Nvidia Corp. (NVDA) popularized the graphics processing unit (GPU) and gets the vast majority of its revenue from these specialized chips.
It's rapidly expanding into fields such as artificial intelligence (AI). Nvidia designs and sells GPUs for gaming and professional applications, as well as chip systems for use in vehicles, robotics, and other tools.
- Nvidia popularized the use of graphics processing units, known as GPUs, a key component of PC architecture.
- The Graphics segment is Nvidia's largest revenue generator.
- The company's Compute and Networking segment is growing fast.
- Nvidia is looking to expand its AI capacities, recently entering into an agreement to acquire CPU maker Arm from SoftBank Group for $40 billion.
- Antitrust regulators in both the U.S. and the U.K. say they are investigating Nvidia's agreement to acquire Arm.
Nvidia is growing again after negative trends in the global chip market led to falling revenue and profits during the company's 2020 fiscal year (FY).
The increased demand for gaming and data center services over the past year from people sheltering at home amid the COVID-19 pandemic has helped to fuel a rise in demand for Nvidia's products.
The company reported a net income of $4.3 billion in its 2021 fiscal year (FY), which ended on Jan. 31, 2021. Net income was up 54.9% compared to the previous year. Revenue grew 52.7%, reaching an annual record of $16.7 billion for the year.
Nvidia focuses on five key market platforms, which reported mixed results in FY 2021. Gaming posted a 40.6% rise in revenue, comprising 47% of Nvidia's total revenue. Data Center revenue grew 124.5%, accounting for 40% of the total. Professional Visualization and Automotive each posted respective revenue declines, while the OEM and Other platforms posted a 25.0% rise.
Nvidia's Business Segments
Nvidia reorganized how it reports its operating segments beginning in Q1 FY 2021.
The company's two main reportable segments are now "Graphics" and "Compute and Networking". Nvidia also includes an "All Other" category for expenses not included in the other two segments. Breakdowns for revenue and operating income are included for these segments. Previously, the company provided a breakdown of the revenue for a "GPU" segment and a "Tegra Processor" segment.
Nvidia's Graphics segment includes the GeForce GPUs for gaming and PCs, the GeForce NOW game-streaming service and related infrastructure, and solutions for gaming platforms. It also includes the Quadro/NVIDIA RTX GPUs for enterprise workstation graphics, vGPU software for cloud-based visual and virtual computing, and automotive platforms for infotainment systems.
In FY 2021, the Graphics segment generated $9.8 billion, or about 59%, of Nvidia's total revenue. This was up 28.7% compared to the previous year. The segment's operating income grew 41.2% to $4.6 billion, comprising about 64% of the total.
Compute and Networking
The Compute and Networking segment includes Nvidia's Data Center platforms as well as systems for AI, high-performance computing, and accelerated computing. It also includes Mellanox networking and interconnected solutions, automotive AI Cockpit, autonomous driving development agreements, autonomous vehicle solutions, and Jetson for robotics and other embedded platforms.
The Compute and Networking segment delivered revenue of $6.8 billion in FY 2021, up 108.6% from the previous year. The segment accounts for about 41% of Nvidia's total revenue. Operating income grew 239.3% to $2.5 billion. Compute & Networking accounts for about 36% of the company's total operating income.
As mentioned above, the All Other category includes expenses not included in the other two segments. Such expenses include stock-based compensation, corporate infrastructure and support costs, acquisition-related costs, legal settlement costs, and other non-recurring charges and benefits deemed to be enterprise in nature. These expenses amounted to an operating loss of $2.6 billion for the category in FY 2021, more than double the $1.2 billion operating loss reported in the previous year.
Nvidia's Recent Developments
On Sept. 13, 2020, Nvidia announced that it had entered into a definitive agreement to purchase Arm Inc. from SoftBank Group Corp. (TSE:9984) for $40 billion. Arm is a U.K.-based semiconductor and software design company specializing in CPU architecture. Nvidia says the acquisition will help it to expand its AI capacities and advance a range of technologies from cloud computing and smartphones to self-driving cars and the internet of things (IoT). Nvidia noted in its annual FY 2021 filings that the transaction is expected to close some time in the first quarter of the calendar year 2022.
On Feb. 12, 2021, Reuters reported that the U.S. Federal Trade Commission (FTC) was opening an in-depth investigation into Nvidia's agreement to acquire Arm. Additionally, Google parent Alphabet Inc. (GOOGL), Qualcomm Inc. (QCOM), and Microsoft Inc. (MSFT) have all complained about the deal to U.S. antitrust regulators. Arm supplies intellectual property to Apple, Qualcomm, and a number of other enterprises for chips used in almost all of the smartphones across the globe. Furthermore, Britain's Competition and Markets Authority said in January that it would also be investigating the deal.
How Nvidia Reports Diversity and Inclusiveness
As part of our effort to improve the awareness of the importance of diversity in companies, we offer investors a glimpse into the transparency of Nvidia and its commitment to diversity, inclusiveness, and social responsibility. We examined the data Nvidia releases to show you how it reports the diversity of its board and workforce to help readers make educated purchasing and investing decisions.
Below is a table of potential diversity measurements. It shows whether Nvidia discloses its data about the diversity of its board of directors, C-Suite, general management, and employees overall, as is marked with a ✔. It also shows whether Nvidia breaks down those reports to reveal the diversity of itself by race, gender, ability, veteran status, and LGBTQ+ identity.
|Nvidia Diversity and Inclusiveness Reporting|
|Race||Gender||Ability||Veteran Status||Sexual Orientation|
|Board of Directors|
|General Management||✔ (U.S. Only)||✔|
|Employees||✔ (U.S. Only)||✔|
Nvidia Corp. "Form 10-K for the fiscal year ended January 31, 2021," Page 4. Accessed Mar. 5, 2021.
Nvidia Corp. "Form 10-K for the fiscal year ended January 31, 2021," Page 18. Accessed March 5, 2021.
Nvidia Corp. "NVIDIA Announces Financial Results for Fourth Quarter and Fiscal 2021." Accessed March 5, 2021.
Nvidia Corp. "Form 10-K for the fiscal year ended January 31, 2021," Page 30. Accessed March 5, 2021.
Nvidia Corp. "Form 10-K for the fiscal year ended January 31, 2021," Page 77. Accessed March 5, 2021.
Nvidia Corp. "Form 10-K for the fiscal year ended January 31, 2021," Page 75. Accessed March 5, 2021.
Nvidia Corp. "Form 10-K for the fiscal year ended January 31, 2021," Page 29. Accessed March 5, 2021.
Nvidia Corp. "Form 10-K for the fiscal year ended January 31, 2021," Page 76. Accessed March 5, 2021.
Bloomberg. "Nvidia Buys SoftBank's Arm in Record $40 Billion Chip Deal." Accessed Sept 14, 2020.
Nvidia Corp. "Letter From Jensen: Creating a Premier Company for the Age of AI." Accessed Sept 14, 2020.
Nvidia Corp. "Form 10-K for the fiscal year ended January 31, 2021," Page 5. Accessed March 5, 2021.
Reuters. "U.S. FTC opens probe into Nvidia's acquisition of Arm: Bloomberg." Accessed March 5, 2021.