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NVIDIA (NASDAQ: NVDA) got off to a great start in calendar year 2021, with shares of the graphics card specialist surging more than 14% in the first weeks of the new year.
The company’s impressive performance in the stock market could gain further momentum next week with the release of results for the fourth quarter of fiscal 2021, which ended on January 31, 2021. Let’s see why.
NVDA data by YCharts
NVIDIA Ready for Explosive Earnings and Strong Forecast
Wall Street analysts expect NVIDIA to earn $ 2.80 per share on revenue of $ 4.82 billion. The numbers are almost in line with the midpoint of the company’s revenue forecast (released in November) of $ 4.8 billion and a profit estimate of $ 2.79 per share.
Investors should remember that analysts originally expected NVIDIA to earn $ 2.54 per share in adjusted earnings on $ 4.42 billion in revenue. The chipmaker set the bar much higher when it released its third quarter budget report in mid-November.
The midpoint of NVIDIA’s forecast range indicates that its fourth-quarter tax revenue would grow 54% year-over-year, while profits would increase 48%. But don’t be surprised to see NVIDIA exceed its own expectations, thanks to the overwhelming demand for its graphics cards. The RTX 30 series graphics cards that NVIDIA launched a few months ago are hard to find thanks to their impressive price tag and major improvements over previous generation cards.
NVIDIA CFO Colette Kress recently pointed out that the demand for its gaming GPUs (graphics processing units) is “out of the ordinary”. Supply levels are expected to remain low during the company’s first fiscal quarter, which ends in April, Kress said. A component shortage is also hurting supply, but NVIDIA would be in a better position on this front compared to its rival. Advanced micro-systems (AMD).
Image source: Getty Images
In addition, NVIDIA is trying to address the shortage of graphics cards by increasing the production of older generation chips. Quoting an NVIDIA executive, PC World reports that the company is experiencing “extremely high” demand, which has led it to ramp up production of two popular cards – the RTX 2060 and the GTX 1050 Ti.
Consumers won’t have to break the bank to buy these cards, as the RTX 2060 is priced at $ 350, while the 1050 Ti is much more affordable at $ 140. These cards come with GDDR5 memory, which allows NVIDIA to bypass the lack of GDDR6 memory used in RTX 30 cards.
As such, NVIDIA may have taken more market share from AMD in the last quarter. The rise of older but popular GPUs could help NVIDIA put more pressure on its main rival this quarter, which could lead to better-than-expected forecasts.
The data center catalyst
The data center industry, meanwhile, is expected to deliver another successful performance, driven by strong demand from cloud service providers.
NVIDIA has ramped up production of its data center servers and recently started shipping its A100 GPUs to partner servers. The A100 has proven to be an extremely popular data center GPU, with a slew of large cloud companies lining up to buy it due to the massive performance boost it offers over its predecessor. .
Unsurprisingly, demand for the A100 GPU would have exceeded supply last year. Ramp-up in production bodes well for NVIDIA’s data center revenue, which was 40% of revenue in fiscal third quarter and posted a 162% year-over-year jump on the other.
Overall, NVIDIA is sitting on favorable end-market conditions in its quarterly report, which is expected to be released on Wednesday, February 24. The huge demand for graphics cards used in video games and data centers, coupled with the dominant market share of NVIDIA, help it deliver a quarter-beat and increase and add fuel to the recovery of this action of hot growth.
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