NVIDIA Quarterly Report: Form 10-Q Q3 FY2023

Key insights

7 takeaways

01
NVIDIA reported a massive surge in operating income for Q3 FY2024, reaching $10.42 billion, a 1,633% increase compared to the same period in the previous year.
02
The Compute & Networking segment was the primary driver of growth, generating $10.26 billion in operating income, an 845% increase year-on-year.
03
Professional Visualization revenue grew 108% year-on-year, attributed to the normalization of channel inventory levels and increased demand for enterprise and notebook workstations.
04
The company repurchased 8.3 million shares of common stock for $3.72 billion during the third quarter of fiscal year 2024.
05
Gross margins improved significantly due to a favorable product mix from Data Center growth and a reduction in net inventory provisions, which totaled $442 million for the quarter.
06
NVIDIA resolved an IRS audit for fiscal years 2018 and 2019, resulting in a non-cash net benefit of $145 million.
07
Deferred revenue increased to $938 million as of October 29, 2023, up from $551 million in the prior year, with approximately 42% expected to be recognized over the next twelve months.

Summary

NVIDIA's Form 10-Q for the third quarter of fiscal 2024 (quarter ended October 29, 2023) documents an extraordinary surge in AI-driven demand while cautioning that this growth rests on fragile supply, regulatory, and geopolitical foundations. Revenue reached a record $18.12 billion, up 206% year over year and 34% sequentially, while net income climbed to $9.24 billion ($3.71 per diluted share) from $680 million. Gross margin expanded to 74.0% from 53.6% on improved product mix and lower inventory provisions, and operating income rose to $10.42 billion. For the nine months, revenue totaled roughly $38.8 billion and net income $17.5 billion.

Data Center was the engine, with revenue of $14.51 billion, up 279%, on demand for the Hopper-based HGX platform for generative AI and large language models. Gaming grew 81% to $2.86 billion and Professional Visualization 108% to $416 million, while Automotive rose 4%. Cash and securities grew to about $18 billion, and the company repurchased $7.01 billion of stock over nine months, with $25.24 billion remaining under an authorization increased by $25 billion in August. Net debt stood at $9.7 billion after a $1.25 billion note repayment, and purchase commitments reached $21.54 billion.

The risk disclosures are substantial. U.S. export licensing rules expanded in October 2023 cover A100, H100, and related products bound for China and other restricted destinations, regions that contributed roughly 20-25% of Data Center revenue. Sales there are expected to fall significantly in Q4, though management anticipates offsetting growth elsewhere. Larger supply commitments heighten the risk of inventory write-downs and margin pressure if demand softens, and the long-term trajectory of generative AI demand remains uncertain. Customer concentration is high, with two end customers at roughly 15% and 13% of revenue. Additional exposures include Taiwan supply dependence, about 3,400 employees in Israel, emerging AI regulation, and a partially revived securities class action tied to crypto-mining disclosures, for which no loss has been accrued.