Nvidia (NASDAQ: NVDA) is slated to report its fourth-quarter and full-year results for fiscal 2022 after the market close on Wednesday, Feb. 16.
Investors in the graphics chip specialist will probably be approaching the report with optimism. The company has beaten Wall Street’s consensus earnings estimate in at least the past six consecutive quarters. In addition, investors will be eager to hear what management has to say on the earnings call about the Omniverse, which is Nvidia’s platform for enabling companies to build out their metaverses.
Investors shouldn’t be concerned if management shares that the company is abandoning its attempt to acquire a leading mobile-chip designer Arm, owned by Japan’s SoftBank. On Jan. 25, news reports began rolling out saying that Nvidia is poised to give up pursuing this proposed deal, which has run into brisk regulatory headwinds. Nvidia doesn’t need Arm for the company and its stock to continue to be long-term winners, as I’ve been writing for a couple of quarters.
Nvidia stock has returned 69.6% over the one year through Jan. 26, easily outpacing the S&P 500’s return of 14.5% over this period.
As mentioned above, investors will also be focusing on Nvidia’s data center revenue. Nvidia has traditionally specialized in making chips for the gaming and graphics industry, being a pioneer in the development of graphics processing units (GPUs). It turns out that the robust computational capabilities employed by GPUs to power video games and graphics software are also well-suited for technologies like AI and machine learning. Both of those technologies are increasingly important for the rapidly growing data center market. Demand for remote computing power increased substantially during the pandemic as more and more people began working from home and businesses were forced to shift certain operations online That development has helped to boost demand for Nvidia’s chips used by data centers. Increasing focus on the metaverse, a virtual world built on technologies like VR and augmented reality (AR), is likely to create additional sources of demand for the company’s data center chips.
Nvidia’s data center revenue rose sharply in FY 2021 amid the pandemic, climbing 124.5%. That was a significant acceleration from the previous year’s growth of 1.7% and it was the fastest pace since FY 2018. The second quarter of FY 2021 saw data center revenue grow as fast as 167.5% YOY. It then began to decelerate over the next four quarters, slowing to a pace of 35.1% YOY in the second quarter of FY 2022. But it started to accelerate again in Q3 FY 2022, rising 54.5% YOY. Analysts expect data center revenue to continue accelerating in Q4 FY 2022, rising 66.3% YOY. For full-year FY 2022, analysts expect annual data center revenue to rise 57.0%. That would be a significant slowdown from the previous year’s rapid pace, but still the second-fastest pace of growth since FY 2018.
Nvidia Long (Buy)
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