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Nvidia Shows Why It Is King

Chipmaker Nvidia beat expectations for Q2 earnings on Wednesday and saw its data center business overtake gaming for the first time

It takes a big earnings call to distract from Apple’s stock hitting $2 trillion yesterday, but Nvidia’s (NASDAQ: NVDA) Q2 report was just too good to ignore. Nvidia designs graphics processing units (GPUs) mainly for gaming units as well as chips for mobile computing and automation. 

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Nvidia’s Q2 earnings

Where to begin. Nvidia saw earnings per share (EPS) hit $2.18 versus the $1.97 expected by Wall Street, while revenue came in at $3.87 billion, versus $3.65 billion estimated. These gains represent an overall revenue growth of 50% year-over-year (YoY) and a 39% jump from the first quarter of 2020. 

The company’s gaming business came out with $1.65 billion in revenue, a 26% rise YoY, and far surpassing the $1.41 billion estimated by analysts. Not to be outdone by the rise in gaming thanks to lockdown restrictions, Nvidia’s data center revenue actually outdid its gaming counterpart for the first time ever at $1.75 billion — up 167% YoY and higher than the consensus estimate of $1.71 billion.

Why is its data business so important?

This milestone does not represent a decrease in gaming for Nvidia, which is still growing, but rather a pivot into another key revenue stream. Datacenter revenue first breached $1 billion in revenue back in Q1 2020 and includes sales of GPUs that power AI systems for business use. 

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The company’s growth of this line of business decreases its reliance on the video-game market, which can be volatile at times, and allows it to expand its client base to businesses such as Amazon. 

A key driver in its rising datacenter business includes its recent acquisition of Mellanox, a networking hardware company, which cost Nvidia $7.13 billion and attributed to 14% of the company’s overall revenue for the quarter. 

What about the competition?

With Intel losing out its chip-making business with Apple recently and experiencing a general decline, Nvidia appears to be caught in a rivalry with Advanced Micro Devices (NASDAQ: AMD). While the likes of Sony and Microsoft are likely to refresh their next generation of consoles with AMD chips, Nvidia is not too worried. In fact, Chief Financial Officer Colette Kress believes that the new generation of consoles will only accelerate the gaming market and further grow its own revenue. 

AMD may not be the competition that Kress has on her mind though, with the company executive claiming that she wants to see the gaming and data divisions competing with one another to become the top revenue generator for the business. “We have to keep both of these businesses on their toes and racing,” Kress said. “Watching them trade-off once in a while is a great thing.”

Shares in AMD have risen 65% YTD and reported an impressive $1.93 billion in revenue and net income of $157 million. Nvidia, on the other hand, has seen its stock soar 102% YTD and almost 150% since its March lows. Nvidia estimated $4.40 billion in revenue for Q3 which would work out at 46% growth in the middle of the range.


MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in companies mentioned above. Read our full disclosure policy here.

Jamie Adams
Jamie Adams
Jamie is the Content Editor here at MyWallSt. His favorite stock is Apple, which is also the first stock he ever bought. Jamie is not only a big fan of its products, but he believes that the tech giant has a whole lot more to give the world, and hasn't even scraped the surface of its potential.