What changed in this filing

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Item 1. Financial Statements

2021-05-26 compared with 2020-11-18 · 189 added, 318 removed, 439 unchanged (54% of the section changed)

3 unchanged sentences

(In millions, except per share data)

Three Months Ended Nine Months Ended

October 25, October 27, October 25, October 27,

2020 2019 2020 2019

Three Months Ended

May 2, April 26,

Revenue $ 5,661 $ 3,080

10 unchanged sentences

Other income (expense), net

( 50 ) 32 ( 86 ) 98

Income before income tax 2,044 981

11 unchanged sentences

(In millions)

Three Months Ended Nine Months Ended

October 25, October 27, October 25, October 27,

2020 2019 2020 2019

Three Months Ended

May 2, April 26,

Net income $ 1,912 $ 917

Other comprehensive income (loss), net of tax

Available-for-sale securities:

Net change in unrealized gain (loss) ( 1 ) — 3 9

Reclassification adjustments for net realized gain (loss) included in net income — — ( 2 ) —

Net change in unrealized gain (loss) ( 1 ) — 1 9

Other comprehensive loss, net of tax

Cash flow hedges:

Net unrealized gain 5 — 10 4

Reclassification adjustments for net realized gain included in net income 4 ( 2 ) — ( 4 )

Net change in unrealized gain (loss) 9 ( 2 ) 10 —

Other comprehensive income (loss), net of tax 8 ( 2 ) 11 9

Net unrealized loss ( 14 ) ( 10 )

Reclassification adjustments for net realized gain (loss) included in net income 9 ( 1 )

Net change in unrealized loss ( 5 ) ( 11 )

Total comprehensive income $ 1,907 $ 906

3 unchanged sentences

(In millions)

October 25, January 26,

May 2, January 31,

Current assets:

35 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED OCTOBER 25, 2020 AND OCTOBER 27, 2019

Additional Paid-in Capital Treasury Stock Accumulated Other Comprehensive Income (Loss) Retained Earnings Total Shareholders' Equity

(In millions, except per share data) Shares Amount

Balances, July 26, 2020 617 $ 1 $ 7,828 $ ( 10,232 ) $ 4 $ 16,313 $ 13,914

Net income — — — — — 1,336 1,336

Other comprehensive income — — — — 8 — 8

Issuance of common stock from stock plans 3 — 96 — — — 96

Tax withholding related to vesting of restricted stock units ( 1 ) — — ( 298 ) — — ( 298 )

Cash dividends declared and paid ($ 0.16 per common share)

— — — — — ( 99 ) ( 99 )

Stock-based compensation — — 377 — — — 377

Balances, October 25, 2020 619 $ 1 $ 8,301 $ ( 10,530 ) $ 12 $ 17,550 $ 15,334

Balances, July 28, 2019 609 $ 1 $ 6,543 $ ( 9,524 ) $ ( 1 ) $ 13,317 $ 10,336

Net income — — — — — 899 899

Other comprehensive loss — — — — ( 2 ) — ( 2 )

Issuance of common stock from stock plans 4 — 63 — — — 63

Tax withholding related to vesting of restricted stock units ( 1 ) — — ( 202 ) — — ( 202 )

Cash dividends declared and paid ($ 0.16 per common share)

— — — — — ( 98 ) ( 98 )

Stock-based compensation — — 218 — — — 218

Balances, October 27, 2019 612 $ 1 $ 6,824 $ ( 9,726 ) $ ( 3 ) $ 14,118 $ 11,214

See accompanying Notes to Condensed Consolidated Financial Statements.

NVIDIA CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

FOR THE NINE MONTHS ENDED OCTOBER 25, 2020 AND OCTOBER 27, 2019

FOR THE THREE MONTHS ENDED MAY 2, 2021 AND APRIL 26, 2020

Additional Paid-in Capital Treasury Stock Accumulated Other Comprehensive Income (Loss) Retained Earnings Total Shareholders' Equity

2 unchanged sentences

Net income — — — — — 1,912 1,912

Other comprehensive income — — — — 11 — 11

Other comprehensive loss — — — — ( 5 ) — ( 5 )

Issuance of common stock from stock plans 4 — 126 — — — 126

2 unchanged sentences

— — — — — ( 99 ) ( 99 )

Fair value of partially vested equity awards assumed in connection with acquisitions — — 86 — — — 86

Stock-based compensation — — 433 — — — 433

Balances, October 25, 2020 619 $ 1 $ 8,301 $ ( 10,530 ) $ 12 $ 17,550 $ 15,334

Balances, May 2, 2021 623 $ 1 $ 9,280 $ ( 11,242 ) $ 14 $ 20,721 $ 18,774

Balances, January 26, 2020 612 $ 1 $ 7,045 $ ( 9,814 ) $ 1 $ 14,971 $ 12,204

Net income — — — — — 917 917

Other comprehensive income — — — — 9 — 9

Other comprehensive loss — — — — ( 11 ) — ( 11 )

Issuance of common stock from stock plans 4 — 88 — — — 88

3 unchanged sentences

Stock-based compensation — — 221 — — — 221

Balances, October 27, 2019 612 $ 1 $ 6,824 $ ( 9,726 ) $ ( 3 ) $ 14,118 $ 11,214

Balances, April 26, 2020 615 $ 1 $ 7,354 $ ( 10,036 ) $ ( 10 ) $ 15,790 $ 13,099

See accompanying Notes to Condensed Consolidated Financial Statements.

2 unchanged sentences

(In millions)

Nine Months Ended

October 25, October 27,

Three Months Ended

May 2, April 26,

Cash flows from operating activities:

4 unchanged sentences

Deferred income taxes 24 16

(Gains) losses on investments in non-affiliates, net ( 133 ) 3

Other ( 3 ) 1

11 unchanged sentences

Purchases of marketable securities ( 4,470 ) ( 861 )

Acquisitions, net of cash acquired ( 8,524 ) —

Purchases related to property and equipment and intangible assets ( 298 ) ( 155 )

Investments and other, net ( 2 ) ( 6 )

Net cash provided by (used in) investing activities ( 16,546 ) 6,296

Acquisitions, net of cash acquired — ( 34 )

Net cash used in investing activities ( 1,272 ) ( 1,055 )

Cash flows from financing activities:

Issuance of debt, net of issuance costs 4,971 —

Proceeds related to employee stock plans 126 88

1 unchanged sentence

Dividends paid ( 99 ) ( 98 )

Principal payments on property and equipment ( 19 ) —

Other ( 2 ) ( 3 )

Issuance of debt, net of issuance costs — 4,979

Net cash provided by (used in) financing activities ( 471 ) 4,744

13 unchanged sentences

The following information should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended January 31, 2021.

The unaudited condensed consolidated financial statements in this report include the financial results of Mellanox Technologies Ltd., or Mellanox, prospectively from April 27, 2020.

For additional details, refer to Note 2 - Business Combination.

Significant Accounting Policies

Except for the accounting policies for business combination and investment in non-affiliated entities, there have been no material changes to our significant accounting policies disclosed in Note 1 - Organization and Summary of Significant Accounting Policies, of the Notes to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended January 26, 2020.

Business Combination

We allocate the fair value of the purchase price of an acquisition to the tangible assets acquired, liabilities assumed, and intangible assets acquired, including in-process research and development, or IPR&D, based on their estimated fair values.

The excess of the fair value of the purchase price over the fair values of these net tangible and intangible assets acquired is recorded as goodwill.

Management’s estimates of fair value are based upon assumptions believed to be reasonable, but our estimates and assumptions are inherently uncertain and subject to refinement.

The estimates and assumptions used in valuing intangible assets include, but are not limited to, the amount and timing of projected future cash flows, discount rate used to determine the present value of these cash flows and asset lives.

These estimates are inherently uncertain and, therefore, actual results may differ from the estimates made.

As a result, during the measurement period of up to one year from the acquisition date, we record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill.

Upon the conclusion of the measurement period or final determination of the fair value of the purchase price of an acquisition, whichever comes first, any subsequent adjustments are recorded to our condensed consolidated statements of income.

We initially capitalize the fair value of IPR&D as an intangible asset with an indefinite life.

We assess for impairment thereafter.

When IPR&D projects are completed, we reclassify the IPR&D as an amortizable purchased intangible asset and amortize over the asset’s estimated useful life.

Acquisition-related expenses are recognized separately from the business combination and expensed as incurred.

Investment in Non-Affiliated Entities

Non-marketable equity investments in privately-held companies are recorded at fair value on a non-recurring basis only if an impairment or observable price adjustment occurs in the period with changes in fair value recorded through net income.

These investments are valued using observable and unobservable inputs or data in an inactive market and the valuation requires our judgment due to the absence of market prices and inherent lack of liquidity.

The estimated fair value is based on quantitative and qualitative factors including subsequent financing activities by the investee.

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

There have been no material changes to our significant accounting policies disclosed in Note 1 - Organization and Summary of Significant Accounting Policies, of the Notes to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended January 31, 2021.

We operate on a 52- or 53-week year, ending on the last Sunday in January.

Fiscal year 2021 is a 53-week year and fiscal year 2020 is a 52-week year.

The third quarters of fiscal years 2021 and 2020 were both 13-week quarters.

Fiscal year 2022 is a 52-week year and fiscal year 2021 was a 53-week year.

The first quarters of fiscal years 2022 and 2021 were both 13-week quarters.

Reclassifications

7 unchanged sentences

Actual results could differ materially from our estimates.

On an on-going basis, we evaluate our estimates, including those related to revenue recognition, cash equivalents and marketable securities, accounts receivable, inventories, income taxes, goodwill, stock-based compensation, litigation, investigation and settlement costs, restructuring and other charges, and other contingencies.

The inputs into our judgments and estimates consider the economic implications of COVID-19 on our critical and significant accounting estimates.

On an ongoing basis, we evaluate our estimates, including those related to revenue recognition, cash equivalents and marketable securities, accounts receivable, inventories, income taxes, goodwill, stock-based compensation, litigation, investigation and settlement costs, restructuring and other charges, and other contingencies.

The inputs into our judgments and estimates consider the economic implications of COVID-19.

These estimates are based on historical facts and various other assumptions that we believe are reasonable.

Adoption of New and Recently Issued Accounting Pronouncements

Recently Adopted Accounting Pronouncement

In June 2016, the Financial Accounting Standards Board issued a new accounting standard to replace the existing incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates for accounts receivable and other financial instruments, including available-for-sale debt securities.

We adopted the standard in the first quarter of fiscal year 2021 and the impact of the adoption was not material to our consolidated financial statements.

Note 2 - Business Combination

Pending Acquisition of Arm Limited

On September 13, 2020, we entered into a Share Purchase Agreement, or the Purchase Agreement, with Arm Limited, or Arm, and SoftBank Group Capital Limited and SVF Holdco (UK) Limited, or together, SoftBank, for us to acquire, from SoftBank, all of the allotted and issued ordinary shares of Arm in a transaction valued at $ 40 billion.

We paid $ 2 billion in cash at signing, or the Signing Consideration, and will pay upon closing of the acquisition $ 10 billion in cash and issue to SoftBank 44.3 million shares of our common stock with an aggregate value of $ 21.5 billion.

On September 13, 2020, we entered into a Share Purchase Agreement, or the Purchase Agreement, with Arm Limited, or Arm, and SoftBank Group Capital Limited and SVF Holdco (UK) Limited, or together, SoftBank, for us to acquire, from SoftBank, all allotted and issued ordinary shares of Arm in a transaction valued at $ 40 billion.

The transaction includes a potential earn out, which is contingent on the achievement of certain financial performance targets by Arm during the fiscal year ending March 31, 2022.

If the financial targets are achieved, SoftBank can elect to receive either up to $ 5 billion in cash or up to 10.3 million shares of our common stock.

If the financial targets are achieved, SoftBank can elect to receive either up to an additional $ 5 billion in cash or up to an additional 10.3 million shares of our common stock.

We will issue up to $ 1.5 billion in restricted stock units to Arm employees after closing.

The $ 2 billion paid upon signing was allocated between advanced consideration for the acquisition of $ 1.36 billion and the prepayment of intellectual property licenses from Arm of $ 0.17 billion and royalties of $ 0.47 billion.

The closing of the acquisition is subject to customary closing conditions, including receipt of specified governmental and regulatory consents and approvals and expiration of any related mandatory waiting period, and Arm's implementation of the reorganization and distribution of Arm’s IoT Services Group and certain other assets and liabilities.

If the Purchase Agreement is terminated under certain circumstances, we will be refunded $ 1.25 billion of the Signing Consideration.

The $ 2 billion payment upon signing was allocated on a fair value basis and any refund of the Signing Consideration will use stated values in the Purchase Agreement.

We believe the closing of the acquisition will likely occur in the first quarter of calendar year 2022.

The $ 2 billion

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

paid upon signing was allocated between advanced consideration for the acquisition of $ 1.36 billion and the prepayment of intellectual property licenses from Arm of $ 0.17 billion and royalties of $ 0.47 billion, both with a 20-year term.

The closing of the acquisition is subject to customary closing conditions, including receipt of specified governmental and regulatory consents and approvals and the expiration of any related mandatory waiting period, and Arm's implementation of the reorganization and distribution of Arm’s IoT Services Group and certain other assets and liabilities.

We are engaged with regulators in the United States, the United Kingdom, the European Union, China and other jurisdictions.

If the Purchase Agreement is terminated under certain circumstances, we will be refunded $ 1.25 billion of the Signing Consideration.

The Signing Consideration was allocated on a fair value basis and any refund of the Signing Consideration will use stated values in the Purchase Agreement.

We believe the closing of the acquisition will likely occur in the first quarter of calendar year 2022.

Acquisition of Mellanox Technologies, Ltd.

2 unchanged sentences

We acquired Mellanox to optimize data center workloads to scale across the entire computing, networking, and storage stack.

Preliminary Purchase Price Allocation

The aggregate purchase consideration has been preliminarily allocated as follows (in millions):

Purchase Price

Cash paid for outstanding Mellanox ordinary shares (1) $ 7,033

Cash for Mellanox equity awards (2) 16

Total cash consideration 7,049

Fair value of Mellanox equity awards assumed by NVIDIA (3) 85

Total purchase consideration $ 7,134

Cash and cash equivalents $ 115

Marketable securities 699

Accounts receivable, net 216

Inventories 320

Prepaid expenses and other assets 179

Property and equipment, net 144

Goodwill 3,431

Intangible assets 2,970

Accounts payable ( 136 )

Accrued and other current liabilities ( 236 )

Income tax liability ( 191 )

Deferred income tax liability ( 258 )

Other long-term liabilities ( 119 )

(1) Represents the cash consideration of $ 125.00 per share paid to Mellanox shareholders for approximately 56 million shares of outstanding Mellanox ordinary shares.

(2) Represents the cash consideration for the settlement of approximately 249 thousand Mellanox stock options held by employees and non-employee directors of Mellanox.

(3) Represents the fair value of Mellanox’s stock-based compensation awards attributable to pre-combination services.

We allocated the purchase price to tangible and identified intangible assets acquired and liabilities assumed based on the preliminary estimates of their estimated fair values, which were determined using generally accepted valuation techniques based on estimates and assumptions made by management at the time of the acquisition and are subject to change during the measurement period which is not expected to exceed one year.

The primary tasks that are required to be completed include validation of business level forecasts, jurisdictional forecasts, customer attrition rates, contingent liabilities assessments and any related tax impacts from the acquisition.

Any adjustments to our preliminary purchase price allocation identified during the measurement period will be recognized in the period in which the adjustments are determined.

The goodwill is primarily attributable to the planned growth in the combined business of NVIDIA and Mellanox.

Goodwill is not amortized to earnings, but instead is reviewed for impairment at least annually, absent any interim indicators of impairment.

Goodwill recognized in the acquisition is not expected to be deductible for foreign tax purposes.

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

arising from the Mellanox acquisition has been allocated to the Compute and Networking segment.

Refer to Note 15 – Segment Information for further details on segments.

The operating results of Mellanox have been included in our condensed consolidated financial statements for the third quarter and first nine months of fiscal year 2021 since the acquisition date of April 27, 2020.

Revenue attributable to Mellanox was approximately 13 % and 10 % of consolidated revenue for the third quarter and first nine months of fiscal year 2021, respectively.

There is not a practical way to determine net income attributable to Mellanox due to integration.

Acquisition-related costs attributable to Mellanox of $ 27 million were included in selling, general and administrative expense for the first nine months of fiscal year 2021.

Intangible Assets

The estimated fair value and weighted average useful life of the acquired intangible assets are as follows:

Fair Value Weighted Average Useful Lives

(In millions)

Developed technology (1) $ 1,640 5 years

Customer relationships (2) 440 3 years

Order backlog (3) 190 Based on actual shipments

Trade names (4) 70 5 years

Total identified finite-lived intangible assets 2,340

IPR&D (5) 630 N/A

Total identified intangible assets $ 2,970

(1) The fair value of developed technology was identified using the Multi-Period Excess Earning Method.

(2) Customer relationships represent the fair value of the existing relationships using the With and Without Method.

(3) Order backlog represents primarily the fair value of purchase arrangements with customers using the Multi-Period Excess Earning Method.

(4) Trade names primarily relate to Mellanox trade names and fair value was determined by applying the Relief-from-Royalty Method under the income approach.

(5) The fair value of IPR&D was determined using the Multi-Period Excess Earning Method.

The fair value of the finite-lived intangible assets will be amortized over the estimated useful lives based on the pattern in which the economic benefits are expected to be received to cost of revenue and operating expenses.

Mellanox had an IPR&D project associated with the next generation interconnect product that had not yet reached technological feasibility as of the acquisition date.

Accordingly, we recorded an indefinite-lived intangible asset of $ 630 million for the fair value of this project, which will initially not be amortized.

Instead, the project will be tested for impairment whenever events or changes in circumstances indicate that the project may be impaired or may have reached technological feasibility.

Once the project reaches technological feasibility, we will begin to amortize the intangible asset over its estimated useful life.

Supplemental Unaudited Pro Forma Information

The following unaudited pro forma financial information summarizes the combined results of operations for NVIDIA and Mellanox as if the companies were combined as of the beginning of fiscal year 2020:

Three Months Ended Nine Months Ended

2020 October 27,

2019 October 25,

2020 October 27,

Three Months Ended

April 26, 2020

(In millions)

1 unchanged sentence

Net income $ 918

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The unaudited pro forma information includes adjustments related to amortization of acquired intangible assets, adjustments to stock-based compensation expense, fair value of acquired inventory, and transaction costs.

The unaudited pro forma information presented above is for informational purposes only and is not necessarily indicative of our consolidated results of operations of the combined business had the acquisition actually occurred at the beginning of fiscal year 2020 or of the results of our future operations of the combined businesses.

The pro forma results reflect the inventory step-up expense of $ 161 million in the first nine months of fiscal year 2020 and were excluded from the pro forma results for the first nine months of fiscal year 2021.

There were no other material nonrecurring adjustments.

The unaudited pro forma information presented above is for informational purposes only and is not necessarily indicative of our consolidated results of operations of the combined business had the acquisition occurred at the beginning of fiscal year 2020 or of the results of our future operations of the combined businesses.

Note 3 - Leases

Our lease obligations primarily consist of operating leases for our headquarters complex, domestic and international office facilities, and data center space, with lease periods expiring between fiscal years 2022 and 2035.

Future minimum lease payments under our non-cancelable operating leases as of October 25, 2020, are as follows:

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Future minimum lease payments under our non-cancelable operating leases as of May 2, 2021, are as follows:

Operating Lease Obligations

(In millions)

2021 (excluding first nine months of fiscal year 2021)

2022 (excluding first quarter of fiscal year 2022)

2027 and thereafter

3 unchanged sentences

Long-term operating lease liabilities $ 640

Operating lease expense was $ 37 million and $ 28 million for the third quarter of fiscal years 2021 and 2020, respectively, and $ 104 million and $ 83 million for the first nine months of fiscal years 2021 and 2020, respectively.

Short-term and variable lease expenses for the third quarter and first nine months of fiscal years 2021 and 2020 were not significant.

Operating lease expenses were $ 39 million and $ 31 million for the first quarter of fiscal years 2022 and 2021, respectively.

Short-term and variable lease expenses for the first quarter of fiscal years 2022 and 2021 were not significant.

Other information related to leases was as follows:

Nine Months Ended

October 25, 2020 October 27, 2019

Three Months Ended

May 2, 2021 April 26, 2020

(In millions)

2 unchanged sentences

Operating lease assets obtained in exchange for lease obligations $ 54 $ 3

(1) The first nine months of fiscal year 2021 includes $ 80 million of operating lease assets addition due to a business combination.

As of October 25, 2020, our operating leases had a weighted average remaining lease term of 7.8 years and a weighted average discount rate of 3.06 %.

As of May 2, 2021, our operating leases had a weighted average remaining lease term of 7.5 years and a weighted average discount rate of 2.77 %.

As of January 31, 2021, our operating leases had a weighted average remaining lease term of 7.6 years and a weighted average discount rate of 2.87 %.

4 unchanged sentences

Our Condensed Consolidated Statements of Income include stock-based compensation expense, net of amounts allocated to inventory, as follows:

Three Months Ended Nine Months Ended

2020 October 27,

2019 October 25,

2020 October 27,

Three Months Ended

2021 April 26,

(In millions)

11 unchanged sentences

Vested restricted stock ( 4 ) $ 252.22

Balances, October 25, 2020 16 $ 253.81

As of October 25, 2020, there was $ 3.42 billion of aggregate unearned stock-based compensation expense, net of forfeitures.

Balances, May 2, 2021 12 $ 279.79

As of May 2, 2021, there was $ 3.32 billion of aggregate unearned stock-based compensation expense, net of forfeitures.

This amount is expected to be recognized over a weighted average period of 2.4 years for RSUs, PSUs, and market-based PSUs, and 1.1 years for ESPP.

3 unchanged sentences

The following is a reconciliation of the denominator of the basic and diluted net income per share computations for the periods presented:

Three Months Ended Nine Months Ended

October 25, October 27, October 25, October 27,

2020 2019 2020 2019

Three Months Ended

May 2, April 26,

(In millions, except per share data)

1 unchanged sentence

Basic weighted average shares

618 610 616 609

Dilutive impact of outstanding equity awards

Diluted weighted average shares

630 618 626 617

Net income per share:

5 unchanged sentences

Note 6 – Income Taxes

We recognized an income tax expense of $ 12 million and $ 64 million for the third quarter and first nine months of fiscal year 2021, respectively, and $ 60 million and $ 109 million for the third quarter and first nine months of fiscal year 2020, respectively.

The income tax expense as a percentage of income before income tax was 0.9 % and 2.2 % for the third quarter and first nine months of fiscal year 2021, respectively, and 6.3 % and 5.6 % for the third quarter and first nine months of fiscal year 2020, respectively.

The decrease in our effective tax rate for the third quarter and first nine months of fiscal year 2021 as compared to the same periods of fiscal year 2020 was primarily due to a decrease in the proportional amount of earnings subject to United States tax and an increase of tax benefits from stock-based compensation.

Our effective tax rates for the first nine months of fiscal years 2021 and 2020 were lower than the U.S.

We recognized an income tax expense of $ 132 million and $ 64 million for the first quarter of fiscal years 2022 and 2021, respectively.

The income tax expense as a percentage of income before income tax was 6.5 % and 6.6 % for the first quarter of fiscal years 2022 and 2021, respectively.

The slight decrease in our effective tax rate for the first quarter of fiscal year 2022 as compared to the first quarter of fiscal year 2021 was primarily due to a change in the jurisdiction of earnings, partially offset by a decrease in the impact of tax benefits from the U.S.

federal research tax credit.

Our effective tax rates for the first quarter of fiscal years 2022 and 2021 were lower than the U.S.

federal statutory rate of 21% due to income earned in jurisdictions that are subject to taxes lower than the U.S.

1 unchanged sentence

federal research tax credit, and tax benefits related to stock-based compensation.

During the second quarter of fiscal year 2021, we completed the acquisition of Mellanox.

As a result of the acquisition, we recorded $ 256 million of net deferred tax liabilities primarily on the excess of book basis over the tax basis of the acquired intangible assets and undistributed earnings in certain foreign subsidiaries.

We also recorded $ 153 million of long-term tax liabilities related to tax basis differences in Mellanox.

The net deferred tax liabilities and long-term tax liabilities are based upon certain assumptions underlying our purchase price allocation.

Upon finalization of the purchase price allocation, additional adjustments to the amount of our net deferred taxes and long-term tax liabilities may be required.

As a result of the acquisition, we intend to indefinitely reinvest approximately $ 675 million of cumulative undistributed earnings held by Mellanox non-U.S.

As of May 2, 2021, we intend to indefinitely reinvest approximately $ 1.3 billion of cumulative undistributed earnings held by Mellanox non-U.S.

subsidiaries.

1 unchanged sentence

subsidiaries as the determination of such amount is not practicable.

For the first nine months of fiscal year 2021, there have been no material changes to our tax years that remain subject to examination by major tax jurisdictions.

For the first quarter of fiscal year 2022, there have been no material changes to our tax years that remain subject to examination by major tax jurisdictions.

We are currently under examination by the Internal Revenue Service for our fiscal years 2018 and 2019.

In the second quarter of fiscal year 2021, we assumed $ 59 million of unrecognized tax

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

benefits and $ 4 million of related interest through the Mellanox acquisition.

Other than these amounts, there have been no material changes to our unrecognized tax benefits and any related interest or penalties since the fiscal year ended January 26, 2020.

Additionally, there have been no material changes to our unrecognized tax benefits and any related interest or penalties since the fiscal year ended January 31, 2021.

While we believe that we have adequately provided for all uncertain tax positions, or tax positions where we believe it is not more-likely-than-not that the position will be sustained upon review, amounts asserted by tax authorities could be greater or less than our accrued position.

Accordingly, our provisions on federal, state and foreign tax related matters to be recorded in the future may change as revised estimates are made or the underlying matters are settled or otherwise resolved with the respective tax authorities.

As of October 25, 2020, we do not believe that our estimates, as otherwise provided for, on such tax positions will significantly increase or decrease within the next twelve months.

As of May 2, 2021, we do not believe that our estimates, as otherwise provided for, on such tax positions will significantly increase or decrease within the next 12 months.

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 7 - Cash Equivalents and Marketable Securities

Our cash equivalents and marketable securities, except for money market funds and certificates of deposits, are classified as “available-for-sale” debt securities.

The following is a summary of cash equivalents and marketable securities as of October 25, 2020 and January 26, 2020:

October 25, 2020

Our cash equivalents and marketable securities related to debt securities are classified as “available-for-sale” debt securities.

The following is a summary of cash equivalents and marketable securities as of May 2, 2021 and January 31, 2021:

Cost Unrealized

4 unchanged sentences

(In millions)

Debt securities issued by the United States Treasury $ 3,881 $ — $ — $ 3,881 $ 1,116 $ 2,765

Corporate debt securities $ 5,240 $ 2 $ — $ 5,242 $ 323 $ 4,919

Debt securities issued by United States government agencies 3,045 1 — 3,046 — 3,046

Debt securities issued by the United States Treasury 2,820 1 — 2,821 — 2,821

Certificates of deposit 884 — — 884 48 836

9 unchanged sentences

(In millions)

Money market funds $ 7,507 $ — $ — $ 7,507 $ 7,507 $ —

Debt securities issued by the United States Treasury 1,358 — — 1,358 1,358 —

Debt securities issued by United States government agencies 1,096 — — 1,096 1,096 —

Corporate debt securities $ 4,442 $ 2 $ — $ 4,444 $ 234 $ 4,210

Foreign government bonds 200 — — 200 200 —

Debt securities issued by United States government agencies 2,975 1 — 2,976 28 2,948

Debt securities issued by the United States Treasury 2,846 — — 2,846 25 2,821

Certificates of deposit 705 — — 705 37 668

Asset-backed securities 1 — — 1 — 1

Money market funds 313 — — 313 313 —

Foreign government bonds 67 — — 67 — 67

Total $ 11,348 $ 3 $ — $ 11,351 $ 637 $ 10,714

Net realized gains and unrealized gains and losses were not significant for all periods presented.

The amortized cost and estimated fair value of cash equivalents and marketable securities as of October 25, 2020 and January 26, 2020 are shown below by contractual maturity.

October 25, 2020 January 26, 2020

The amortized cost and estimated fair value of cash equivalents and marketable securities as of May 2, 2021 and January 31, 2021 are shown below by contractual maturity.

May 2, 2021 January 31, 2021

Amortized Cost Estimated Fair Value Amortized Cost Estimated Fair Value

3 unchanged sentences

Total $ 12,375 $ 12,379 $ 11,348 $ 11,351

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 8 – Fair Value of Financial Assets and Liabilities

1 unchanged sentence

We review fair value hierarchy classification on a quarterly basis.

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Fair Value at

Pricing Category October 25, 2020 January 26, 2020

Pricing Category May 2, 2021 January 31, 2021

(In millions)

1 unchanged sentence

Money market funds Level 1 $ 319 $ 313

Debt securities issued by the United States Treasury Level 2 $ 3,881 $ 1,358

Corporate debt securities Level 2 $ 5,242 $ 4,444

Debt securities issued by United States government agencies Level 2 $ 3,046 $ 2,976

Debt securities issued by the United States Treasury Level 2 $ 2,821 $ 2,846

Certificates of deposit Level 2 $ 884 $ 705

Foreign government bonds Level 2 $ 67 $ 67

Asset-backed securities Level 2 $ — $ 1

Prepaid expenses and other current assets:

Publicly-held equity security (1) Level 1 $ 133 $ —

Other assets:

Investment in non-affiliated entities (2) Level 3 $ 146 $ 144

Other non-current liabilities:

2.20 % Notes Due 2021 (3)

10 unchanged sentences

Level 2 $ 552 $ 602

(1) Investment in non-affiliated entities is privately held and recorded at fair value on a non-recurring basis only if an impairment or observable price adjustment occurs in the period with changes in fair value recorded through net income.

The amount recorded as of October 25, 2020 has not been significant.

(1) The balance as of May 2, 2021 includes an investment that was reclassified from privately-held equity securities following the commencement of public market trading of the issuer in the first quarter of fiscal year 2022.

As of May 2, 2021, the investment is subject to short-term selling restrictions.

Due to the public market trading of the issuer, an unrealized gain on the investment of $ 124 million was recorded in other income (expense), net in the first quarter of fiscal year 2022.

The net cumulative unrealized gain on the investment was $ 130 million as of May 2, 2021.

(2) Investment in private non-affiliated entities is recorded at fair value on a non-recurring basis only if an impairment or observable price adjustment occurs in the period with changes in fair value recorded through net income.

The amount recorded as of May 2, 2021 has not been significant.

(3) These liabilities are carried on our Consolidated Balance Sheets at their original issuance value, net of unamortized debt discount and issuance costs, and are not marked to fair value each period.

Refer to Note 12 of these Notes to Condensed Consolidated Financial Statements for additional information .

Refer to Note 12 of the Notes to Condensed Consolidated Financial Statements for additional information .

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 9 - Amortizable Intangible Assets

Note 9 - Amortizable Intangible Assets and Goodwill

The components of our amortizable intangible assets are as follows:

October 25, 2020 January 26, 2020

May 2, 2021 January 31, 2021

Amount Accumulated

6 unchanged sentences

Total intangible assets $ 3,999 $ ( 1,386 ) $ 2,613 $ 3,986 $ ( 1,249 ) $ 2,737

(1) As of October 25, 2020, acquisition-related intangible assets include the fair value of a Mellanox IPR&D project of $ 630 million, which has not been amortized.

(1) As of May 2, 2021, acquisition-related intangible assets include the fair value of a Mellanox in-process research and development, or IPR&D, project of $ 630 million, which has not yet commenced amortization.

Once the project reaches technological feasibility, we will begin to amortize the intangible asset over its estimated useful life.

Refer to Note 2 of these Notes to Condensed Consolidated Financial Statements for further details.

Amortization expense associated with intangible assets was $ 174 million and $ 465 million for the third quarter and first nine months of fiscal year 2021, respectively, and $ 6 million and $ 19 million for the third quarter and first nine months of fiscal year 2020, respectively.

Future amortization expense related to the net carrying amount of intangible assets as of October 25, 2020 is estimated to be $ 146 million for the remainder of fiscal year 2021, $ 542 million in fiscal year 2022, $ 539 million in fiscal year 2023, $ 418 million in fiscal year 2024, $ 364 million in fiscal year 2025, and $ 852 million in fiscal year 2026 and thereafter.

Refer to Note 2 of these Notes to Condensed Consolidated Financial Statements for further details on intangible assets.

Amortization expense associated with intangible assets was $ 137 million and $ 7 million for the first quarter of fiscal years 2022 and 2021, respectively.

Future amortization expense related to the net carrying amount of intangible assets, excluding IPR&D, as of May 2, 2021 is estimated to be $ 412 million for the remainder of fiscal year 2022, $ 546 million in fiscal year 2023, $ 424 million in fiscal year 2024, $ 370 million in fiscal year 2025, $ 99 million in fiscal year 2026, and $ 132 million in fiscal year 2027 and thereafter.

There were no changes to the carrying amount of goodwill during the first quarter of fiscal year 2022.

Note 10 - Balance Sheet Components

Certain balance sheet components are as follows:

October 25, January 26,

May 2, January 31,

(In millions)

3 unchanged sentences

Total inventories $ 1,992 $ 1,826

October 25, January 26,

May 2, January 31,

Prepaid expenses and other current assets:

(In millions)

Prepaid expenses $ 179 $ 142

Publicly-held equity security (1) 133 —

Total prepaid expenses and other current assets $ 444 $ 239

As of May 2, 2021, the investment is subject to short-term selling restrictions.

Due to the public market trading of the issuer, an unrealized gain on the investment of $ 124 million was recorded in other income (expense), net in the first quarter of fiscal year 2022.

The net cumulative unrealized gain on the investment was $ 130 million as of May 2, 2021.

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

May 2, January 31,

Other assets:

3 unchanged sentences

Investment in non-affiliated entities 146 144

Deposits 123 136

Total other assets $ 2,090 $ 2,144

(1) Advanced consideration for acquisition and long-term prepaid royalties are related to the pending acquisition of Arm.

Refer to Note 2 of these Notes to Condensed Consolidated Financial Statements for further details.

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

October 25, January 26,

May 2, January 31,

Accrued and Other Current Liabilities:

1 unchanged sentence

Customer program accruals $ 700 $ 630

Accrued payroll and related expenses 277 185

Deferred revenue (1) 333 288

Licenses and royalties 124 66

Accrued payroll and related expenses 265 297

Operating leases 135 121

Licenses and royalties 96 128

Taxes payable 96 61

Product warranty and return provisions 45 39

Professional service fee 28 18

Professional service fees 33 26

Coupon interest on debt obligations 19 74

1 unchanged sentence

(1) Deferred revenue primarily includes customer advances and deferrals related to license and development arrangements and post-contract customer support, or PCS.

October 25, January 26,

May 2, January 31,

Other Long-Term Liabilities:

6 unchanged sentences

Total other long-term liabilities $ 1,414 $ 1,375

(1) As of October 25, 2020, income tax payable represents the long-term portion of the one-time transition tax payable of $ 284 million, unrecognized tax benefits of $ 264 million, related interest and penalties of $ 46 million, and other foreign long-term tax payable of $ 153 million.

(2) Deferred income tax primarily relates to acquired intangible assets.

(1) As of May 2, 2021, income tax payable represents the long-term portion of the one-time transition tax payable of $ 284 million, unrecognized tax benefits of $ 374 million, related interest and penalties of $ 48 million, and other foreign long-term tax payable of $ 158 million.

(2) Deferred revenue primarily includes deferrals related to PCS.

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Deferred Revenue

The following table shows the changes in deferred revenue during the first nine months of fiscal years 2021 and 2020:

October 25, October 27,

The following table shows the changes in deferred revenue during the first quarter of fiscal years 2022 and 2021:

May 2, April 26,

(In millions)

1 unchanged sentence

Deferred revenue added during the period 178 110

Addition due to business combinations 75 —

Revenue recognized during the period ( 123 ) ( 70 )

Balance at end of period $ 506 $ 241

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Revenue related to remaining performance obligations represents the remaining contracted license, development arrangements and PCS that has not been recognized.

This includes related deferred revenue currently recorded and amounts that will be invoiced in future periods.

As of October 25, 2020, the amount of our remaining performance obligations that has not been recognized as revenue was $ 679 million, of which we expect to recognize approximately 41 % as revenue over the next twelve months and the remainder thereafter.

As of May 2, 2021, the amount of our remaining performance obligations that has not been recognized as revenue was $ 680 million, of which we expect to recognize approximately 48 % as revenue over the next 12 months and the remainder thereafter.

This amount excludes the value of remaining performance obligations for contracts with an original expected length of one year or less.

3 unchanged sentences

Gains or losses on the contracts are recorded in accumulated other comprehensive income or loss and reclassified to operating expense when the related operating expenses are recognized in earnings or ineffectiveness should occur.

The fair value of the contracts was not significant as of October 25, 2020 and January 26, 2020.

The fair value of the contracts was not significant as of May 2, 2021 and January 31, 2021.

We also enter into foreign currency forward contracts to mitigate the impact of foreign currency movements on monetary assets and liabilities that are denominated in currencies other than the U.S.

dollar, including intercompany hedging instruments, or intercompany derivatives, with wholly-owned subsidiaries in order to hedge certain forecasted expenses denominated in currencies other than the U.S.

These forward contracts were not designated for hedge accounting treatment.

Therefore, the change in fair value of these contracts is recorded in other income or expense and offsets the change in fair value of the hedged foreign currency denominated monetary assets and liabilities, which is also recorded in other income or expense.

The table below presents the notional value of our foreign currency forward contracts outstanding as of October 25, 2020 and January 26, 2020:

The table below presents the notional value of our foreign currency forward contracts outstanding as of May 2, 2021 and January 31, 2021:

2021 January 31,

2 unchanged sentences

Not designated for hedge accounting $ 402 $ 441

As of October 25, 2020, all designated foreign currency forward contracts mature within eighteen months .

The expected realized gains and losses deferred into accumulated other comprehensive income or loss related to foreign currency forward contracts within the next twelve months was not significant.

During the first nine months of fiscal years 2021 and 2020, the impact of derivative financial instruments designated for hedge accounting treatment on other comprehensive income or loss was not significant and all such instruments were determined to be highly effective.

As of May 2, 2021, all designated foreign currency forward contracts mature within 18 months.

The expected realized gains and losses deferred into accumulated other comprehensive income or loss related to foreign currency forward contracts within the next 12 months was not significant.

During the first quarter of fiscal years 2022 and 2021, the impact of derivative financial instruments designated for hedge accounting treatment on other comprehensive income or loss was not significant and all such instruments were determined to be highly effective.

Therefore, there were no gains or losses associated with ineffectiveness.

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 12 - Debt

1 unchanged sentence

In March 2020, we issued $ 1.50 billion of the 2.85 % Notes Due 2030, $ 1.00 billion of the 3.50 % Notes Due 2040, $ 2.00 billion of the 3.50 % Notes Due 2050, and $ 500 million of the 3.70 % Notes Due 2060, or collectively, the March 2020 Notes.

Interest on the March 2020 Notes is payable on April 1 and October 1 of each year, beginning on October 1, 2020.

Upon 30 days' notice to holders of the Notes, we may redeem the Notes for cash prior to maturity, at redemption prices that include accrued and unpaid interest, if any, and a make-whole premium.

However, no make-whole premium will be paid for redemptions of the Notes Due 2030 on or after January 1, 2030, the Notes Due 2040 on or after October 1, 2039, the Notes Due 2050 on or after October 1, 2049, or the Notes Due 2060 on or after October 1, 2059.

The net proceeds from the March 2020 Notes were $ 4.97 billion, after deducting debt discount and issuance costs.

Interest on the March 2020 Notes is payable on April 1 and October 1 of each year.

In September 2016, we issued $ 1.00 billion of the 2.20 % Notes Due 2021 and $ 1.00 billion of the 3.20 % Notes Due 2026, or collectively, the September 2016 Notes.

Interest on the September 2016 Notes is payable on March 16 and September 16 of each year.

Upon 30 days' notice to holders of the Notes, we may redeem the Notes for cash prior to maturity, at redemption prices that include accrued and unpaid interest, if any, and a make-whole premium.

However, no make-

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

whole premium will be paid for redemptions of the Notes Due 2021 on or after August 16, 2021, or for redemptions of the Notes Due 2026 on or after June 16, 2026.

The net proceeds from the September 2016 Notes were $ 1.98 billion, after deducting debt discount and issuance costs.

Both the September 2016 Notes and the March 2020 Notes, or collectively, the Notes, are our unsecured senior obligations and rank equally in right of payment with all existing and future unsecured and unsubordinated indebtedness.

3 unchanged sentences

Remaining Term (years)

Interest Rate October 25, 2020 January 26, 2020

Interest Rate May 2, 2021 January 31, 2021

(In millions)

13 unchanged sentences

Net carrying amount 6,963 6,963

As of October 25, 2020, we were in compliance with the required covenants under the Notes.

Revolving Credit Facility

Less short-term portion ( 999 ) ( 999 )

Total long-term portion $ 5,964 $ 5,964

As of May 2, 2021, we were in compliance with the required covenants under the Notes.

Credit Facilities

We have a Credit Agreement under which we may borrow up to $ 575 million for general corporate purposes and can obtain revolving loan commitments up to $ 425 million.

As of October 25, 2020, we had no t borrowed any amounts and were in compliance with the required covenants under this agreement.

Commercial Paper

As of May 2, 2021, we had no t borrowed any amounts and were in compliance with the required covenants under this agreement.

The Credit Agreement expires October 2021.

We have a $ 575 million commercial paper program to support general corporate purposes.

As of October 25, 2020, we had no t issued any commercial paper.

As of May 2, 2021, we had no t issued any commercial paper.

Note 13 - Commitments and Contingencies

Purchase Obligations

As of October 25, 2020, we had outstanding inventory purchase obligations totaling $ 2.57 billion and other purchase obligations totaling $ 398 million.

As of May 2, 2021, we had outstanding inventory purchase obligations totaling $ 3.46 billion which are expected to occur over the next 12 months, and other purchase obligations totaling $ 396 million, which are primarily expected to occur over the next 18 months.

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Accrual for Product Warranty Liabilities

The estimated amount of product returns and warranty liabilities was $ 19 million and $ 15 million as of October 25, 2020 and January 26, 2020, respectively, and the activities related to the warranty liabilities were not significant.

The estimated amount of product warranty liabilities was $ 30 million and $ 22 million as of May 2, 2021 and January 31, 2021, respectively, and the activities related to the warranty liabilities were not significant.

In connection with certain agreements that we have entered in the past, we have provided indemnities to cover the indemnified party for matters such as tax, product, and employee liabilities.

2 unchanged sentences

We have not recorded any liability in our Condensed Consolidated Financial Statements for such indemnifications.

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Securities Class Action and Derivative Lawsuits

The plaintiffs in the putative securities class action lawsuit, captioned 4:18-cv-07669-HSG, initially filed on December 21, 2018, and titled In Re NVIDIA Corporation Securities Litigation, filed an amended complaint on May 13, 2020.

The amended complaint asserts that NVIDIA and certain NVIDIA executives violated Section 10(b) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and SEC Rule 10b-5, by making materially false or misleading statements related to channel inventory and the impact of cryptocurrency mining on GPU demand between May 10, 2017 and November 14, 2018.

Plaintiffs also allege that the NVIDIA executives who they named as defendants violated Section 20(a) of the Exchange Act.

Plaintiffs seek class certification, an award of unspecified compensatory damages, an award of reasonable costs and expenses, including attorneys’ fees and expert fees, and further relief as the Court may deem just and proper.

On June 29, 2020, NVIDIA moved to dismiss the amended complaint on the basis that plaintiffs failed to state any claims for violations of the securities laws by NVIDIA or the individual defendants.

As of September 14, 2020, the motion was fully briefed but the Court has not yet issued a decision.

The putative derivative lawsuit pending in the United States District Court for the Northern District of California, captioned 4:19-cv-00341-HSG, initially filed January 18, 2019 and titled In re NVIDIA Corporation Consolidated Derivative Litigation, remains stayed pending resolution of NVIDIA’s motion to dismiss the complaint in the In Re NVIDIA Corporation Securities Litigation action.

The plaintiffs in the putative securities class action lawsuit, captioned 4:18-cv-07669-HSG, initially filed on December 21, 2018 in the United States District Court for the Northern District of California, and titled In Re NVIDIA Corporation Securities Litigation, filed an amended complaint on May 13, 2020.

The amended complaint asserted that NVIDIA and certain NVIDIA executives violated Section 10(b) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and SEC Rule 10b-5, by making materially false or misleading statements related to channel inventory and the impact of cryptocurrency mining on GPU demand between May 10, 2017 and November 14, 2018.

Plaintiffs also alleged that the NVIDIA executives who they named as defendants violated Section 20(a) of the Exchange Act.

Plaintiffs sought class certification, an award of unspecified compensatory damages, an award of reasonable costs and expenses, including attorneys’ fees and expert fees, and further relief as the Court may deem just and proper.

On March 2, 2021, the district court granted NVIDIA’s motion to dismiss the complaint without leave to amend, entered judgment in favor of NVIDIA and closed the case.

On March 30, 2021, plaintiffs filed a notice of appeal from judgment in the United States Court of Appeals for the Ninth Circuit, case number 21-15604.

The putative derivative lawsuit pending in the United States District Court for the Northern District of California, captioned 4:19-cv-00341-HSG, initially filed January 18, 2019 and titled In re NVIDIA Corporation Consolidated Derivative Litigation, remains stayed pending resolution of the plaintiffs’ appeal in the In Re NVIDIA Corporation Securities Litigation action.

The lawsuit asserts claims for breach of fiduciary duty, unjust enrichment, waste of corporate assets, and violations of Sections 14(a), 10(b), and 20(a) of the Exchange Act based on the dissemination of allegedly false and misleading statements related to channel inventory and the impact of cryptocurrency mining on GPU demand.

3 unchanged sentences

1:19-cv-01795-UNA) and Nelson v.

1:19-cv-01798- UNA), remain stayed pending resolution of NVIDIA’s motion to dismiss the complaint in the In Re NVIDIA Corporation Securities Litigation action.

1:19-cv-01798- UNA), remain stayed pending resolution of the plaintiffs’ appeal in the In Re NVIDIA Corporation Securities Litigation action.

The lawsuits assert claims for breach of fiduciary duty, unjust enrichment, insider trading, misappropriation of information, corporate waste and violations of Sections 14(a), 10(b), and 20(a) of the Exchange Act based on the dissemination of allegedly false, and misleading statements related to channel inventory and the impact of cryptocurrency mining on GPU demand.

2 unchanged sentences

Accounting for Loss Contingencies

As of October 25, 2020, we have not recorded any accrual for contingent liabilities associated with the legal proceedings described above based on our belief that liabilities, while possible, are not probable.

As of May 2, 2021, we have not recorded any accrual for contingent liabilities associated with the legal proceedings described above based on our belief that liabilities, while possible, are not probable.

Further, except as specifically described above, any possible loss or range of loss in these matters cannot be reasonably estimated at this time.

We are engaged in legal actions not described above arising in the ordinary course of business and, while there can be no assurance of favorable outcomes, we believe that the ultimate outcome of these actions will not have a material adverse effect on our operating results, liquidity or financial position.

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 14 - Shareholders’ Equity

1 unchanged sentence

Beginning August 2004, our Board of Directors authorized us to repurchase our stock.

Through October 25, 2020, we have repurchased an aggregate of 260 million shares under our share repurchase program for a total cost of $ 7.08 billion.

Through May 2, 2021, we have repurchased an aggregate of 260 million shares under our share repurchase program for a total cost of $ 7.08 billion.

All shares delivered from these repurchases have been placed into treasury stock.

As of October 25, 2020, we were authorized, subject to certain specifications, to repurchase additional shares of our common stock up to $ 7.24 billion through December 2022.

During the third quarter and first nine months of fiscal year 2021, we paid $ 99 million and $ 296 million in cash dividends to our shareholders, respectively.

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As of May 2, 2021, we were authorized, subject to certain specifications, to repurchase additional shares of our common stock up to $ 7.24 billion through December 2022.

During the first quarter of fiscal year 2022, we paid $ 99 million in cash dividends to our shareholders.

Note 15 - Segment Information

Our Chief Executive Officer, who is considered to be our chief operating decision maker, or CODM, reviews financial information presented on an operating segment basis for purposes of making decisions and assessing financial performance.

In the prior fiscal year, we had reported two operating segments:

GPU and Tegra Processor.

During the first quarter of fiscal year 2021, we changed our operating segments to be consistent with the revised manner in which our CODM reviews our financial performance and allocates resources.

The two new operating segments are "Graphics" and "Compute & Networking".

Comparative periods presented reflect this change.

Our operating segments are equivalent to our reportable segments.

Our two operating segments are "Graphics" and "Compute & Networking." Our operating segments are equivalent to our reportable segments.

Our Graphics segment includes GeForce GPUs for gaming and PCs, the GeForce NOW game streaming service and related infrastructure, and solutions for gaming platforms;

Quadro GPUs for enterprise design;

Quadro/NVIDIA RTX GPUs for enterprise design;

GRID software for cloud-based visual and virtual computing;

2 unchanged sentences

Mellanox networking and interconnect solutions;

DRIVE for autonomous vehicles;

automotive AI Cockpit, autonomous driving development agreements, and autonomous vehicle solutions;

cryptocurrency mining processors, or CMP;

and Jetson for robotics and other embedded platforms.

1 unchanged sentence

The “All Other” category includes the expenses that our CODM does not assign to either Graphics or Compute & Networking for purposes of making operating decisions or assessing financial performance.

The expenses include stock-based compensation expense, corporate infrastructure and support costs, acquisition-related costs, legal settlement costs, and other non-recurring charges and benefits that our CODM deems to be enterprise in nature.

The expenses include stock-based compensation expense, corporate infrastructure and support costs, acquisition-related costs, IP-related costs, and other non-recurring charges and benefits that our CODM deems to be enterprise in nature.

Our CODM does not review any information regarding total assets on a reportable segment basis.

6 unchanged sentences

(In millions)

Three Months Ended October 25, 2020

Revenue $ 2,787 $ 1,939 $ — $ 4,726

Operating income (loss) $ 1,345 $ 738 $ ( 685 ) $ 1,398

Three Months Ended October 27, 2019

Revenue $ 2,226 $ 788 $ — $ 3,014

Operating income (loss) $ 1,068 $ 158 $ ( 299 ) $ 927

Nine Months Ended October 25, 2020

Three Months Ended May 2, 2021

Revenue $ 3,451 $ 2,210 $ — $ 5,661

Operating income (loss) $ 1,786 $ 861 $ ( 691 ) $ 1,956

Nine Months Ended October 27, 2019

Three Months Ended April 26, 2020

Revenue $ 1,906 $ 1,174 $ — $ 3,080

2 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Three Months Ended Nine Months Ended

2020 October 27,

2019 October 25,

2020 October 27,

Three Months Ended

2021 April 26,

(In millions)

3 unchanged sentences

Unallocated cost of revenue and operating expenses ( 90 ) ( 82 )

Legal settlement costs ( 21 ) — ( 38 ) ( 13 )

IP-related costs ( 5 ) —

Total $ ( 691 ) $ ( 311 )

1 unchanged sentence

The following table summarizes information pertaining to our revenue from customers based on the invoicing address by geographic regions:

Three Months Ended Nine Months Ended

October 25, October 27, October 25, October 27,

2020 2019 2020 2019

Three Months Ended

May 2, April 26,

(In millions)

7 unchanged sentences

The following table summarizes information pertaining to our revenue by each of the specialized markets we serve:

Three Months Ended Nine Months Ended

October 25, October 27, October 25, October 27,

2020 2019 2020 2019

Three Months Ended

May 2, April 26,

(In millions)

Gaming $ 2,760 $ 1,339

Professional Visualization 236 324 746 881

Data Center 2,048 1,141

Professional Visualization 372 307

Automotive 154 155

1 unchanged sentence

Total revenue $ 5,661 $ 3,080

No customer represented 10% or more of total revenue for the first quarter of fiscal years 2022 or 2021.

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

No customer represented 10% or more of total revenue for the third quarter and first nine months of fiscal year 2021.

One customer represented 10 % and 11 % of our total revenue for the third quarter and first nine months of fiscal year 2020, respectively, and was attributable primarily to the Graphics segment.

One customer represented 13 % and 21 % of our accounts receivable balance as of October 25, 2020 and January 26, 2020, respectively.

Note 16 - Goodwill

During the first quarter of fiscal year 2021, we changed our operating segments to Graphics and Compute & Networking, as discussed in Note 15 of these Notes to Condensed Consolidated Financial Statements.

As a result, our reporting units also changed, and we reassigned the goodwill balance to the new reporting units based on their relative fair values.

We determined there was no goodwill impairment immediately prior to the reorganization.

As of October 25, 2020, the total carrying amount of goodwill was $ 4.19 billion and the amount of goodwill allocated to our Graphics and Compute & Networking reporting units was $ 347 million and $ 3.85 billion, respectively.

In the first nine months of fiscal year 2021, goodwill increased by $ 3.57 billion.

The increase in goodwill in the first nine months of fiscal year 2021 was due to goodwill of $ 3.43 billion arising from the Mellanox acquisition, and goodwill of $ 133 million from other acquisition activity, both of which were allocated to the Compute & Networking reporting unit.

One customer represented 13 % and 16 % of our accounts receivable balance as of May 2, 2021 and January 31, 2021, respectively.

Note 16 – Subsequent Event

On May 21, 2021, our Board of Directors declared a four -for-one split of our common stock in the form of a stock dividend, conditioned on obtaining stockholder approval at our 2021 Annual Meeting of Stockholders to be held on June 3, 2021, of an amendment to our Amended and Restated Certificate of Incorporation to increase the number of authorized shares of common stock from 2 billion to 4 billion.

The following table reflects basic and diluted weighted average shares and net income per share on an unaudited pro forma basis giving effect to the four-for-one stock split as if it had been effective for all periods presented:

Pro Forma (Unaudited)

Three Months Ended Twelve Months Ended

May 2, April 26, January 31, January 26, January 27,

2021 2020 2021 2020 2019

(In millions, except per share data)

$ 1,912 $ 917 $ 4,332 $ 2,796 $ 4,141

Basic weighted average shares 2,484 2,456 2,468 2,436 2,432

Dilutive impact of outstanding equity awards 44 32 44 36 68

Diluted weighted average shares

2,528 2,488 2,512 2,472 2,500

Net income per share:

$ 0.77 $ 0.37 $ 1.76 $ 1.15 $ 1.70

$ 0.76 $ 0.37 $ 1.72 $ 1.13 $ 1.66

(1) Calculated as net income divided by basic weighted average shares.

(2) Calculated as net income divided by diluted weighted average shares.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements