Nvidia (NASDAQ:NVDA) Posts Better-Than-Expected Sales In Q4, Provides Optimistic Guidance For Next Quarter

Kayode Omotosho /
2022/02/16 4:26 pm EST
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Leading designer of graphics chips Nvidia (NASDAQ:NVDA) beat analyst expectations in Q4 FY2022 quarter, with revenue up 52.7% year on year to $7.64 billion. Guidance for next quarter's revenue was $8.1 billion at the midpoint, 11.1% above the average of analyst estimates. Nvidia made a GAAP profit of $3 billion, improving on its profit of $1.45 billion, in the same quarter last year.

Is now the time to buy Nvidia? Access our full analysis of the earnings results here, it's free.

Nvidia (NVDA) Q4 FY2022 Highlights:

  • Revenue: $7.64 billion vs analyst estimates of $7.42 billion (2.87% beat)
  • EPS (non-GAAP): $1.32 vs analyst estimates of $1.22 (7.96% beat)
  • Revenue guidance for Q1 2023 is $8.1 billion at the midpoint, above analyst estimates of $7.28 billion
  • Inventory Days Outstanding: 90, up from 82 previous quarter
  • Gross Margin (GAAP): 65.4%, up from 63% same quarter last year

“We are seeing exceptional demand for NVIDIA computing platforms,” said Jensen Huang, founder and CEO of NVIDIA.

Founded in 1993 by Jensen Huang and two former Sun Microsystems engineers, Nvidia (NASDAQ:NVDA) is a leading fabless designer of chips used in gaming, PCs, data centers, automotive, and a variety of end markets.

The biggest demand drivers for processors (CPUs) and graphics chips at the moment are secular trends related to 5G and Internet of Things, autonomous driving, and high performance computing in the data center space, specifically around AI and machine learning. Like all semiconductor companies, digital chip makers exhibit a degree of cyclicality, driven by supply and demand imbalances and exposure to PC and Smartphone product cycles.

Sales Growth

Nvidia's revenue growth over the last three years has been very strong, averaging 37.4% annually. And as you can see below, last year has been especially strong, with quarterly revenue growing from $5 billion to $7.64 billion. Semiconductors are a cyclical industry and long-term investors should be prepared for periods of high growth, followed by periods of revenue contractions (which can sometimes offer opportune times to buy).

Nvidia Total Revenue

This was a fantastic quarter for Nvidia with 52.7% revenue growth, beating analyst estimates by 2.87%. This marks 9 straight quarters of revenue growth, which means the current upcycle has had a good run, as a typical upcycle tends to be 8-10 quarters.

However, Nvidia believes the growth is set to continue, and is guiding for revenue to grow 43% YoY next quarter, and Wall St analysts are estimating growth 18.8% over the next twelve months.

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Product Demand & Outstanding Inventory

Days Inventory Outstanding (DIO) are an important metric for chipmakers, as it reflects the capital intensity of the business and the cyclical nature of semiconductor supply and demand. In a tight supply environment, inventories tend to be stable, allowing chipmakers to exert pricing power. Steadily increasing DIO can be a warning sign that demand is weak, and if inventories continue to rise the company may have to downsize production.

Nvidia Inventory Days Outstanding

This quarter, Nvidia’s inventory days came in at 90, one day below the five year average, showing that despite the recent increase there is no indication of an excessive inventory buildup at the moment.

Key Takeaways from Nvidia's Q4 Results

With a market capitalization of $662 billion, more than $21.2 billion in cash and with free cash flow over the last twelve months being positive, the company is in a very strong position to invest in growth.

We were impressed by the very optimistic revenue guidance Nvidia provided for the next quarter. And we were also excited to see the really strong revenue growth. On the other hand, it was less good to see the inventory levels increase slightly. Overall, we think this was a really good quarter, that should leave shareholders feeling very positive. But investors might have been expecting more and the company is down 1.72% on the results and currently trades at $260.78 per share.

Nvidia may have had a good quarter, so should you invest right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

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The author has no position in any of the stocks mentioned.