Nvidia Tops Analyst Q1 Profit Expectations by 80 Percent, Provides Tepid Outlook for Q2

Andrew Klips  |

Analysts weren’t expecting much from graphics chip maker Nvidia Corp. (NVDA) in the first quarter given the slowdown in the personal computer industry, but the Santa Clara, California-based company delivered increasing revenue and profits in the first quarter, although Nvidia came up short on outlook for the current quarter.

For the quarter ended April 28, Nvidia logged revenue of $954.7 million, up form $924.9 million in the year prior quarter. GAAP income totaled $77.9 million, or 13 cents per share, topping $60.4 million, or 10 cents per share in the first quarter of 2012. On an adjusted basis, the company earned $113.8 million, or 18 cents per share, compared to $97.5 million, or 16 cents per share, in the year earlier quarter.

Wall Street was expecting Nvidia to announce profits of 10 cents per share and revenue of $940.6 million. Analyst predictions are typically on an adjusted basis.

Gross margin improved to 54.3 percent from 50.1 percent in the comparable 2012 quarter. Operating expenses climbed 11.6 percent to $435.8 million.

While analysts pondered what the declining PC business, Nvidia has seen it coming as well and diversified into mobile device technology and drawing strength form gaming applications and its supercomputing segment. Nvidia said recently it is investing heavily in it mobile operations because of “once in a lifetime” opportunities currently available.

"The success of Kepler-based GPUs within and beyond the PC helped drive another quarter of record margins," said Jen-Hsun Huang, president and chief executive of Nvidia.

As promised, Nvidia plans to return more than $1 billion this year to shareholders via share repurchases and quarterly dividends. In Q1, the company bought $100 million of its shares and paid $46.3 million in dividends. A dividend of 7.5 cents per share will be given to shareholders of record as of May 23, payable on June 14.

Looking at the current quarter, Nvidia sees revenue of $975 million, plus or minus 2 percent. Analysts were expecting revenue of $1 billion.

“With Tegra 4 devices and Tegra 4i certification on the way, we're gearing up to return to growth in the second half,” said Huang, hinting that things will improve after the current quarter.

Shares of NVDA are up about 14 percent in 2013, including a basically flat trading day on Thursday, closing at $13.91. Following the after-hours earnings report, shares have climbed a little more than 1 percent to $14.10.

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