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Item 1. Financial Statements

2022-11-18 compared with 2022-08-31 · 162 added, 146 removed, 522 unchanged (37% of the section changed)

3 unchanged sentences

(In millions, except per share data)

Three Months Ended Six Months Ended

July 31, August 1, July 31, August 1,

Three Months Ended Nine Months Ended

October 30, October 31, October 30, October 31,

2022 2021 2022 2021

26 unchanged sentences

(In millions)

Three Months Ended Six Months Ended

July 31, August 1, July 31, August 1,

Three Months Ended Nine Months Ended

October 30, October 31, October 30, October 31,

2022 2021 2022 2021

Net income $ 680 $ 2,464 $ 2,954 $ 6,749

Other comprehensive loss, net of tax

Other comprehensive income (loss), net of tax

Available-for-sale securities:

3 unchanged sentences

Cash flow hedges:

Net unrealized loss ( 2 ) ( 14 ) ( 30 ) ( 27 )

Reclassification adjustments for net realized gain (loss) included in net income ( 13 ) 8 ( 15 ) 17

Net change in unrealized loss ( 15 ) ( 6 ) ( 45 ) ( 10 )

Other comprehensive loss, net of tax ( 26 ) ( 6 ) ( 79 ) ( 11 )

Net unrealized gain (loss) ( 14 ) 22 ( 44 ) ( 5 )

Reclassification adjustments for net realized loss included in net income ( 1 ) ( 17 ) ( 16 ) —

Net change in unrealized gain (loss) ( 15 ) 5 ( 60 ) ( 5 )

Other comprehensive income (loss), net of tax ( 33 ) 1 ( 112 ) ( 10 )

Total comprehensive income $ 647 $ 2,465 $ 2,842 $ 6,739

3 unchanged sentences

(In millions)

July 31, January 30,

October 30, January 30,

Current assets:

34 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED JULY 31, 2022 AND AUGUST 1, 2021

FOR THE THREE MONTHS ENDED OCTOBER 30, 2022 AND OCTOBER 31, 2021

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, May 1, 2022 2,504 $ 3 $ 10,623 $ — $ ( 64 ) $ 15,758 $ 26,320

Balances, July 31, 2022 2,489 $ 2 $ 10,968 $ — $ ( 90 ) $ 12,971 $ 23,851

Net income — — — — — 680 680

6 unchanged sentences

Stock-based compensation — — 749 — — — 749

Balances, July 31, 2022 2,489 $ 2 $ 10,968 $ — $ ( 90 ) $ 12,971 $ 23,851

Balances, May 2, 2021 2,491 $ 3 $ 9,278 $ ( 11,242 ) $ 14 $ 20,721 $ 18,774

Balances, October 30, 2022 2,468 $ 2 $ 11,565 $ — $ ( 123 ) $ 9,905 $ 21,349

Balances, August 1, 2021 2,496 $ 3 $ 9,745 $ ( 11,604 ) $ 8 $ 22,995 $ 21,147

Net income — — — — — 2,464 2,464

Other comprehensive loss — — — — ( 6 ) — ( 6 )

Other comprehensive income — — — — 1 — 1

Issuance of common stock from stock plans 8 — 150 — — — 150

2 unchanged sentences

— — — — — ( 100 ) ( 100 )

Fair value of partially vested equity awards assumed in connection with acquisitions — — 18 — — — 18

Stock-based compensation — — 552 — — — 552

Balances, August 1, 2021 2,496 $ 3 $ 9,745 $ ( 11,604 ) $ 8 $ 22,995 $ 21,147

Balances, October 31, 2021 2,502 $ 3 $ 10,465 $ ( 12,038 ) $ 9 $ 25,359 $ 23,798

See accompanying Notes to Condensed Consolidated Financial Statements.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

FOR THE SIX MONTHS ENDED JULY 31, 2022 AND AUGUST 1, 2021

FOR THE NINE MONTHS ENDED OCTOBER 30, 2022 AND OCTOBER 31, 2021

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

9 unchanged sentences

Stock-based compensation — — 1,965 — — — 1,965

Balances, July 31, 2022 2,489 $ 2 $ 10,968 $ — $ ( 90 ) $ 12,971 $ 23,851

Balances, October 30, 2022 2,468 $ 2 $ 11,565 $ — $ ( 123 ) $ 9,905 $ 21,349

Balances, January 31, 2021 2,479 $ 3 $ 8,719 $ ( 10,756 ) $ 19 $ 18,908 $ 16,893

5 unchanged sentences

— — — — — ( 298 ) ( 298 )

Fair value of partially vested equity awards assumed in connection with acquisitions — — 18 — — — 18

Stock-based compensation — — 1,451 — — — 1,451

Balances, August 1, 2021 2,496 $ 3 $ 9,745 $ ( 11,604 ) $ 8 $ 22,995 $ 21,147

Balances, October 31, 2021 2,502 $ 3 $ 10,465 $ ( 12,038 ) $ 9 $ 25,359 $ 23,798

See accompanying Notes to Condensed Consolidated Financial Statements.

2 unchanged sentences

(In millions)

Six Months Ended

July 31, August 1,

Nine Months Ended

October 30, October 31,

Cash flows from operating activities:

1 unchanged sentence

Adjustments to reconcile net income to net cash provided by operating activities:

Acquisition termination cost

Stock-based compensation expense 1,971 1,453

Acquisition termination cost

Depreciation and amortization 1,118 865

1 unchanged sentence

Deferred income taxes ( 1,517 ) ( 182 )

Other ( 27 ) 25

Changes in operating assets and liabilities, net of acquisitions:

15 unchanged sentences

Cash flows from financing activities:

Issuance of debt, net of issuance costs — 4,985

Proceeds related to employee stock plans 349 277

3 unchanged sentences

Principal payments on property and equipment and intangible asset ( 54 ) ( 62 )

Issuance of debt, net of issuance costs — 4,977

Repayment of debt — ( 1,000 )

Other 1 ( 2 )

20 unchanged sentences

Fiscal years 2023 and 2022 are both 52-week years.

The second quarters of fiscal years 2023 and 2022 were both 13-week quarters.

The third quarters of fiscal years 2023 and 2022 were both 13-week quarters.

Reclassifications

Certain prior fiscal year balances have been reclassified to conform to the current fiscal year presentation.

Prior period intangible asset gross carrying amount and accumulated amortization in Note 9 have been adjusted to write off immaterial fully amortized intangible assets as of January 30, 2022.

Principles of Consolidation

1 unchanged sentence

All intercompany balances and transactions have been eliminated in consolidation.

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 2 - Business Combination

2 unchanged sentences

The parties agreed to terminate because of significant regulatory challenges preventing the completion of the transaction.

We recorded an acquisition termination cost of $ 1.35 billion in the first quarter of fiscal year 2023 reflecting the write-off of the prepayment provided at signing in September 2020.

We recorded an acquisition termination cost of $ 1.35 billion in the first quarter of fiscal year 2023 reflecting the write-off of the prepayment provided at signing.

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 2023 and 2035.

Future minimum lease payments under our non-cancelable operating leases as of July 31, 2022 are as follows:

Future minimum lease payments under our non-cancelable operating leases as of October 30, 2022 are as follows:

Operating Lease Obligations

(In millions)

2023 (excluding first half of fiscal year 2023)

2023 (excluding first nine months of fiscal year 2023)

2028 and thereafter

3 unchanged sentences

Long-term operating lease liabilities $ 798

In addition to our existing operating lease obligations, we have operating leases that are expected to commence between the third quarter of fiscal year 2023 and fiscal year 2025 with lease terms of 2 to 8 years for $ 798 million, consisting primarily of data center space.

Operating lease expenses were $ 47 million and $ 42 million for the second quarter of fiscal years 2023 and 2022, respectively, and $ 90 million and $ 81 million for the first half of fiscal years 2023 and 2022, respectively.

Short-term and variable lease expenses for the second quarter and first half of fiscal years 2023 and 2022 were not significant.

In addition to our existing operating lease obligations, we have operating leases, primarily for our data centers, that are expected to commence between the fourth quarter of fiscal year 2023 and fiscal year 2025 with lease terms of 2 to 8 years for $ 647 million.

Operating lease expenses were $ 49 million and $ 44 million for the third quarter of fiscal years 2023 and 2022, respectively, and $ 139 million and $ 125 million for the first nine months of fiscal years 2023 and 2022, respectively.

Short-term and variable lease expenses for the third quarter and first nine months of fiscal years 2023 and 2022 were not significant.

Other information related to leases was as follows:

Six Months Ended

July 31, 2022 August 1, 2021

Nine Months Ended

October 30, 2022 October 31, 2021

(In millions)

2 unchanged sentences

Operating lease assets obtained in exchange for lease obligations $ 213 $ 230

As of October 30, 2022, our operating leases had a weighted average remaining lease term of 6.9 years and a weighted average discount rate of 2.82 %.

As of January 30, 2022, our operating leases had a weighted average remaining lease term of 7.1 years and a weighted average discount rate of 2.51 %.

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As of July 31, 2022, our operating leases had a weighted average remaining lease term of 7.1 years and a weighted average discount rate of 2.73 %.

As of January 30, 2022, our operating leases had a weighted average remaining lease term of 7.1 years and a weighted average discount rate of 2.51 %.

Note 4 - Stock-Based Compensation

1 unchanged sentence

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

Three Months Ended Six Months Ended

2022 August 1,

2021 July 31,

2022 August 1,

Three Months Ended Nine Months Ended

2022 October 31,

2021 October 30,

2022 October 31,

(In millions)

12 unchanged sentences

Canceled and forfeited ( 1 ) $ 137.27

Balances, July 31, 2022 56 $ 148.43

As of July 31, 2022, there was $ 7.61 billion of aggregate unearned stock-based compensation expense.

This amount is expected to be recognized over a weighted average period of 2.8 years for RSUs, PSUs, and market-based PSUs, and 1.0 year for ESPP.

Balances, October 30, 2022 50 $ 153.73

As of October 30, 2022, there was $ 7.19 billion of aggregate unearned stock-based compensation expense.

This amount is expected to be recognized over a weighted average period of 2.7 years for RSUs, PSUs, and market-based PSUs, and 1.1 years for ESPP.

NVIDIA CORPORATION AND SUBSIDIARIES

2 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 Six Months Ended

July 31, August 1, July 31, August 1,

Three Months Ended Nine Months Ended

October 30, October 31, October 30, October 31,

2022 2021 2022 2021

13 unchanged sentences

Note 6 – Income Taxes

We recognized an income tax benefit of $ 181 million and an income tax expense of $ 6 million for the second quarter and first half of fiscal year 2023, respectively, and an income tax expense of $ 20 million and $ 153 million for the second quarter and first half of fiscal year 2022, respectively.

Income tax as a percentage of income before income tax was a benefit of 38.0 % for the second quarter of fiscal year 2023, and an expense of 0.3 % for the first half of fiscal year 2023 and an expense of 0.9 % and 3.4 % for the second quarter and first half of fiscal year 2022, respectively.

The decrease in our effective tax rate for the second quarter and first half of fiscal year 2023 as compared to the same periods of fiscal year 2022 was primarily due to the increased tax benefit of stock-based compensation, the foreign-derived intangible income deduction, and the U.S.

federal research tax credit, relative to a reduction in expected profitability.

We recognized an income tax benefit of $ 67 million and $ 61 million for the third quarter and first nine months of fiscal year 2023, respectively, and an income tax expense of $ 174 million and $ 327 million for the third quarter and first nine months of fiscal year 2022, respectively.

Income tax as a percentage of income before income tax was a benefit of 10.9 % and 2.1 % for the third quarter and first nine months of fiscal year 2023, respectively, and an expense of 6.6 % and 4.6 % for the third quarter and first nine months of fiscal year 2022, respectively.

The decrease in our effective tax rate for the third quarter and first nine months of fiscal year 2023 as compared to the same periods of fiscal year 2022 was primarily due to the increased tax benefit of the foreign-derived intangible income deduction, stock-based compensation, and the U.S.

federal research tax credit, relative to a lower expected profitability.

This is partially offset by the impact of an increase in the proportion of earnings subject to U.S.

tax in fiscal year 2023 and the one-time discrete benefit from re-valuing certain deferred tax assets in connection with the domestication of one of our foreign subsidiaries, or the Domestication, in fiscal year 2022.

Our effective tax rate for the first half of fiscal year 2023 was lower than the U.S.

Our effective tax rate for the first nine months of fiscal year 2023 was lower than the U.S.

federal statutory rate of 21% due to tax benefits from the foreign-derived intangible income deduction, stock-based compensation and the U.S.

federal research tax credit.

Our effective tax rate for the first half of fiscal year 2022 was lower than the U.S.

federal statutory rate of 21% due to the discrete benefit of the Domestication, tax benefits related to the foreign-derived intangible income deduction, income earned in jurisdictions that are subject to taxes lower than the U.S.

federal statutory tax rate, and tax benefits related to the U.S.

federal research tax credit and stock-based compensation.

For the first half of fiscal year 2023, there were no material changes to our tax years that remain subject to examination by major tax jurisdictions.

Our effective tax rate for the first nine months of fiscal year 2022 was lower than the U.S.

federal statutory rate of 21% due to tax benefits from the foreign-derived intangible income deduction, income earned in jurisdictions that are subject to taxes lower than the U.S.

federal statutory tax rate, the discrete benefit of the Domestication, and tax benefits related to stock-based compensation and the U.S.

federal research tax credit.

For the first nine months of fiscal year 2023, there were 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.

4 unchanged sentences

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 July 31, 2022, 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.

As of October 30, 2022, 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.

Note 7 - Cash Equivalents and Marketable Securities

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 July 31, 2022 and January 30, 2022:

July 31, 2022

The following is a summary of cash equivalents and marketable securities as of October 30, 2022 and January 30, 2022:

October 30, 2022

Cost Unrealized

5 unchanged sentences

Corporate debt securities $ 4,221 $ — $ ( 19 ) $ 4,202 $ 239 $ 3,963

Debt securities issued by the United States Treasury 4,068 1 ( 39 ) 4,030 108 3,922

Debt securities issued by United States government agencies 3,056 — ( 2 ) 3,054 564 2,490

Debt securities issued by the U.S.

Treasury 4,176 1 ( 60 ) 4,117 1 4,116

Debt securities issued by U.S.

government agencies 2,259 — ( 4 ) 2,255 344 1,911

Certificates of deposit 316 — — 316 58 258

10 unchanged sentences

Corporate debt securities $ 9,977 $ — $ ( 3 ) $ 9,974 $ 1,102 $ 8,872

Debt securities issued by the United States Treasury 7,314 — ( 14 ) 7,300 — 7,300

Debt securities issued by United States government agencies 1,612 — — 1,612 256 1,356

Debt securities issued by the U.S.

Treasury 7,314 — ( 14 ) 7,300 — 7,300

Debt securities issued by U.S.

government agencies 1,612 — — 1,612 256 1,356

Certificates of deposit 1,561 — — 1,561 21 1,540

3 unchanged sentences

The following tables provide the breakdown of unrealized losses, aggregated by investment category and length of time that individual securities have been in a continuous loss position:

July 31, 2022

October 30, 2022

Less than 12 Months 12 Months or Greater Total

1 unchanged sentence

(In millions)

Debt securities issued by the United States Treasury $ 2,793 $ ( 39 ) $ — $ — $ 2,793 $ ( 39 )

Debt securities issued by United States government agencies 2,312 ( 2 ) — — 2,312 ( 2 )

Debt securities issued by the U.S.

Treasury $ 1,928 $ ( 35 ) $ 1,051 $ ( 24 ) $ 2,979 $ ( 59 )

Debt securities issued by U.S.

government agencies 1,888 ( 4 ) — — 1,888 ( 4 )

Corporate debt securities 1,786 ( 18 ) 208 ( 2 ) 1,994 ( 20 )

4 unchanged sentences

(In millions)

Debt securities issued by the United States Treasury $ 5,292 $ ( 14 ) $ — $ — $ 5,292 $ ( 14 )

Debt securities issued by the U.S.

Treasury $ 5,292 $ ( 14 ) $ — $ — $ 5,292 $ ( 14 )

Corporate debt securities 2,445 ( 3 ) 19 — 2,464 ( 3 )

1 unchanged sentence

The gross unrealized losses are related to fixed income securities, driven primarily by changes in interest rates.

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 July 31, 2022 and January 30, 2022 are shown below by contractual maturity.

July 31, 2022 January 30, 2022

Net realized 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 30, 2022 and January 30, 2022 are shown below by contractual maturity.

October 30, 2022 January 30, 2022

Amortized Cost Estimated Fair Value Amortized Cost Estimated Fair Value

9 unchanged sentences

Fair Value at

Pricing Category July 31, 2022 January 30, 2022

Pricing Category October 30, 2022 January 30, 2022

(In millions)

2 unchanged sentences

Corporate debt securities Level 2 $ 4,202 $ 9,974

Debt securities issued by the United States Treasury Level 2 $ 4,030 $ 7,300

Debt securities issued by United States government agencies Level 2 $ 3,054 $ 1,612

Debt securities issued by the U.S.

Treasury Level 2 $ 4,117 $ 7,300

Debt securities issued by U.S.

government agencies Level 2 $ 2,255 $ 1,612

Certificates of deposit Level 2 $ 316 $ 1,561

22 unchanged sentences

Level 2 $ 344 $ 551

(1) Unrealized losses of $ 7 million and $ 31 million from investments in publicly-traded equity securities were recorded in other income (expense), net, in the second quarter and first half of fiscal year 2023, respectively.

An unrealized loss of $ 6 million on an investment in a publicly-traded equity security was recorded in other income (expense), net in the second quarter of fiscal year 2022 and an unrealized gain of $ 118 million was recorded in other income (expense), net in the first half of fiscal year 2022.

(1) Unrealized losses of $ 11 million and $ 35 million from investments in publicly-traded equity securities were recorded in other income (expense), net, in the third quarter and first nine months of fiscal year 2023, respectively.

Unrealized gains of $ 8 million and $ 126 million from an investment in a publicly-traded equity security were recorded in other income (expense), net, in the third quarter and first nine months of fiscal year 2022, respectively.

(2) These liabilities are carried on our Condensed Consolidated Balance Sheets at their original issuance value, net of unamortized debt discount and issuance costs.

3 unchanged sentences

The components of our amortizable intangible assets are as follows:

July 31, 2022 January 30, 2022

October 30, 2022 January 30, 2022

Amount Accumulated

6 unchanged sentences

Total intangible assets $ 3,535 $ ( 1,685 ) $ 1,850 $ 3,507 $ ( 1,168 ) $ 2,339

(1) During the first quarter of fiscal year 2023, we commenced amortization of the $ 630 million in-process research and development intangible asset related to our acquisition of Mellanox.

Amortization expense associated with intangible assets was $ 182 million and $ 336 million for the second quarter and first half of fiscal year 2023, respectively, and $ 138 million and $ 275 million for the second quarter and first half of fiscal year 2022, respectively.

Future amortization expense related to the net carrying amount of intangible assets as of July 31, 2022 is estimated to be $ 364 million for the remainder of fiscal year 2023, $ 601 million in fiscal year 2024, $ 539 million in fiscal year 2025, $ 245 million in fiscal year 2026, $ 141 million in fiscal year 2027, and $ 146 million in fiscal year 2028 and thereafter.

In the first half of fiscal year 2023, goodwill increased by $ 23 million and intangible assets increased by $ 32 million from acquisitions.

(1) During the first quarter of fiscal year 2023, we commenced amortization of a $ 630 million in-process research and development intangible asset related to our acquisition of Mellanox.

Amortization expense associated with intangible assets was $ 181 million and $ 518 million for the third quarter and first nine months of fiscal year 2023, respectively, and $ 143 million and $ 418 million for the third quarter and first nine months of fiscal year 2022, respectively.

Future amortization expense related to the net carrying amount of intangible assets as of October 30, 2022 is estimated to be $ 181 million for the remainder of fiscal year 2023, $ 600 million in fiscal year 2024, $ 538 million in fiscal year 2025, $ 244 million in fiscal year 2026, $ 141 million in fiscal year 2027, and $ 146 million in fiscal year 2028 and thereafter.

In the first nine months of fiscal year 2023, goodwill increased by $ 23 million and intangible assets increased by $ 33 million from acquisitions.

We assigned $ 14 million of the increase in goodwill to our Compute & Networking segment and $ 9 million of the increase to our Graphics segment.

1 unchanged sentence

Certain balance sheet components are as follows:

July 31, January 30,

Inventories (1) :

October 30, January 30,

(In millions)

3 unchanged sentences

Total inventories $ 4,454 $ 2,605

(1) During the second quarter of fiscal year 2023, we recorded an inventory reserve expense of approximately $ 570 million in cost of revenue.

July 31, January 30,

October 30, January 30,

Other assets:

8 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

July 31, January 30,

October 30, January 30,

Accrued and Other Current Liabilities:

2 unchanged sentences

Excess inventory purchase obligations 1,181 196

Accrued payroll and related expenses 421 409

Deferred revenue (1) 338 300

Accrued payroll and related expenses 307 409

Unsettled share repurchases 162 —

Product warranty 104 46

2 unchanged sentences

Total accrued and other current liabilities $ 4,115 $ 2,552

(1) During the second quarter of fiscal year 2023, we recorded an expense of approximately $ 650 million in cost of revenue for inventory purchase obligations in excess of our current demand projections, and cancellation and underutilization penalties.

(1) Deferred revenue primarily includes customer advances and deferrals related to license and development arrangements, support for hardware and software, and cloud services.

July 31, January 30,

October 30, January 30,

Other Long-Term Liabilities:

5 unchanged sentences

Total other long-term liabilities $ 1,785 $ 1,553

(1) As of July 31, 2022, income tax payable represents the long-term portion of the one-time transition tax payable of $ 188 million, unrecognized tax benefits of $ 762 million, and related interest and penalties of $ 72 million.

(1) As of October 30, 2022, income tax payable represents the long-term portion of the one-time transition tax payable of $ 188 million, unrecognized tax benefits of $ 789 million, and related interest and penalties of $ 80 million.

As of January 30, 2022, income tax payable represents the long-term portion of the one-time transition tax payable of $ 251 million, unrecognized tax benefits of $ 670 million, and related interest and penalties of $ 59 million.

1 unchanged sentence

Deferred Revenue

The following table shows the changes in deferred revenue during the first half of fiscal years 2023 and 2022:

July 31, August 1,

The following table shows the changes in deferred revenue during the first nine months of fiscal years 2023 and 2022:

October 30, October 31,

(In millions)

5 unchanged sentences

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

As of July 31, 2022, $ 645 million of revenue related to performance obligations had not been recognized, of which we expect to recognize approximately 48 % over the next twelve months and the remainder thereafter.

As of October 30, 2022, $ 681 million of revenue related to performance obligations had not been recognized, of which we expect to recognize approximately 47 % over the next twelve months and the remainder thereafter.

This excludes revenue related to performance obligations for contracts with a length of one year or less.

5 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 July 31, 2022 and January 30, 2022.

The fair value of the contracts was not significant as of October 30, 2022 and January 30, 2022.

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.

1 unchanged sentence

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 July 31, 2022 and January 30, 2022:

The table below presents the notional value of our foreign currency forward contracts outstanding as of October 30, 2022 and January 30, 2022:

2022 January 30,

2 unchanged sentences

Not designated for hedge accounting $ 330 $ 408

As of July 31, 2022, all designated foreign currency forward contracts mature within 18 months.

As of October 30, 2022, 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 twelve months was not significant.

During the first half of fiscal years 2023 and 2022, the impact of derivative financial instruments designated for hedge accounting treatment on other comprehensive income or loss was not significant.

During the first nine months of fiscal years 2023 and 2022, the impact of derivative financial instruments designated for hedge accounting treatment on other comprehensive income or loss was not significant.

NVIDIA CORPORATION AND SUBSIDIARIES

5 unchanged sentences

Remaining Term (years)

Interest Rate July 31, 2022 January 30, 2022

Interest Rate October 30, 2022 January 30, 2022

(In millions)

25 unchanged sentences

We may redeem each of our notes prior to maturity, subject to a make-whole premium as defined in the applicable form of note.

As of July 31, 2022, we have complied with the required covenants under the notes.

As of October 30, 2022, we have complied with the required covenants under the notes.

Commercial Paper

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

As of July 31, 2022, we had no t issued any commercial paper.

As of October 30, 2022, we had no t issued any commercial paper.

Note 13 - Commitments and Contingencies

2 unchanged sentences

We have entered into several long-term supply agreements, under which we have made advance payments and have $ 917 million remaining unpaid.

As of July 31, 2022, we had outstanding inventory purchase and long-term supply obligations totaling $ 9.22 billion, inclusive of the $ 929 million.

We also had other purchase obligations totaling $ 1.36 billion.

As of October 30, 2022, we had outstanding inventory purchase and long-term supply obligations totaling $ 7.02 billion, inclusive of the $ 917 million.

Other non-inventory purchase obligations of $ 2.75 billion include $ 1.59 billion of multi-year cloud service agreements.

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Total gross future unconditional purchase commitments as of July 31, 2022, are as follows:

Total gross future unconditional purchase commitments as of October 30, 2022 are as follows:

(In millions)

2023 (excluding first half of fiscal year 2023)

2023 (excluding first nine months of fiscal year 2023)

2028 and thereafter

1 unchanged sentence

Accrual for Product Warranty Liabilities

The estimated amount of product warranty liabilities was $ 168 million and $ 46 million as of July 31, 2022 and January 30, 2022, respectively.

In the second quarter of fiscal year 2023, we recorded $ 122 million in product warranty liabilities primarily related to a defect identified in a third-party component embedded in certain Data Center products.

The estimated amount of product warranty liabilities was $ 104 million and $ 46 million as of October 30, 2022 and January 30, 2022, respectively.

The estimated product returns and estimated product warranty activity consisted of the following:

Three Months Ended Six Months Ended

July 31, August 1, July 31, August 1,

2022 2021 2022 2021

Three Months Ended

Nine Months Ended

(In millions)

Balance at beginning of period

Additions 122 4 138 15

Deductions ( 9 ) ( 3 ) ( 16 ) ( 6 )

$ 168 $ 31 $ 46 $ 22

( 67 ) ( 4 ) ( 83 ) ( 10 )

Balance at end of period

$ 104 $ 32 $ 104 $ 32

In the third quarter of fiscal year 2023, we recognized a warranty-related benefit of approximately $ 70 million in cost of revenue due to favorable product recovery.

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

22 unchanged sentences

The plaintiffs seek unspecified damages and other relief, including disgorgement of profits from the sale of NVIDIA stock and unspecified corporate governance measures.

In May 2022, NVIDIA entered into a settlement with the SEC relating to MD&A disclosures in our Forms 10-Q for the second and third quarters of fiscal year 2018 concerning the impact of cryptocurrency mining on year-over-year growth in revenue for our gaming specialized market during those periods.

As part of the settlement, without admitting or denying the findings in the administrative order issued by the SEC, NVIDIA agreed to cease-and-desist from violating certain federal securities laws and paid a $ 5.5 million civil penalty.

Accounting for Loss Contingencies

As of July 31, 2022, 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 October 30, 2022, 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.

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Capital Return Program

During the second quarter and first half of fiscal year 2023, we repurchased a total of 19 million and 28 million shares for $ 3.35 billion and $ 5.34 billion, respectively.

Through July 31, 2022, we have repurchased an aggregate of 1.07 billion shares under our share repurchase program for a total cost of $ 12.42 billion.

As of July 31, 2022, we were authorized, subject to certain specifications, to repurchase additional common stock up to a total of $ 11.93 billion through December 2023.

During the second quarter and first half of fiscal year 2023, we paid $ 100 million and $ 200 million in cash dividends to our shareholders, respectively.

During the second quarter and first half of fiscal year 2022, we paid $ 100 million and $ 198 million in cash dividends to our shareholders, respectively.

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

During the third quarter and first nine months of fiscal year 2023, we repurchased 28 million shares for $ 3.65 billion and 56 million shares for $ 8.99 billion, respectively.

Since the inception of our share repurchase program through October 30, 2022, we have repurchased an aggregate of 1.10 billion shares for $ 16.07 billion.

As of October 30, 2022, we were authorized, subject to certain specifications, to repurchase an additional $ 8.28 billion of shares through December 2023.

From October 31, 2022 through November 17, 2022, we repurchased 7 million shares for $ 1.05 billion pursuant to a Rule 10b5-1 trading plan.

During the third quarter and first nine months of fiscal year 2023, we paid $ 100 million and $ 300 million in cash dividends to our shareholders, respectively.

During the third quarter and first nine months of fiscal year 2022, we paid $ 100 million and $ 298 million in cash dividends to our shareholders, respectively.

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.

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/NVIDIA RTX GPUs for enterprise workstation graphics;

vGPU software for cloud-based visual and virtual computing;

automotive platforms for infotainment systems;

and Omniverse software for building 3D designs and virtual worlds.

Our Compute & Networking segment includes Data Center platforms and systems for artificial intelligence, or AI, high-performance computing, and accelerated computing;

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and NVIDIA AI Enterprise and other software.

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/NVIDIA RTX GPUs for enterprise workstation

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

vGPU software for cloud-based visual and virtual computing;

automotive platforms for infotainment systems;

and Omniverse software for building 3D designs and virtual worlds.

Operating results by segment include costs or expenses that are directly attributable to each segment, and costs or expenses that are leveraged across our unified architecture and therefore allocated between our two segments.

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, IP-related costs, and other non-recurring charges and benefits that our CODM deems to be enterprise in nature.

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

The expenses include stock-based compensation expense, acquisition-related and other costs, corporate infrastructure and support costs, restructuring costs, acquisition termination cost, IP-related and legal settlement costs, contributions, 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.

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The table below presents details of our reportable segments and the “All Other” category.

Graphics Compute & Networking All Other Consolidated

Compute & Networking Graphics All Other Consolidated

(In millions)

Three Months Ended July 31, 2022

Three Months Ended October 30, 2022

Revenue $ 3,816 $ 2,115 $ — $ 5,931

Operating income (loss) $ 1,086 $ 606 $ ( 1,091 ) $ 601

Three Months Ended August 1, 2021

Three Months Ended October 31, 2021

Revenue $ 3,011 $ 4,092 $ — $ 7,103

Operating income (loss) $ 1,332 $ 2,160 $ ( 821 ) $ 2,671

Six Months Ended July 31, 2022

Nine Months Ended October 30, 2022

Revenue $ 11,395 $ 9,528 $ — $ 20,923

Operating income (loss) $ 3,509 $ 3,739 $ ( 4,280 ) $ 2,968

Six Months Ended August 1, 2021

Nine Months Ended October 31, 2021

Revenue $ 7,821 $ 11,450 $ — $ 19,271

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Three Months Ended Six Months Ended

2022 August 1,

2021 July 31,

2022 August 1,

Three Months Ended Nine Months Ended

2022 October 31,

2021 October 30,

2022 October 31,

(In millions)

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Unallocated cost of revenue and operating expenses ( 156 ) ( 106 ) ( 432 ) ( 286 )

Contributions ( 2 ) — ( 2 ) —

IP-related and legal settlement costs — ( 4 ) ( 7 ) ( 9 )

Restructuring costs ( 16 ) — ( 16 ) —

Acquisition termination cost — — ( 1,353 ) —

IP-related and legal settlement costs — — ( 7 ) ( 8 )

Contributions — — ( 2 ) —

Total $ ( 1,091 ) $ ( 821 ) $ ( 4,280 ) $ ( 2,229 )

Revenue by geographic region is allocated to individual countries based on the location to which the products are initially billed even if our customers’ revenue is attributable to end customers that are located in a different location.

Revenue by geographic region is allocated to individual countries based on the billing location of the customer.

End customer location may be different than our customer’s billing location.

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

Three Months Ended Six Months Ended

July 31, August 1, July 31, August 1,

Three Months Ended Nine Months Ended

October 30, October 31, October 30, October 31,

2022 2021 2022 2021

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United States $ 2,148 $ 1,126 $ 6,069 $ 2,890

China (including Hong Kong) 1,602 1,720 3,683 3,111

Taiwan 1,153 2,187 5,134 5,932

China (including Hong Kong) 1,148 2,017 4,831 5,128

Other countries 1,482 1,773 4,889 5,321

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

Three Months Ended Six Months Ended

July 31, August 1, July 31, August 1,

Three Months Ended Nine Months Ended

October 30, October 31, October 30, October 31,

2022 2021 2022 2021

(In millions)

Gaming $ 2,042 $ 3,061 $ 5,662 $ 5,821

Data Center $ 3,833 $ 2,936 $ 11,389 $ 7,350

Gaming 1,574 3,221 7,236 9,042

Professional Visualization 200 577 1,318 1,468

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Total revenue $ 5,931 $ 7,103 $ 20,923 $ 19,271

No customer represented 10% or more of total revenue for the second quarter and first half of fiscal years 2023 or 2022.

Two customers each represented 10% or more of accounts receivable for a total of 21 % of our accounts receivable balance as of July 31, 2022.

One customer represented 10 % of our total revenue for the third quarter of fiscal year 2023 and was attributable primarily to the Compute & Networking segment.

No customer represented 10% or more of total revenue for the first nine months of fiscal year 2023 and for the third quarter and first nine months of fiscal year 2022.

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

One customer represented 10% or more of accounts receivable for a total of 12 % of our accounts receivable balance as of October 30, 2022.

Two customers each represented 10% or more of accounts receivable for a total of 22 % as of January 30, 2022.

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