Nvidia announced first quarter results for its fiscal year 2017 yesterday, and the firm’s results were excellent — particularly in a market where companies like AMD and Intel have been taking a hammering. First-quarter revenue was up 13% to $1.3 billion, with strong gains in gaming, data centers, and the automotive market.
The slide below breaks down Nvidia’s revenue in two different ways. Reportable segment revenue reflects Nvidia’s chosen method of grouping its businesses (Tegra, GPU, Other). Revenue by market platform provides additional color into how each individual area of the company is performing. One does not map cleanly to the other, but it’s worth considering both data sets.
These two charts suggest that the bulk of Nvidia’s growth is linked to its strong performance in gaming, data centers, and automotive sales. The drop off in the OEM and IP market was most likely caused by declines in Nvidia’s original Tegra mobile business and offset by a significant uptick in demand for Nvidia’s automotive designs. Nvidia logged a 63% increase in data center revenue, driven by its efforts to position itself at the center of both the driverless car initiative and deep learning networks. Both of these efforts have been front and center during a number of recent company demos and presentations.
Gaming also saw strong gains year-on-year, and Nvidia implied this was due to increased sales volume in all areas rather than increased ASPs. The 8% quarterly decline is in line with seasonal projections, which means Nvidia has probably taken market share from AMD over the past 12 months. The company’s recent GTX 1080 and 1070 announcementshave set the stage for an aggressive move to take over the high-end of the market. AMD countered the GTX 980 Ti with the Fury family in 2015, but Polaris isn’t a high-end uber-GPU and Nvidia has obviously planned to sweep both the high-end market in general and the VR space, specifically.
AMD hasn’t formally announced Polaris positioning or performance yet, but the rumor mill suggests it’s an extremely potent competitor in much less expensive markets that constitute the actual bulk of the GPU space. For all the ink lavished on high-end cards, very few people actually buy a $600 GPU. Most of the market is in the $150-$250 space, and if AMD launches a strong midrange part, it could seize leadership in that area. We don’t know yet how all these variables will play out.
Nvidia’s long-term success
It’s interesting to look at where Nvidia is now as opposed to what conventional wisdom predicted roughly eight years ago. Back then, AMD and Intel both had plans to combine GPUs with CPUs to create products that would likely kill the low-end GPU markets. By and large this happened, which is why both AMD and Nvidia focus on the $100+ space these days. The cards sold below that price point tend to be older hardware from previous low-end generations.
Nvidia poured enormous resources into Tegra to win early space in mobile — Tegra 2 was one of the most popular smartphone and tablet processors in the early dual-core days — before pivoting the entire segment towards automotive designs. Using GeForce cards fordeep learning and HPC work is another market Nvidia has largely dominated. Until quite recently, AMD didn’t seriously compete for these spaces and the company has a long way to go to ramp up its resources to match Team Green.
The flip side to this is that Nvidia’s own Project Denver CPU core hasn’t amounted to much in the market to date, and Nvidia’s efforts to create a comprehensive SoC platform with Icera’s modem technology also failed. Like Microsoft and Intel, Nvidia has had difficulty breaking out of its core GPU market — but one could argue that it’s also spent less money chasing alternatives that haven’t panned out. Microsoft and Intel have both pivoted their business strategies and created new products, but both also threw huge amounts of money and mobile for a number of years.
Overall, the company is well positioned for FY 2017 (calendar 2016). We’ll see if and how that changes when Polaris launches this summer. And just to be clear: Knowledgeable sources ET has spoken to have confirmed that Polaris is on-track for a mid-year launch. Rumors that AMD has pulled Vega in for an October launch are just that — rumors.