NVIDIA Corp. (NVDA) Q4 2021 Earnings Call Transcript

NVIDIA Corp. (NASDAQ: NVDA) Q4 2021 earnings call dated Feb. 24, 2021

Corporate Participants:

Simona Jankowski — Vice President of Investor Relations and Strategic Finance

Colette Kress — Executive Vice President and Chief Financial Officer

Jensen Huang — Founder, President and Chief Executive Officer

Analysts:

C.J. Muse — Evercore ISI — Analyst

Vivek Arya — BofA Securities — Analyst

Stacy Rasgon — Bernstein Research — Analyst

Timothy Arcuri — UBS — Analyst

John Pitzer — Credit Suisse — Analyst

Aaron Rakers — Wells Fargo — Analyst

Mark Lipacis — Jefferies — Analyst

Presentation:

Operator

Good afternoon, my name is Mariama and I will be your conference operator today. At this time, I would like to welcome everyone to NVIDIA’s Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. I will now turn the call over to Simona Jankowski, NVIDIA’s Vice President of Investor Relations and Strategic Finance, to begin the conference.

Simona Jankowski — Vice President of Investor Relations and Strategic Finance

Thank you. Good afternoon everyone and welcome to NVIDIA’s conference call for the fourth quarter of fiscal 2021. With me on the call today from NVIDIA are Jensen Huang, President and Chief Executive Officer and Colette Kress, Executive Vice President and Chief Financial Officer. I’d like to remind you that our call is being webcast live on NVIDIA’s investor relations website. The webcast will be available for replay until the conference call to discuss our financial results for the first quarter of fiscal 2022. The content of today’s call is NVIDIA’s property. It can’t be reproduced or transcribed without our prior written consent.

During this call, we may make forward-looking statements based on current expectations. These are subject to a number of significant risks and uncertainties and our actual results may differ materially. For a discussion of factors that could affect our future financial results and business, please refer to the disclosure in today’s earnings release, our most recent forms 10-K and 10-Q and the reports that we may file on Form 8-K with the Securities and Exchange Commission. All our statements are made as of today, February 24, 2021 based on information currently available to us. Except as required by law, we assume no obligation to update any such statements.

During this call, we will discuss non-GAAP financial measures. You can find a reconciliation of these non-GAAP financial measures to GAAP financial measures in our CFO commentary, which is posted on our website. With that, let me turn the call over to Colette.

Colette Kress — Executive Vice President and Chief Financial Officer

Thanks, Simona. Q4 was another record quarter with revenue exceeding $5 billion and year-on-year growth accelerating to 61%. Full year revenue was also a record at $16.7 billion, up 53%. Our Gaming business reached record revenue of $2.5 billion in Q4, up 10% sequentially and up 67% from a year earlier. Full year Gaming revenue was a record of $7.8 billion, up 41%. Demand is incredible for our new GeForce RTX 30 Series products based on the NVIDIA Ampere GPU architecture. In early December, we launched the GeForce RTX 3060 Ti, which joined the previously launched RTX 3090, 3080, and 3070. The entire 30 Series lineup has been hard to keep in stock and we exited Q4 with channel inventories even lower than when we started. Although we are increasing supply, channel inventories will likely remain low throughout Q1.

GeForce RTX 30 Series graphics cards were a holiday sensation due not just to their amazing performance but also to the rich features including our second-generation RTX ray tracing technology and DLSS, AI powered performance accelerator, which massively boosts frame rates in graphically demanding titles. 3,000 games now support RTX including the top battle royale game, Fortnite; the top role playing game, Cyberpunk 2077; the top massively multiplayer online game, World of Warcraft; and the best selling game of all-time, Minecraft. RTX has clearly set the new standard in gaming.

Building on this momentum, at CES in January, we introduced a wave of Ampere architecture gaming products, including our biggest ever laptop launch powered by GeForce RTX 3060, 3070 and 3080 laptop GPUs and with our third generation Max-Q technology. These new thin and lightweight gaming laptops increase performance and energy efficiency by up to 2 times from the prior generation. RTX 3060 laptops start $999 and are faster than the previous generation laptops, which sold for $2,500. The incredible performance, design, and price points of these new laptops will delight the growing universe of gamers and creators as well as students and professionals.

The gaming laptop market has grown seven-fold in the past seven years and momentum is building. With top OEMs bringing to market a record 70 plus laptop models based on the GeForce RTX 30 Series. GeForce laptops as a whole are the fastest growing and one of the largest gaming platforms. Also at CES, we announced the GeForce RTX 3060 GPU priced at $329, extending the 30 Series desktop lineup further into the mainstream. We expect strong demand when it launches this Friday as 60-class GPUs have traditionally been our most popular products.

Starting with the 3060, we’re taking an important step to maximize the supply of GeForce GPUs for gamers. Users are constantly discovering new applications for our powerful, programmable GPUs and cryptocurrency mining is one of them. With rising Ethereum prices, there are indications that miners are behind GPUs. We would like GeForce GPUs to end up with gamers. So we have created new special software drivers that will detect the Ethereum mining algorithm, cutting in half the mining efficiency of the GeForce RTX 3060.

We suspect the significant increase in the Ethereum network hash rate observed over the past few months was driven by a combination of previously installed mining capacity that was reactivated as well as new sales of GPUs and ASICs. Since our GPUs are sold to graphics card manufacturers and then on to distribution, we don’t have the ability to accurately track or quantify their end-use. Analyst estimates suggest that crypto mining contributed $100 million to $300 million to our Q4 revenue, a relatively small portion of our Gaming revenue in Q4.

Cryptocurrencies have recently started to be accepted by companies and financial institutions and show increased signs of staying power. To address industrial Ethereum mining demand, last week, we announced a new line of NVIDIA CMPs or Crypto Mining Processors. Shipments will start in March. CMP’s lack display outputs and have other optimizations that improve crypto mining power efficiency. CMP products will let us gain some visibility into the contribution of crypto mining to our overall revenue. For Q1, we estimate that CMP will contribute approximately $50 million. We plan to sell these products to industrial miners. We will quantify their contribution each quarter for transparency.