NVIDIA may be struggling to shift its high-end GeForce RTX 4000 series graphics cards into the PCs of consumers but it certainly isn’t struggling to find new and lucrative measures of alternative income following a massive boost in quarter profits and revenue as the company starts to shift away from the consumer sector.
In the third quarter of fiscal 2024, NVIDIA showcased immense growth, reporting a remarkable 206% year-over-year increase in revenue, totaling $18.12 billion.
This impressive surge followed a challenging period in the semiconductor industry during the same quarter last year. Notably, revenue from the core data center division soared by an astounding 279% year-over-year, reaching $14 billion, compared to $3.8 billion in the corresponding quarter of the previous year.
NVIDIA’s profits soared to $10 billion, marking a substantial 588% increase from the $1.4 billion reported in the same quarter last year, surpassing analysts’ expectations of $16.2 billion in revenue.
The third quarter results revealed unprecedented triple-digit earnings growth for a multibillion-dollar company. Operating income and net income surged by 652% and 588%, reaching $11.5 billion and $10 billion, respectively.
In a positive turn of events for NVIDIA, its profit margins improved in the face of declining U.S. inflation and amid rapid interest rate hikes by the Federal Reserve. The gross margin, representing the ratio of profit after direct costs to total sales, reached 75%, marking an 18.9% increase compared to last year.
The data center segment emerged as the revenue leader, contributing around 80% of its total earnings at $14.5 billion and experiencing a remarkable growth rate of 279%, followed closely by the professional imaging division.
Such strong sales and grown are mostly attributed to the likes of NVIDIA’s H100 and A100, alongside the fact that the company is effectively bankrolling the everlasting market boom of artificial intelligence of which GeForce / Quadro hardware has proven to be the dominate solution in terms of readymade hardware that’s accessible with software that works without issue.
NVIDIA’s GeForce continues to show solid performance in the third quarter. With a revenue of $2.8 billion the division experienced an impressive 81% year-over-year growth, though this is mainly attributed due to NVIDIA’s sheer dominance when it comes to sales of OEM / Prebuilt systems, not so much in terms of actual DIY product sales.
This positive trend is attributed to a stabilizing supply chain, according to NVIDIA CFO Collette Kress. She emphasized that increased sales to partners, normalized channel inventory levels, and strong demand for the GeForce RTX 40 series GPUs contributed to the division’s growth during the back-to-school period and the start of the holiday season.
However, Kress cautioned that sanctions preventing the sale of NVIDIA products to countries like China, Russia, Saudi Arabia, and the United Arab Emirates could impact data center revenue in the current quarter. Sales to these countries previously accounted for approximately 20%-25% of data center sales, and this is expected to influence the performance in Q4 FY2024.
Despite beating earnings per share expectations at 69 cents, NVIDIA’s shares experienced fluctuations in the aftermarket, reflecting investor concerns about the potential slowdown in data center sales due to sanctions.
The future of NVIDIA remains bright, though it’s quite evident at this point given the sheer hike in retail pricing for their latest GeForce RTX hardware that NVIDIA sees gamers as an afterthought as majority of their profit and revenue is now being generated from high-margin enterprise / data center product offerings, backed by a steep demand when it comes to the AI gravy train.
Gamers aren’t willing to drop $1200 in purchasing an RTX 4080 graphics card which now utilizes a lower rate X103 core chip, the AD102 based RTX 4090 costs well over $1600 and is severely cut down from what the core itself is entirely capable of, NVIDIA simply does this because they’re allocating the full core towards Quadro / AI oriented hardware which costs thousands of dollars more than consumer grade goods giving the company a much larger profit margin.
Which is why NVIDIA are struggling to sell sufficient units in what can only be described as one of the worst graphics card generations in a long time, the only GeForce products that are selling are the RTX 4070 ($600) and below, higher-end SKUs simply aren’t selling in similar numbers as previous generations and they don’t really need to anymore.
They continually chase any and all golden gooses that become available such as cryptocurrency beforehand and now artificial intelligence which is why their “Gaming” division has pivoted versus the Data Center.
NVIDIA makes more than enough revenue with GeForce when it comes to the contracts they have with OEM system builders and distributors, as the former “graphics company” now seeks new heights in propelling themselves higher and higher outside of mundane consumerist oriented hardware.
GeForce remains profitable but it is no longer a crutch that NVIDIA has to facilitate any longer, which is why they’ve gone above and beyond entering new and lucrative new markets at every available opportunity such as machine learning, artificial intelligence and self-driving autonomous vehicles which for the time being has paid dividends propelling the companies stocks higher, holding form over a trillion dollars in market capital.
I look forward to what trickle fed nonsense the next year will bring to the DIY PC sector.
