EPS of $0.06 decreased by 95.3% from previous year
Gross margin of 63.3%
Net income of 1.41B
""Generative AI applications will help almost every industry do more faster." - Jensen Huang" - Jensen Huang
NVIDIA Corporation (NVDA) Q4 2023 Financial Results: Insights and Future Outlook
Executive Summary
In Q4 2023, NVIDIA Corporation reported revenues of $6.05 billion, a slight sequential increase of 2% but a substantial decline of 21% year-over-year, largely impacted by a correction in channel inventory and macroeconomic uncertainties. Despite these challenges, NVIDIA’s data center segment continued to show resilience, with revenue reaching $3.62 billion, up 11% year-over-year. The company’s advancements in AI infrastructure, particularly with the launch of the H100 GPU, have generated significant interest and demand among hyperscale cloud providers. Management emphasized the ongoing relevance of AI technologies, bolstered by the rising adoption of generative AI applications across various sectors, suggesting a pivotal moment for NVIDIA as it leads in this transformative landscape.
Balance Sheet Health:
- Total Assets: $41.18 billion
- Total Liabilities: $19.08 billion
- Shareholders' Equity: $22.10 billion
Cash Flow Metrics:
- Free Cash Flow: $1.74 billion
- Net Cash Provided by Operating Activities: $2.25 billion
NVIDIA's effective tax rate was reported at -9.78%, reflecting tax benefits contributing to improved net income despite lower revenues. Management expressed optimism regarding revenue growth from AI and the introduction of new products this fiscal year.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
6.05B
-20.83%
2.02%
Gross Profit
3.83B
-23.32%
20.65%
Operating Income
1.26B
-57.71%
108.99%
Net Income
1.41B
-52.91%
107.94%
EPS
0.06
-95.25%
111.11%
Key Financial Ratios
currentRatio
3.52
grossProfitMargin
63.3%
operatingProfitMargin
20.8%
netProfitMargin
23.4%
returnOnAssets
3.43%
returnOnEquity
6.4%
debtEquityRatio
0.54
operatingCashFlowPerShare
$0.09
freeCashFlowPerShare
$0.07
dividendPayoutRatio
6.93%
priceToBookRatio
21.36
priceEarningsRatio
83.47
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Management's commentary during the Q4 earnings call focused on several key themes:
- Generative AI Growth: Jensen Huang stated, "Generative AI's versatility and capability has triggered a sense of urgency at enterprises... to develop and deploy AI strategies." This highlights the crucial position NVIDIA holds in the AI supercomputing market.
- Resilience in Data Center Segments: Colette Kress noted, "Revenue was $3.62 billion was down 6% sequentially and up 11% year-on-year. Fiscal year revenue was $15 billion and up 41%." This signals strong long-term demand fundamentals despite short-term fluctuations.
- Innovative Products: Management emphasized that "adoption of our new flagship H100 data center GPU is strong," and emphasizes its exceptional performance compared to previous models.
"Generative AI applications will help almost every industry do more faster." - Jensen Huang
— Jensen Huang
"Strong sequential growth in data center, gaming... Revenue for the first quarter is expected to be $6.5 billion, plus or minus 2%." - Colette Kress
— Colette Kress
Forward Guidance
For Q1 FY2024, NVIDIA expects to see sequential revenue growth across all major platforms, primarily driven by data center and gaming segments. Revenue guidance is $6.5 billion, plus or minus 2%. Management anticipates significant contributions from emerging AI applications. They also predict continued margin resilience, with gross margins expected to remain around the mid-64% range. NVIDIA’s strategy to enhance AI market penetration through partnerships and product expansions will be critical in navigating potential challenges from competition in the growing generative AI space.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
NVDA Focus
63.34%
20.80%
6.40%
83.47%
INTC
39.20%
-8.06%
-0.66%
-40.88%
MRVL
47.50%
1.64%
-0.10%
-613.54%
MU
39.50%
22.90%
2.99%
10.53%
AMD
50.70%
5.54%
1.19%
89.29%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Given NVIDIA's strong positioning in AI technology and robust performance metrics despite macroeconomic challenges, coupled with tailored guidance reflecting expected growth in revenue and margins, the outlook for investors remains favorable. With innovative products in pipeline and increasing enterprise focus on AI applications, NVIDIA stands to benefit significantly in the coming years. However, investors should monitor developments in competition and potential supply chain vulnerabilities as key factors influencing performance.
Key Investment Factors
Growth Potential
NVIDIA is poised for growth driven by its leadership in AI technologies, particularly in data center solutions. The shift towards generative AI and ongoing demand for GPUs in cloud infrastructures are expected to provide substantial growth opportunities.
Profitability Risk
The company faces risks associated with macroeconomic uncertainties, fluctuating demand particularly in the consumer segment, and potential supply chain disruptions related to raw material shortages and geopolitical tensions, notably in China.
Financial Position
NVIDIA's financial position is solid with a healthy cash balance of $3.39 billion and total assets of $41.18 billion against total liabilities of $19.08 billion, indicating robust liquidity and financial stability.
SWOT Analysis
Strengths
Strong brand and market leadership in GPU technology for gaming and AI.
Robust R&D capabilities driving innovation in AI and machine learning.
Diverse revenue streams across gaming, data center, and automotive technology.
Weaknesses
Significant reliance on the consumer graphics business, which can be cyclical.
Potential impact of supply chain disruptions on production and delivery.
Opportunities
Expanding data center revenue as AI adoption accelerates across industries.
Growing market for AI-driven applications and services in various sectors, including finance and healthcare.
Strategic partnerships with cloud service providers enhancing market access.
Threats
Intensifying competition from AMD, Intel, and emerging AI hardware providers.
Rapid technological changes requiring continuous innovation to maintain competitive edge.