in the mid-70% range, with slight variations in Q4 due to product transitions [92] Question: Long-term growth factors [63] - Answer: The company is focused on scaling AI models to drive down costs and energy consumption, with accelerated computing being key to sustainability [45][49] Question: Customer ROI and CapEx sustainability [129] - Answer: Customers investing in NVIDIA infrastructure are seeing immediate ROI, with accelerated computing offering significant cost and energy savings [43][129] Question: Vertical integration and supply chain [81] - Answer: NVIDIA's supply chain is disintegrated, allowing it to serve a wide range of ecosystem partners, which is a key strength [23][94] Question: Blackwell mask changes and production timeline [148] - Answer: The Blackwell mask change is complete, with no functional changes, and production is on track to begin in Q4 [128]