Investors should focus on the big picture after the tech giant’s latest results.
Shares of Nvidia ( NVDA -3.53% ) fell 7.5% following the release of the company’s fiscal 2022 fourth-quarter results on Feb. 16. That market reaction is a tad surprising given that Nvidia crushed Wall Street’s expectations nicely thanks to terrific growth in its top and bottom lines.
Nvidia posted record quarterly revenue of $7.64 billion, up 53% from the prior year, while adjusted earnings popped 69% year-over-year to $1.32 per share. Analysts were looking for $1.23 per share in earnings on revenue of $7.42 billion, but outstanding growth in three of its biggest businesses helped it beat expectations.
The graphics specialist also delivered a sizzling outlook, calling for 43% year-over-year revenue growth in the current quarter to $8.1 billion, compared to analysts’ revenue expectations of $7.3 billion. The steep decline in Nvidia stock despite such impressive numbers doesn’t seem justified, especially considering that the company looks all set for solid growth over the next five years at least.
Let’s see where Nvidia could stand after five years, and why investors could make a smart move by buying the stock right now. Image source: Getty Images The gaming and data center businesses will power Nvidia higher
Gaming was Nvidia’s biggest source of revenue last quarter, generating nearly 45% of its top line. Nvidia’s gaming revenue increased 37% year-over-year to $3.4 billion during the quarter thanks to the robust demand for its graphics processing units (GPUs) across both desktops and notebooks.
Nvidia has bombarded the market with an army of laptops and notebooks powered by its graphics cards. CFO Colette Kress remarked on the company’s latest earnings conference call that its RTX 30 series cards will be powering more than 160 new laptop designs. At the same time, demand for Nvidia’s high-end desktop graphics cards led to record desktop revenue last quarter.
It is easy to see why Nvidia’s gaming business registered such terrific growth last quarter, and is on track to repeat that performance once again in the current one, as the guidance suggests. With 83% of the discrete GPU market under its control, according to Jon Peddie Research, Nvidia is in a solid position to corner most of the incremental sales in this market.
The GPU market is expected to clock impressive growth over the next five years. Allied Market Research estimates that the GPU market could clock 33.6% annual growth for the next five years, and exceed $200 billion in value by 2027. Nvidia is unlikely to loosen its grip over this space thanks to its technology lead over rivals.
Even better, the company is expected to release its next generation of gaming GPUs this year, which could pack more than twice the computing power of the current generation of cards. As such, Nvidia’s hegemony in the GPU market is here to stay, and should accelerate its growth over the next five years.
The data center business, on the other hand, produced nearly 43% of Nvidia’s revenue last quarter. The segment’s revenue increased 71% year-over-year, which means that it grew at a faster pace than the company’s gaming business. Again, the massive growth in this segment isn’t surprising, as the company reportedly commands over 80% of the data center GPU market.
Hyperscale and cloud customers are buying Nvidia’s data center GPUs hand over fist, with revenue from these customers more than doubling over the prior year. Meanwhile, Nvidia’s revenue from GPUs, which are aimed at data centers, tripled year-over-year on account of the growth in artificial intelligence (AI) workloads.
Third-party research forecasts that the data center GPU market could be worth more than $20 billion by 2027, clocking in at an annual growth rate of 42% for the next five years. Nvidia is in an outstanding position to make the most of this opportunity thanks to its solid market share and fast-growing sales. The professional visualization business could explode
Nvidia’s professional visualization business generated a record $643 million in revenue last quarter, recording 109% growth over the prior-year period. The segment’s outstanding growth was driven by an increase in demand for more expensive workstations, as well as the need for creating hybrid work environments using the company’s graphics processing abilities.
Duke Energy , for instance, is using Nvidia’s GPUs to map, view, and maintain its energy production and delivery facilities. Motion, on the other hand, is using the company’s graphics cards to provide predictive vehicle maintenance. It wouldn’t be surprising to see more companies use Nvidia’s GPUs to digitize their physical operations, especially considering the […]
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