With revenue increased 57% year-over-year to $4.73 billion, driven by seasonal strength in gaming and organic and inorganic growth in the data center business, Nvidia Corp has one of the best stocks to buy right now.
NVidia Corp., based in Santa Clara, California, is a visual computing company with worldwide operations and markets. The company operates through two segments, Graphics and Compute & Networking. The company's four main markets are gaming; professional visualization; data center; and automotive. In calendar 2020, NVidia completed the acquisition of data center connectivity leader Mellanox and announced the planned acquisition of ARM Holdings plc.
Professional Visualization and Automotive declined in double digits year-over-year, reflecting pandemic-induced relative weakness in enterprise business activity and automotive sales. Both divisions posted double-digit sequential growth, however, as the economy seeks a gradual return to normalcy.
Gaming saw higher sales across desktop and notebook GPUs, with desktop benefiting from launch of RTX series 30 Ampere GeForce cards. In data center, recently acquired Mellanox grew 14% sequentially, reflecting benefits from cross-selling across NVidia's data center platform.
NVidia had an extremely busy fiscal 3Q21. The company launched its RTX series 30 Ampere gaming card family. The company announced the planned acquisition of ARM Holdings, slated for completion in calendar 1Q22. NVidia is already a leader in cloud data centers; the new deal will potentially result in leadership in edge data centers, fueling the internet of things. NVidia also introduced data processing units (DPUs), representing the next step in NVidia's approach to AI data center; each Bluefield-2 DPU can deliver the same data center services that would consume the output of 125 CPU core.
For fiscal 4Q21 (ended January 2021), NVidia guided for midpoint revenue of $4.8 billion, implying mid-double-digit annual growth and single-digit sequential growth. Even before the ARM deal closes, NVidia is uniquely positioned to advance GPU compute technology across multiple growth opportunities, including AI data center and machine learning, professional visualization, and autonomous driving.
RECENT DEVELOPMENTS
Due to its strong performances, NVDA is now considered one of the best stocks in the market. Its price is up 128% in 2020, while the peer group is up 34%. NVDA rose 76% in 2019, while the Argus-covered semiconductor peer group increased 54%. NVDA declined 31% in 2018, versus a 4% decline for the peer group and an 8% drop for the Philadelphia Semiconductor Index (SOX). NVDA rose 81% in 2017, while peers advanced 33% and the SOX was up 38%. NVDA soared 224% in 2016, compared to a 70% simple average gain for Argus-covered semiconductor companies, a 40% gain in the SOX Index, and an 11% gain for the S&P 500.
For fiscal 3Q21 (ended 10/25/20), NVidia posted revenue of $4.73 billion, which was up 57% year-over-year and 22% sequentially. Revenue was above the top of management's guidance range of $4.32-$4.49 billion and the consensus call of $4.41 billion. With Mellanox now acquired, the Street is tracking non-GAAP performance for NVidia. Non-GAAP earnings of $2.91 per diluted share for 3Q21 were up 63% from $1.78 in fiscal 3Q20, and also topped the $2.55 consensus call; line-item guidance pointed to adjusted EPS in the $2.50-$2.60 range.
NVidia had another extremely successful quarter reflecting vastly powerful franchise in data center and gaming, and sequential recovery in the two pandemic-impacted platforms of professional visualization and automotive. Beyond quarterly operations, NVidia's fiscal 3Q21 was transformative on several fronts. The seeds of these transformations were sown at the beginning of fiscal 2021.
On 4/27/20, the first day of the fiscal 2021 year, NVidia completed the acquisition of Mellanox Technologies. Combining NVidia's GPU computing expertise with Mellanox's high-performance networking technology, the combination enables customers to achieve higher performance, greater utilization of computing resources, and lower operating costs.
During fiscal 3Q21, Mellanox generated revenue of $614 million, representing 13% of total revenue and 32% of data center revenue. Excluding Mellanox, total revenue still grew 36% year-over-year, and data center grew 77% annually. Reflecting the sales benefits of folding Mellanox into the NVidia data center platform, Mellanox-only revenue grew 14% sequentially.
About one month into fiscal 3Q21 on 9/1/20, NVidia formally unveiled new gaming cards based on its state of the art 'Ampere' technology. The NVidia GeForce RTX 30 series GPUs represent the second generation of gaming GPUs to feature ray-tracing technology, which provides much more realistic lighting and shadows. The series 30 devices offer up to 2-times the performance and 1.9-times the power efficiency over the previous Turing-based generation. At the 9/1/20 virtual launch event, NVidia unveiled three devices: the RTX 3090, 3080, and 3070.
Less than two weeks later on 9/13/20, NVidia and Japan's SoftBank announced a definitive agreement under which NVidia will acquire ARM Limited from SBG and the SoftBank Vision Fund in a part-stock, part-cash transaction valued at $40 billion. The combination brings together NVidia's leading AI computing platform with ARM's vast licensed eco-system to create the premier computing company for the age of artificial intelligence. The deal accelerates innovation at NVidia while pushing the company into large, high-growth markets. The current opportunity is enormous, with billions of smartphones using ARM architecture. In future, the deal positions NVidia to power the internet of things, expected to eventually be thousands of times larger than today's internet of people.
Capping off a busy fall, on 10/5/20, NVidia introduced what it called a new kind of processor: the DPU, or data processing unit. Along with supporting software, NVidia's Bluefield-2 and Bluefield 2X DPUs are designed to provide 'breakthrough' performance in networking, storage and security. The DPUs, designed to offload critical networking, storage and security tasks from CPUs, can deliver the same data center services that would consume the output of 125 CPU cores, according to NVidia.
