Release Date: August 28, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- NVIDIA Corp (NVDA, Financial) reported record revenue of $30 billion for Q2, up 15% sequentially and 122% year-on-year, surpassing their outlook of $28 billion.
- Data center revenue reached a record $26.3 billion, driven by strong demand for NVIDIA Hopper GPU computing and networking platforms.
- The NVIDIA H200 platform began ramping in Q2, offering over 40% more memory bandwidth compared to the H100.
- NVIDIA's enterprise AI initiatives are gaining traction, with significant partnerships and deployments across various industries.
- Automotive and healthcare sectors are emerging as multi-billion dollar opportunities for NVIDIA, driven by advancements in AI and autonomous technologies.
Negative Points
- GAAP and non-GAAP gross margins were down sequentially due to a higher mix of new products within the data center and inventory provisions for low-yielding Blackwell material.
- The China market remains competitive, and while data center revenue in China grew sequentially, it is still below levels seen prior to export controls.
- There are concerns about the readiness of customers for liquid cooling, which could impact the ramp-up of Blackwell products.
- Operating expenses increased by 12% sequentially, primarily due to higher compensation-related costs.
- The transition to new products and the associated cost structures could lead to fluctuations in gross margins in the upcoming quarters.
Q & A Highlights
Q: Jensen, you mentioned in the prepared comments that there's a change in the Blackwell GPU mask. Are there any other incremental changes in back-end packaging or anything else? And you suggested that you could ship several billion dollars of Blackwell in Q4 despite a change in the design. Is it because all these issues will be solved by then?
A: (Jensen Huang, President, Chief Executive Officer, Director) The change to the mask is complete. There were no functional changes necessary. We are sampling functional samples of Blackwell, Grace Blackwell, in a variety of system configurations as we speak. We expect to start production in Q4.
Q: Jensen, there's a debate in the market on your customers' return on investment and what that means for the sustainability of CapEx going forward. Internally at NVIDIA, what are you watching to gauge customer return and how that impacts CapEx?
A: (Jensen Huang, President, Chief Executive Officer, Director) We are going through two simultaneous platform transitions: from general purpose computing to accelerated computing, and from human-engineered algorithms to machine-learned algorithms. Accelerated computing reduces costs and energy consumption significantly. Generative AI is a fundamental new way of doing software, and its momentum is accelerating.
Q: Jensen, in the press release, you talked about Blackwell anticipation being incredible, but it seems like Hopper demand is also really strong. How long do you see coexisting strong demand for both?
A: (Jensen Huang, President, Chief Executive Officer, Director) The demand for Hopper is really strong, and the demand for Blackwell is incredible. Cloud service providers have almost no GPU capacity available, and they need it now. Hopper will continue to grow, and Blackwell will start shipping out in billions of dollars at the end of this year.
Q: Jensen, can you talk about the transition to Blackwell? Do you see people intermixing clusters?
A: (Jensen Huang, President, Chief Executive Officer, Director) Yes, people are deploying both Hopper and Blackwell. Hopper is state-of-the-art, and Blackwell will start shipping out in billions of dollars at the end of this year. The transition is driven by the need for accelerated computing and the race to the next AI plateau.
Q: Colette, you mentioned sovereign AI revenue for the full year went up. What's driving the improved outlook and how should we think about fiscal '26?
A: (Colette Kress, Executive Vice President, Chief Financial Officer) Sovereign AI is a growing opportunity as countries want their own generative AI that incorporates their language, culture, and data. We see growth opportunities ahead.
Q: Jensen, how does the backdrop of rising complexity and advanced packaging alter your thinking around potentially greater vertical integration and supply chain partnerships?
A: (Jensen Huang, President, Chief Executive Officer, Director) Our velocity is high because we have all the parts to design an AI factory. We have CPUs, GPUs, DPUs, NVLink switches, and networking platforms. We provide the system components, and our ecosystem partners integrate them.
Q: Colette, is the sequential overall revenue growth rate for the company expected to accelerate in the fourth quarter given all the favorable revenue dynamics?
A: (Colette Kress, Executive Vice President, Chief Financial Officer) Hopper will continue to grow in the second half, and Blackwell will start ramping in Q4. We see a growth opportunity in Q4 on top of Hopper's growth.
Q: Colette, you mentioned several billion dollars of Blackwell revenue in Q4. Is that additive? Does that mean Hopper strengthens Q3 to Q4 as well on top of Blackwell adding several billion dollars?
A: (Colette Kress, Executive Vice President, Chief Financial Officer) Hopper will continue to grow into the second half, and Blackwell will start ramping in Q4. We expect growth in Q4 on top of Hopper's growth.
Q: Jensen, how do you see the mix of rack-scale systems as we start to think about the Blackwell cycle playing out?
A: (Jensen Huang, President, Chief Executive Officer, Director) The Blackwell rack system is designed and architected as a rack but sold in disaggregated system components. Integration is done close to the location of the CSPs and data centers by our ODM partners.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
