NVIDIA Corporation (NVDA) Shows Resilience

NVIDIA Corporation (NASDAQ:NVDA) went into its Q1 earnings announcement with lowered expectations. In April CEO Jen-Hsun Huang announced that a delay in a new version of the company’s Tegra mobile chip would cause the division’s sales to be flat this year. This combined with the declining PC market, which NVIDIA relies on for its discrete GPU sales, led analysts to expect flat EPS year-over-year and a small 1.7% revenue increase.

NVIDIA shows resilience

NVIDIA Corporation (NASDAQ:NVDA) beat those expectations handily, with revenue rising by 3.2% year-over-year and EPS up 30%. While revenue from the Tegra processor segment was down 22% year-over-year as the newest version of the chip has yet to be released the GPU segment managed to grow revenue by 8%. This is impressive given that the PC market is in decline. During the quarter NVIDIA introduced the GeForce GTX TITAN, a $1000 discrete GPU which provides PC gamers with the ultimate experience. Although the company likely won’t sell a large number of these GPUs it does give NVIDIA Corporation (NASDAQ:NVDA) the most powerful discrete GPU available.

Another interesting point from the earnings release is the gross margin. The company managed to increase the gross margin by 4.2 percentage points year-over-year, rising from 50.1% to 54.3%. Huang had this to say:

The success of Kepler-based GPUs within and beyond the PC helped drive another quarter of record margins. Kepler is capturing share among gamers, strengthening our workstation and supercomputing segments, and will fuel new growth opportunities for our GRID server graphics solutions. With Tegra 4 devices and Tegra 4i certification on the way, we’re gearing up to return to growth in the second half.

Tegra 4i

NVIDIA Corporation (NASDAQ:NVDA) chose to delay the release of the Tegra 4 mobile processor, which will replace the Tegra 3, in order to focus on the Tegra 4i. The Tegra 4i will be the first mobile chip from NVIDIA which offers an integrated LTE modem. QUALCOMM, Inc. (NASDAQ:QCOM), the leader in mobile processors, already has a processor with integrated LTE on the market. The alternative to integrated LTE is a separate LTE modem, but this often leads to poor battery life. Integrating the processor with the modem allows for higher power efficiency, which is especially important for smart phones.

QUALCOMM, Inc. (NASDAQ:QCOM) currently dominates the market for LTE chipsets with around a two-thirds market share, but the size of the LTE market is set to expand dramatically over the next few years as 3G becomes a thing of the past. This gives NVIDIA Corporation (NASDAQ:NVDA) ample opportunity to grab part of the market.