On The Fly: What to watch for in Nvidia's earnings report
Nvidia (NVDA) is scheduled to report results of its first fiscal quarter after the market close on May 10, with a conference call scheduled for 6:00 pm ET. What to watch for: 1. OUTLOOK: During the company's last earnings call, Nvidia said it sees returning $1.25B to shareholders in FY19, through ongoing quarterly cash dividends and share repurchases. The company also expects first quarter revenue of $2.9B plus or minus 2%, with consensus $2.47B. Additionally, Nvidia said it sees first quarter GAAP and non-GAAP gross margins to be 62.7% and 63.0%, respectively, plus or minus 50 basis points. 2. SELF-DRIVING VEHICLES: Nvidia, which has been testing self-driving technology in New Jersey, Santa Clara, Japan and Germany, has suspended all of its testing globally in the wake of an incident involving one of Uber's self-driving cars killing a woman in Arizona, Reuters reported on March 27, citing a source at a GPU conference. Meanwhile, speaking at the opening keynote of GTC 2018, NVIDIA founder and CEO Jensen Huang announced NVIDIA DRIVE Constellation, a cloud-based system for testing autonomous vehicles using photorealistic simulation. "Deploying production self-driving cars requires a solution for testing and validating on billions of driving miles to achieve the safety and reliability needed for customers. With DRIVE Constellation, we've accomplished that by combining our expertise in visual computing and datacenters. With virtual simulation, we can increase the robustness of our algorithms by testing on billions of miles of custom scenarios and rare corner cases, all in a fraction of the time and cost it would take to do so on physical roads," said NVIDIA Automotive VP Rob Csongor. DRIVE Constellation will be available to early access partners in the third quarter of 2018. 3. GPU SHORTAGE: Back in March, Nvidia CEO Jensen Huang addressed the shortage of Nvidia GPUs, citing Ethereum distributed ledgers as the cause and stating the company is not in the business of cryptocurrency or distributed ledgers, according to TechCrunch. "(Cryptocurrency) is not our business," he said. "Gaming is growing and workstation is growing because of ray tracing...We're sold out of many of our high-end SKUs, and so it's a real challenge keeping (graphic cards) in the marketplace for games," he said, adding "At the highest level the way to think about that is because of the philosophy of cryptocurrency -- which is really about taking advantage of distributed high-performance computing - there are supercomputers in the hands of almost everybody in the world so that no singular force or entity that can control the currency." 4. GAMING STRENGTH: On April 10, Morgan Stanley analyst Joseph Moore upgraded Nvidia to Overweight from Equal Weight, stating that he sees gaming strength offsetting cryptocurrency weakness in the near-term while progress in data center inference expands the company's long-term opportunity. The analyst also said he believes Nvidia is at a solid entry point as potential headwinds from cryptocurrency shortages coming to an end are clearly in sight due to the potential for sharp declines in ethereum mining. In addition, Moore said while he remains positive on other opportunities in the memory supply chain and artificial intelligence inference, Nvidia's footprint continues to expand and it's becoming increasingly clear Nvidia will be the most direct beneficiary of trends in machine learning.