What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-05-29 compared with 2023-11-21 · 177 added, 197 removed, 122 unchanged (75% of the section changed)

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Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements which are based on our management’s beliefs and assumptions and on information currently available to our management.

This Quarterly Report on Form 10-Q contains forward-looking statements based on management’s beliefs and assumptions and on information currently available to management.

In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “goal,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “project,” “predict,” “potential” and similar expressions intended to identify forward-looking statements.

These statements involve known and unknown risks, uncertainties and other factors, which may cause our actual results, performance, time frames or achievements to be materially different from any future results, performance, time frames or achievements expressed or implied by the forward-looking statements.

We discuss many of these risks, uncertainties and other factors in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the fiscal year ended January 29, 2023 and in our Quarterly Reports on Form 10-Q for the fiscal quarters ended April 30, 2023 and July 30, 2023 in greater detail under the heading “Risk Factors” of such reports.

We discuss many of these risks, uncertainties and other factors in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the fiscal year ended January 28, 2024 in greater detail under the heading “Risk Factors” of such reports.

Given these risks, uncertainties, and other factors, you should not place undue reliance on these forward-looking statements.

Also, these forward-looking statements represent our estimates and assumptions only as of the date of this filing.

You should read this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect.

You should read this Quarterly Report on Form 10-Q completely and understand that our actual future results may be materially different from what we expect.

We hereby qualify our forward-looking statements by these cautionary statements.

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The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the risk factors set forth in this Quarterly Report on Form 10-Q, our Annual Report on Form 10-K for the fiscal year ended January 29, 2023, and our Quarterly Reports on Form 10-Q for the fiscal quarters ended April 30, 2023 and July 30, 2023 under the heading “Risk Factors” of such reports, and our Condensed Consolidated Financial Statements and related Notes thereto, as well as other cautionary statements and risks described elsewhere in this Quarterly Report on Form 10-Q and our other filings with the SEC, before deciding to purchase or sell shares of our common stock.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the risk factors set forth in Item 1A.

“Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended January 28, 2024 and Part II, Item 1A.

“Risk Factors” of this Quarterly Report on Form 10-Q and our Condensed Consolidated Financial Statements and related Notes thereto, as well as other cautionary statements and risks described elsewhere in this Quarterly Report on Form 10-Q and our other filings with the SEC, before deciding to purchase, hold, or sell shares of our common stock.

Our Company and Our Businesses

Since our founding in 1993, NVIDIA has been a pioneer in accelerated computing.

Our invention of the GPU in 1999 has sparked the growth of the PC gaming market, redefined computer graphics, ignited the era of modern AI and has fueled industrial digitalization across markets.

NVIDIA is now a full-stack computing company with data-center-scale offerings that are reshaping industry.

Our two operating segments are "Compute & Networking" and "Graphics," as described in Note 15 of the Notes to Condensed Consolidated Financial Statements.

NVIDIA pioneered accelerated computing to help solve the most challenging computational problems.

Since our original focus on PC graphics, we have expanded to several other large and important computationally intensive fields.

Fueled by the sustained demand for exceptional 3D graphics and the scale of the gaming market, NVIDIA has leveraged its GPU architecture to create platforms for scientific computing, AI, data science, autonomous vehicles, robotics, metaverse and 3D internet applications.

Our two operating segments are "Compute & Networking" and "Graphics," as described in Note 14 of the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Headquartered in Santa Clara, California, NVIDIA was incorporated in California in April 1993 and reincorporated in Delaware in April 1998.

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Demand and Supply, Product Transitions, and New Products and Business Models

Demand for our data center systems and products has surged over the last three quarters and our demand visibility extends into next year.

To meet this expected demand, we have increased our purchase obligations with existing suppliers, added new suppliers and entered into prepaid supply and capacity agreements.

These increased purchase volumes, the number of suppliers, and the integration of new suppliers into our supply chain may create more supply chain complexity and execution risk.

We expect to continue to enter into supplier and capacity arrangements and expect our supply to increase each quarter through next year.

Our overall revenue, driven by data center compute, continued to grow through the first quarter of fiscal year 2025.

We continue to gather customer demand indications across several product transitions.

We have demand visibility for our data center products, including the recently announced Blackwell GPU architecture.

We have previously increased our supply and capacity purchases with existing suppliers with planned receipts later this year.

We continue to add new vendors and have entered and may continue to enter into prepaid manufacturing and capacity agreements to supply both current and future products.

The increased purchase volumes and number of suppliers and integration of new vendors into our supply chain may create more complexity and execution risk.

Our purchase commitments and obligations for inventory and manufacturing capacity at the end of the first quarter of fiscal year 2025 continued to be impacted by shortening lead times for certain components.

We may incur inventory provisions or impairments if our inventory or supply or capacity commitments exceed demand for our products or demand declines.

We build finished products and maintain inventory in advance of anticipated demand.

While we have entered into long-term supply and capacity commitments, we may not be able to secure sufficient commitments for capacity to address our business needs, or our long-term demand expectations may change.

These risks may increase as we shorten our product development cycles or enter new lines of business, which may require us to integrate new suppliers into our supply chain, creating additional supply chain complexity.

While supply for H100 continued to improve, we are still constrained on H200.

Our next generation data center architecture, Blackwell, is in production, and we plan on shipping customer samples in the second quarter.

We expect to ramp customer shipments of Blackwell in the second half of the fiscal year.

We believe the initial demand for Blackwell is well ahead of the projected supply for this fiscal year.

We expect supply constraints for our Blackwell offerings will continue into next year.

Product transitions are complex as we often ship both new and prior architecture products simultaneously and we and our channel partners prepare to ship and support new products.

Due to our product introduction cycles, we are almost always in various stages of transitioning the architecture of our Data Center, Professional Visualization, and Gaming products.

We will have a broader and faster Data Center product launch cadence to meet a growing and diverse set of AI opportunities.

The increased frequency of these transitions may magnify the challenges associated with managing our supply and demand due to long manufacturing lead times.

Qualification time for new products, customers anticipating product transitions and channel partners reducing channel inventory of prior architectures ahead of new product introductions can create reductions or volatility in our revenue.

In addition, the bring up of new product architectures is complex due to functionality challenges and quality concerns not identified in manufacturing testing.

These product quality issues may incur costs, increase our warranty costs, and delay further production of our architecture.

Due to our product introduction cycles, we are almost always in various stages of transitioning the architectures of our Data Center, Gaming, and Professional Visualization products.

We have begun a broader and faster Data Center product launch cadence to meet a growing and diverse set of

AI opportunities.

The increased frequency of these transitions may magnify the challenges associated with managing our supply and demand due to manufacturing lead times.

The increasing frequency and complexity of newly introduced products could result in quality or production issues that could increase inventory provisions, warranty, or other costs or result in product delays.

Deployment of new products to customers creates additional challenges due to the complexity of our technologies, which has impacted and may in the future impact the timing of customer purchases or otherwise impact our demand.

While we have managed prior product transitions and have previously sold multiple product architectures at the same time, these transitions are difficult, may impair our ability to predict demand and impact our supply mix, and we may incur additional costs.

We build technology and products for use cases and applications that may be new or may not yet exist such as our Omniverse platform, third-party large language models, and generative AI models.

We have recently begun offering enterprise customers NVIDIA DGX cloud services directly and through our network of partners, which includes cloud-based infrastructure and software and services for training and deploying AI models, and NVIDIA AI Foundations for customizable pretrained AI models.

While we have managed prior product transitions and have sold multiple product architectures at the same time, these transitions are difficult, may impair our ability to predict demand and impact our supply mix, and may cause us to incur additional costs.

We build technology and introduce products for new and innovative use cases and applications such as our NVIDIA DGX Cloud services, our Omniverse platform, LLMs, and generative AI models.

Our demand estimates for new use cases, applications, and services can be incorrect and create volatility in our revenue or supply levels, and we may not be able to generate significant revenue from these use cases, applications, and services.

New technologies such as generative AI models have emerged, and while they have driven increased demand for Data Center compute infrastructure, the long-term trajectory is unknown.

During the third quarter of fiscal year 2023, the U.S.

Recent technologies, such as generative AI models, have emerged, and while they have driven increased demand for Data Center, the long-term trajectory is unknown.

In August 2022, the U.S.

government, or the USG, announced licensing requirements that, with certain exceptions, impact exports to China (including Hong Kong and Macau) and Russia of our A100 and H100 integrated circuits, DGX or any other systems or boards which incorporate A100 or H100 integrated circuits.

During the second quarter of fiscal year 2024, the USG informed us of an additional licensing requirement for a subset of A100 and H100 products destined to certain customers and other regions, including some countries in the Middle East.

On October 17, 2023, the USG announced new and updated licensing requirements effective in our fourth quarter of fiscal year 2024 for exports to China and Country Groups D1, D4, and D5 (including but not limited to Saudi Arabia, the United Arab Emirates, and Vietnam, but excluding Israel) of our products exceeding certain performance thresholds, including A100, A800, H100, H800, L4, L40, L40S and RTX 4090.

In July 2023, the USG informed us of an additional licensing requirement for a subset of A100 and H100 products destined to certain customers and other regions, including some countries in the Middle East.

In October 2023, the USG announced new and updated licensing requirements that became effective in our fourth quarter of fiscal year 2024 for exports to China and Country Groups D1, D4, and D5 (including but not limited to Saudi Arabia, the United Arab Emirates, and Vietnam, but excluding Israel) of our products exceeding certain performance thresholds, including A100, A800, H100, H800, L4, L40, L40S and RTX 4090.

The licensing requirements also apply to the export of products exceeding certain performance thresholds to a party headquartered in, or with an ultimate parent headquartered in, Country Group D5, including China.

On October 23, 2023, the USG informed us the licensing requirements were effective immediately for shipments of our A100, A800, H100, H800, and L40S products.

These licensing requirements did not have a meaningful impact on our revenue in the third quarter of fiscal year 2024 as they were announced near the end of the fiscal quarter and we had additional demand from customers outside of the named country groups.

Our sales to China and other affected destinations, derived from products that are now subject to licensing requirements, have consistently contributed approximately 20-25% of Data Center revenue over the past few quarters.

We expect that our sales to these destinations will decline significantly in the fourth quarter of fiscal year 2024, though we believe the decline will be more than offset by strong growth in other regions.

We are working to expand our Data Center product portfolio to offer new regulation-compliant solutions, including those for which the USG does not wish to have any advance notice before each shipment.

extent that a customer requires products covered by the licensing requirements, we may seek a license for the customer but have no assurance that the USG will grant such a license, or that the USG will act on the license application in a timely manner or at all.

Our competitive position has been harmed, and our competitive position and future results may be further harmed over the long-term, if there are further changes in the USG’s export controls.

We have not received licenses to ship these restricted products to China.

We expanded our Data Center product portfolio to offer new solutions, including those for which the USG does not require a license or advance notice before each shipment.

We ramped new products designed specifically for China that do not require an export control license.

Our Data Center revenue in China is down significantly from the level prior to the imposition of new export control restrictions in October 2023.

To the extent that a customer requires products covered by the licensing requirements, we may seek a license for the customer but have no assurance that the USG will grant such a license, or that the USG will act on the license application in a timely manner or at all.

Our competitive position has been harmed, and our competitive position and future results may be further harmed in the long term, if there are further changes in the USG’s export controls.

Given the increasing strategic importance of AI and rising geopolitical tensions, the USG has changed and may again change the export control rules at any time and further subject a wider range of our products to export restrictions and licensing requirements, negatively impacting our business and financial results.

In the event of such change, we may be unable to sell our inventory of such products and may be unable to develop replacement products not subject to the licensing requirements, effectively excluding us from all or part of the China market, as well as other impacted markets, including the Middle East.

Our sales to China will decrease significantly in the fourth quarter of fiscal year 2024.

While we work to enhance the resiliency and redundancy of our supply chain, which is currently concentrated in the Asia-Pacific, including China, Hong Kong, Korea and Taiwan, new and existing export controls or changes to existing export controls could limit alternative manufacturing locations and negatively impact our business.

While we work to enhance the resiliency and redundancy of our supply chain, which is currently concentrated in the Asia-Pacific region, new and existing export controls or changes to existing export controls could limit alternative manufacturing locations and negatively impact our business.

Refer to “Item 1A.

Risk Factors” for a discussion of this potential impact.

Macroeconomic Factors

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While difficult to isolate and quantify, these macroeconomic factors can also impact our supply chain and manufacturing costs, employee wages, costs for capital equipment and value of our investments.

Our product and solution pricing strategy generally does not fluctuate with short-term changes in our costs.

Our product and solution pricing generally does not fluctuate with short-term changes in our costs.

Within our supply chain, we continuously manage product availability and costs with our vendors.

Israel and Hamas Conflict

We are monitoring the impact of the geopolitical conflict in and around Israel on our operations, including the health and safety of our approximately 4,000 employees in the region who primarily support the research and development, operations, and sales and marketing of our networking products.

Our operating expenses in the third quarter of fiscal year 2024 include expenses for financial support to impacted employees and charitable activity.

We believe our global supply chain for our networking products has not experienced any significant impact.

Further, in connection with the conflict, a significant number and percentage of our employees have been called-up for active military duty in Israel.

Accordingly, some of our employees in Israel may be absent for an extended and indeterminate period, which may cause disruption to our product development or operations.

In the third quarter of fiscal year 2024, we did not experience any significant impact or expense to our business;

however, if the conflict is extended, it could impact future product development, operations, and revenue or create other uncertainty for our business.

Third Quarter of Fiscal Year 2024 Summary

Three Months Ended

October 29, 2023 July 30, 2023 October 30, 2022 Quarter-over-Quarter Change Year-over-Year Change

Our global supply chain for our networking products has not experienced any significant impact.

A substantial number of our employees in the region have been called-up for active military duty in Israel.

Some of our employees in Israel have been on active military duty for an extended period and they or others may continue to be absent, which may cause disruption to our product development or operations.

We have not experienced significant impact or expense to our business;

however, if the conflict is further extended, it could impact future product development, operations, and revenue or create other uncertainty for our business.

First Quarter of Fiscal Year 2025 Summary

Three Months Ended Quarter-over-Quarter Change Year-over-Year Change

Apr 28, 2024 Jan 28, 2024 Apr 30, 2023

($ in millions, except per share data)

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We specialize in markets where our computing platforms can provide tremendous acceleration for applications.

These platforms incorporate processors, interconnects, software, algorithms, systems, and

services to deliver unique value.

These platforms incorporate processors, interconnects, software, algorithms, systems, and services to deliver unique value.

Our platforms address four large markets where our expertise is critical:

Data Center, Gaming, Professional Visualization, and Automotive.

Revenue for the third quarter of fiscal year 2024 was $18.12 billion, up 206% from a year ago and up 34% sequentially.

Revenue was $26.0 billion, up 262% from a year ago and up 18% sequentially.

Data Center revenue was up 427% from a year ago and up 23% sequentially.

Strong sales of the NVIDIA HGX platform were driven by global demand for the training and inferencing of large language models, recommendation engines, and generative AI applications.

Data Center compute grew 324% from a year ago and 38% sequentially, largely reflecting the strong ramp of our Hopper GPU architecture-based HGX platform from cloud service providers, or CSPs, including GPU-specialized CSPs;

consumer internet companies;

and enterprises.

Our sales of Ampere GPU architecture-based Data Center products were significant but declined sequentially, as we approach the tail end of this architecture.

We recognized initial revenue on the ramp of our L40S GPU and the GH200 Grace Hopper Superchip for a broad range of customers.

CSPs drove roughly half of Data Center revenue, while consumer internet companies and enterprises comprised approximately the other half.

Networking was up 155% from a year ago and up 52% sequentially, almost entirely due to strong growth in InfiniBand infrastructure to support our HGX platform.

Gaming revenue was up 81% from a year ago and up 15% sequentially.

Strong year-on-year growth reflects higher sell-in to partners following normalization of channel inventory levels.

Sequential growth reflects strong demand for our GeForce RTX 40 Series GPUs for back-to-school and the start of the holiday season.

Professional Visualization revenue was up 108% from a year ago and up 10% sequentially.

The year-on-year increase reflects higher sell-in to partners following normalization of channel inventory levels.

The sequential increase was primarily due to stronger enterprise workstation demand and the ramp of notebook workstations based on the Ada Lovelace GPU architecture.

Data Center compute revenue was $19.4 billion, up 478% from a year ago and up 29% sequentially.

These increases reflect higher shipments of the NVIDIA Hopper GPU computing platform used for training and inferencing with large language models, recommendation engines, and generative AI applications.

Networking revenue was $3.2 billion, up 242% from a year ago on strong growth of InfiniBand end-to-end solutions, and down 5% sequentially due to the timing of supply.

Strong sequential Data Center growth was driven by all customer types, led by Enterprise and Consumer Internet companies.

Large cloud providers continued to drive strong growth as they deploy and ramp NVIDIA AI infrastructure at scale, representing mid-40% of our Data Center revenue.

Gaming revenue was up 18% from a year ago and down 8% sequentially.

The year-on-year increase primarily reflects higher demand.

The sequential decrease reflects seasonally lower GPU sales for laptops.

Professional Visualization revenue was up 45% from a year ago and down 8% sequentially.

The year-on-year increase primarily reflects higher sell-in to partners following the normalization of channel inventory levels.

The sequential decrease was primarily due to desktop workstation GPUs.

Automotive revenue was up 11% from a year ago and up 17% sequentially.

The year-on-year increase primarily reflects growth in sales of auto cockpit solutions and self-driving platforms.

The sequential increase was driven by sales of self-driving platforms.

Gross margin increased significantly from a year ago and sequentially, driven by improved product mix from Data Center revenue growth and lower net inventory provisions and related charges.

In the third quarter of fiscal year 2024, provisions for inventory and related charges were $681 million.

Sales of previously reserved inventory or settlements of excess inventory purchase obligations resulted in a provision release of $239 million, primarily from Ampere GPU architecture products.

The net inventory provisions were $442 million and the unfavorable effect on our gross margin was 2.4 percentage points.

In the third quarter of fiscal year 2023, provisions for inventory and related charges were $702 million.

Sales of previously reserved inventory or settlements of excess inventory purchase obligations resulted in a provision release of $21 million.

The net inventory provisions were $681 million and the unfavorable effect on our gross margin was 11.5 percentage points.

Operating expenses were up 16% from a year ago and up 12% sequentially, driven by compensation and benefits, including stock-based compensation, primarily reflecting growth in employees and compensation increases.

The year-on-year increase was driven primarily by self-driving platforms.

The sequential increase was driven by AI Cockpit solutions and self-driving platforms.

Gross margin for the first quarter increased significantly from a year ago on strong Data Center revenue growth primarily driven by our Hopper GPU computing platform.

Sequentially, gross margin benefited from lower inventory charges.

Operating expenses were up 39% from a year ago and up 10% sequentially.

The increases were primarily driven by compensation and benefits, reflecting growth in employees and compensation.

Market Platform Highlights

Data Center revenue for the third quarter of fiscal year 2024 was $14.51 billion, up 279% from a year ago and up 41% from the previous quarter.

We announced NVIDIA HGX H200 with the H200 Tensor Core GPU;

introduced an AI foundry service, first available on Microsoft Azure;

announced that the NVIDIA Spectrum-X will be integrated into servers from Dell Technologies, Hewlett Packard Enterprise and Lenovo in the first quarter of next year;

announced that NVIDIA GH200 Grace Hopper Superchips will power more than 40 new supercomputers and began shipping in the third quarter of fiscal year 2024;

and partnered with a range of leading companies on AI initiatives, including Amdocs, Dropbox, Foxconn, Genentech (member of Roche Group), Infosys, Lenovo, Reliance Industries, Scaleway, and Tata Group.

Gaming revenue for the third quarter of fiscal year 2024 was $2.86 billion, up 81% from a year ago and up 15% from the previous quarter.

We launched DLSS 3.5 Ray Reconstruction;

released TensorRT-LLM for Windows;

added 56 DLSS games and over 15 Reflex games;

and surpassed 1,700 games on GeForce NOW.

Professional Visualization revenue for the third quarter of fiscal year 2024 was $416 million, up 108% from a year ago and up 10% from the previous quarter.

We announced a new line of desktop workstations with NVIDIA RTX 6000 Ada Generation GPUs and NVIDIA ConnectX smart interface cards.

Automotive revenue for the third quarter of fiscal year 2024 was $261 million, up 4% from a year ago and up 3% from the previous quarter.

We furthered our collaboration with Foxconn to develop next-generation electric vehicles.

Data Center revenue for the first quarter of fiscal year 2025 was $22.6 billion, up 427% from a year ago and up 23% from the previous quarter.

In our trailing 4 quarters, we estimate that inference drove about 40% of our Data Center revenue.

We unveiled the NVIDIA Blackwell platform, our next-generation GPU architecture for the new era of AI computing at trillion-parameter scale and the Blackwell-powered DGX SuperPOD for generative AI supercomputing.

Joining Blackwell will be NVIDIA Quantum InfiniBand and Spectrum Ethernet switches designed for massive-scale AI.

We also announced NVIDIA AI Enterprise 5.0 with NVIDIA NIM Inference Microservices — to speed enterprise app development.

We announced that nine new supercomputers worldwide are using Grace Hopper Superchips to ignite a new era of AI supercomputing.

Gaming revenue for the first quarter of fiscal year 2025 was $2.6 billion, up 18% from a year ago and down 8% from the previous quarter.

We introduced generative AI for digital humans, NVIDIA ACE for speech and animation, and new RTX technologies;

and added support for new models.

Professional Visualization revenue for the first quarter of fiscal year 2025 was $427 million, up 45% from a year ago and down 8% from the previous quarter.

We introduced NVIDIA RTX 500 and 1000 professional Ada generation laptop GPUs;

unveiled NVIDIA RTX A400 and A1000 GPUs for desktop workstations, based on the NVIDIA Ampere architecture;

and introduced NVIDIA Omniverse Cloud APIs to power industrial digital twin software tools.

Automotive revenue for the first quarter of fiscal year 2025 was $329 million, up 11% from a year ago and up 17% from the previous quarter.

We revealed U.S.

and China electric vehicle makers Lucid and IM Motors are using the NVIDIA DRIVE Orin platform;

and announced BYD, XPENG, GAC's AION Hyper, Nuro and others will adopt its successor, NVIDIA DRIVE Thor.

Financial Information by Business Segment and Geographic Data

Refer to Note 15 of the Notes to Condensed Consolidated Financial Statements for disclosure regarding segment information.

Refer to Note 14 of the Notes to the Condensed Consolidated Financial Statements for disclosure regarding segment information.

Critical Accounting Policies and Estimates

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The following table sets forth, for the periods indicated, certain items in our Condensed Consolidated Statements of Income expressed as a percentage of revenue.

Three Months Ended Nine Months Ended

2023 October 30,

2022 October 29,

2023 October 30,

Three Months Ended

Apr 28, 2024 Apr 30, 2023

Revenue 100.0 % 100.0 %

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Sales, general and administrative 3.0 8.8

Acquisition termination cost — — — 6.5

Total operating expenses 13.4 34.9

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Other income (expense), net

0.6 0.2 0.9 (0.3)

Income before income tax 66.5 30.7

Income tax expense (benefit) 7.1 (1.1) 5.8 (0.3)

Income tax expense 9.2 2.3

Net income 57.3 % 28.4 %

Revenue for the third quarter and first nine months of fiscal year 2024 was $18.12 billion and $38.82 billion, up 206% and 86%, respectively.

Revenue by Reportable Segments

Three Months Ended Nine Months Ended

2023 October 30,

Change October 29,

2023 October 30,

Three Months Ended

Apr 28, 2024 Apr 30, 2023 $

($ in millions)

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Total $ 26,044 $ 7,192 $ 18,852 262 %

Compute & Networking - The increase in the third quarter and first nine months of fiscal year 2024 compared to the third quarter and first nine months of fiscal year 2023 was due to higher Data Center revenue.

Compute GPUs grew 369% year-on-year and 193% compared to the first nine months of fiscal year 2023 led by strong demand for the NVIDIA HGX platform driven by global demand for the training and inferencing of large language models, recommendation engines and inferencing of generative AI applications.

Networking was up 155% year-on-year and 99% compared to the first nine months of last year, almost entirely due to strong growth in InfiniBand infrastructure to support our HGX platform.

Graphics - The increase in the third quarter of fiscal year 2024 compared to the third quarter of fiscal year 2023 reflects growth in Gaming GPUs reflecting higher sell-in to partners following normalization of channel inventory levels earlier this year.

The decrease in the first nine months of fiscal year 2024 compared to the first nine months of fiscal year 2023 primarily reflects 57% lower enterprise graphics and 14% lower Professional Visualization GPUs, partially offset by 7% growth in Gaming GPUs, following normalization of channel inventory levels earlier this year.

Operating Income by Reportable Segments

Three Months Ended

Apr 28, 2024 Apr 30, 2023 $

($ in millions)

Compute & Networking $ 17,047 $ 2,160 $ 14,887 689 %

Graphics 1,241 1,046 195 19 %

All Other (1,379) (1,066) (313) 29 %

Total $ 16,909 $ 2,140 $ 14,769 690 %

Compute & Networking revenue – The year-on-year increase was due to higher Data Center revenue.

Compute GPU grew 497%, due to higher shipments of the NVIDIA Hopper GPU computing platform used for training and inferencing with large language models, recommendation engines, and generative AI applications.

Networking was up 242% on strong growth of InfiniBand end-to-end solutions.

Graphics revenue – The year-on-year increase of 18% was led by higher demand for Gaming.

Reportable segment operating income – The year-on-year increase in Compute & Networking and Graphics operating income was driven by higher revenue.

All Other operating loss – The year-on-year increase was due to an increase in stock-based compensation expense.

Concentration of Revenue

Revenue by geographic region is designated based on the billing location even if the revenue may be attributable to end customers, or End Customers, such as CSPs, enterprises, and gamers in a different location.

Revenue from sales to customers outside of the United States accounted for 65% and 62% of total revenue for the third quarter and first nine months of fiscal year 2024, respectively, and 64% and 71% of total revenue for the third quarter and first nine months of fiscal year 2023, respectively.

Our customers include original equipment manufacturers, original device manufacturers, system builders, system integrators, add-in board manufacturers, retailers/distributors, automotive manufacturers, tier-1 automotive suppliers, and other enterprises.

Sales to Customer A represented 12% of total revenue for the third quarter of fiscal year 2024, and sales to Customer B represented 11% of total revenue for the first nine months of fiscal year 2024, both of which were attributable to the Compute & Networking segment.

Our customers sell to End Customers.

Our End Customers often do not purchase directly from us but purchase through multiple original equipment manufacturers, original device manufacturers, system integrators, distributors, and other channel partners.

Our sales to Customer A and Customer B were largely in support of two End Customers.

One End Customer is estimated to have represented approximately 15% and 17% of total revenue for the third quarter and first nine months of fiscal year 2024, respectively.

A second End Customer is estimated to have represented approximately 13% and 10% of total revenue for the third quarter and first nine months of fiscal year 2024, respectively.

Both of these End Customers were primarily attributable to our Compute & Networking segment.

Our estimated Compute & Networking End Customer demand is expected to remain concentrated.

In the first nine months of fiscal year 2023, there were no customers with 10% or more of total revenue.

In the third quarter of fiscal year 2023, one customer represented 10% of total revenue, primarily attributable to the Compute & Networking segment.

Our overall gross margin increased to 74.0% and 70.9% for the third quarter and first nine months of fiscal year 2024, respectively, from 53.6% and 55.1% for the third quarter and first nine months of fiscal year 2023,

respectively.

The year over year increase in the third quarter and first nine months of fiscal year 2024 was primarily due to improved product mix from Data Center revenue growth of 279% and 156%, respectively, and lower net inventory provisions and related charges.

Provisions for inventory and excess inventory purchase obligations totaled $681 million and $1.39 billion for the third quarter and first nine months of fiscal year 2024, respectively.

Sales of previously reserved inventory or settlements of excess inventory purchase obligations resulted in a provision release of $239 million and $372 million, primarily from Ampere GPU architecture products, for the third quarter and first nine months of fiscal year 2024, respectively.

The net effect on our gross margin was an unfavorable impact of 2.4% and 2.6% in the third quarter and first nine months of fiscal year 2024.

Provisions for inventory and excess inventory purchase obligations totaled $702 million and $2.01 billion for the third quarter and first nine months of fiscal year 2023, respectively.

Sales of previously reserved inventory or settlements of excess inventory purchase obligations resulted in a provision release of $21 million and $59 million for the third quarter and first nine months of fiscal year 2023, respectively.

The net effect on our gross margin was an unfavorable impact of 11.5% and 9.3% in the third quarter and first nine months of fiscal year 2023, respectively.

Revenue by geographic region is designated based on the billing location even if the revenue may be attributable to end customers, such as enterprises and gamers in a different location.

Revenue from sales to customers outside of the United States accounted for 48% and 67% of total revenue for the first quarter of fiscal years 2025 and 2024, respectively.

We refer to customers who purchase products directly from NVIDIA as direct customers, such as original equipment manufacturers, or OEMs, original device manufacturers, or ODMs, system integrators, add-in board manufacturers, and distributors.

We also have indirect customers, who purchase products through our direct customers;

indirect customers include public cloud providers, consumer internet companies, enterprises, startups, and public sector entities.

Sales to one direct customer, Customer A, represented 13% of total revenue and sales to a second direct customer, Customer B, represented 11% of total revenue for the first quarter of fiscal year 2025, both of which were attributable to the Compute & Networking segment.

There was no direct customer that represented 10% or more of total revenue for the first quarter of fiscal year 2024.

Two indirect customers each represented 10% or more of total revenue for the first quarter of fiscal year 2025;

one of these indirect customers purchased our products primarily through direct Customer B.

Both were attributable to the Compute & Networking segment.

Gross Profit and Gross Margin

Gross profit consists of total net revenue less cost of revenue.

Our overall gross margin increased to 78.4% for the first quarter of fiscal year 2025 from 64.6% for the first quarter of fiscal year 2024.

The year over year increase was primarily due to strong Data Center revenue growth of 427%.

Provisions for inventory and excess inventory purchase obligations totaled $393 million and $134 million for the first quarter of fiscal years 2025 and 2024, respectively.

Sales of previously reserved inventory and settlements of excess inventory purchase obligations resulted in a provision release of $114 million and $50 million for the first quarter of fiscal years 2025 and 2024, respectively.

The net effect on our gross margin was an unfavorable impact of 1.1% and 1.2% in the first quarter of fiscal years 2025 and 2024, respectively.

For fiscal year 2025, we expect gross margins to be in the mid-70% range.

Operating Expenses

Three Months Ended Nine Months Ended

2023 October 30,

Change October 29,

2023 October 30,

Three Months Ended

Apr 28, 2024 Apr 30, 2023 $

($ in millions)

3 unchanged sentences

% of net revenue 3.0 % 8.8 %

Acquisition termination cost — — — — % — 1,353 (1,353) (100) %

% of net revenue — % — % — % 6.5 %

Total operating expenses $ 3,497 $ 2,508 $ 989 39 %

% of net revenue 13.4 % 34.9 %

The increases in research and development expenses and sales, general and administrative expenses for the third quarter and first nine months of fiscal year 2024 were primarily driven by compensation and benefits, including stock-based compensation, reflecting employee growth and compensation increases.

Acquisition Termination Cost

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

Operating Income

Operating income for the third quarter and first nine months of fiscal year 2024 was $10.42 billion and $19.36 billion, respectively, up 1,633% and 552% from a year ago, respectively.

Operating Income by Reportable Segments

Three Months Ended Nine Months Ended

2023 October 30,

Change October 29,

2023 October 30,

($ in millions)

Compute & Networking

$ 10,262 $ 1,086 $ 9,176 845 % $ 19,149 $ 3,509 $ 15,640 446 %

1,493 606 887 146 % 3,751 3,739 12 — %

(1,338) (1,091) (247) 23 % (3,542) (4,280) 738 (17) %

$ 10,417 $ 601 $ 9,816 1,633 % $ 19,358 $ 2,968 $ 16,390 552 %

Compute & Networking – Segment operating income increased during the third quarter and first nine months of fiscal year 2024 compared to the third quarter and first nine months of fiscal year 2023 primarily due to growth in revenue.

Graphics - Segment operating income increased during the third quarter of fiscal year 2024 compared to the third quarter of fiscal year 2023 due to growth in revenue.

Segment operating income was flat during the first nine months of fiscal year 2024 compared to the first nine months of fiscal year 2023 due to a decline in revenue of $216 million, offset by lower provisions for inventory and excess inventory purchase obligations of $337 million in fiscal year 2024.

All Other expenses increased during the third quarter of fiscal year 2024 compared to the third quarter of fiscal year 2023 due to higher stock-based compensation expense.

All Other expenses decreased during the first nine months of fiscal year 2024 compared to the first nine months of fiscal year 2023 due to an acquisition termination cost of $1.35 billion related to the Arm transaction in the prior year, partially offset by higher stock-based compensation expense of $584 million.

The increases in research and development expenses for the first quarter of fiscal year 2025 were primarily driven by a $482 million increase in compensation and benefits, including stock-based compensation, reflecting employee growth and compensation increases, and a $242 million increase in compute and infrastructure investments.

The increase in sales, general and administrative expenses for the first quarter of fiscal year 2025 was primarily driven by compensation and benefits, including stock-based compensation, reflecting employee growth and compensation increases.

For fiscal year 2025, we expect operating expenses to grow in the low-40% range.

Other Income (Expense), Net

Three Months Ended Nine Months Ended

2023 October 30,

Change October 29,

2023 October 30,

Three Months Ended

Apr 28, 2024 Apr 30, 2023 $

($ in millions)

5 unchanged sentences

Interest income consists of interest earned on cash, cash equivalents and marketable securities.

The increase in interest income was due to higher yields.

The increase in interest income was due to stronger yields on higher cash balances.

Interest expense is comprised of coupon interest and debt discount amortization related to our notes.

Other, net consists of realized or unrealized gains and losses from investments in non-affiliated entities and the impact of changes in foreign currency rates.

The loss in Other, net, in the third quarter of fiscal year 2024 was driven by mark-to-market losses from publicly traded equity investments.

Income tax was an expense of $1.28 billion and $2.24 billion for the third quarter and first nine months of fiscal year 2024, respectively, and a benefit of $67 million and $61 million for the third quarter and first nine months of fiscal year 2023, respectively.

Income tax as a percentage of income before income tax was an expense of 12.2% and 11.3% for the third quarter and first nine months of fiscal year 2024, respectively, and a benefit of 10.9% and 2.1% for the third quarter and first nine months of fiscal year 2023, respectively.

The effective tax rate increased due to a decreased impact of tax benefits from the foreign-derived intangible income deduction, stock-based compensation, and the U.S.

federal research tax credit, relative to the increase in income before income tax.

The increase in the effective tax rate was partially offset by a benefit due to the IRS audit resolution.

The change in Other, net, compared to the first quarter of fiscal year 2024 was driven by changes in value from our investments in non-affiliated entities.

Refer to Note 7 of the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information regarding our investments in non-affiliated entities.

We recognized income tax expense of $2.4 billion and $166 million for the first quarter of fiscal years 2025 and 2024, respectively.

Income tax expense as a percentage of income before income tax was 13.9% and 7.5% for the first quarter of fiscal years 2025 and 2024, respectively.

The effective tax rate increased primarily due to a decreased effect of tax benefits from the foreign-derived intangible income deduction and stock-based compensation relative to the increase in income before income tax.

Refer to Note 5 of the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information.

Liquidity and Capital Resources

October 29, 2023 January 29, 2023

Apr 28, 2024 Jan 28, 2024

(In millions)

2 unchanged sentences

Cash, cash equivalents and marketable securities $ 31,438 $ 25,984

Nine Months Ended

October 29, 2023 October 30, 2022

Three Months Ended

Apr 28, 2024 Apr 30, 2023

(In millions)

Net cash provided by operating activities $ 15,345 $ 2,911

Net cash provided by (used in) investing activities $ (4,457) $ 7,378

Net cash used in investing activities $ (5,693) $ (841)

Net cash used in financing activities $ (9,345) $ (380)

As of October 29, 2023, we had $18.28 billion in cash, cash equivalents, and marketable securities, an increase of $4.99 billion from the end of fiscal year 2023.

Our investment policy requires the purchase of highly rated fixed income securities, the diversification of investment types and credit exposures, and certain maturity limits on our portfolio.

Cash provided by operating activities increased in the first nine months of fiscal year 2024 compared to the first nine months of fiscal year 2023, due to growth in revenue, partially offset by higher accounts receivable balance and taxes paid.

Accounts receivable balance in the third quarter of fiscal year 2024 reflected approximately $570 million from customer payments received ahead of the invoice due date.

Cash provided by investing activities decreased in the first nine months of fiscal year 2024 compared to the first nine months of fiscal year 2023, primarily driven by lower marketable securities maturities.

Cash used in financing activities increased in the first nine months of fiscal year 2024 compared to the first nine months of fiscal year 2023, due to a debt repayment in the second quarter of fiscal year 2024 and higher tax payments related to RSUs, partially offset by lower share repurchases.

Our primary sources of liquidity are our cash, cash equivalents, and marketable securities, and the cash generated by our operations.

As of October 29, 2023, we had $18.28 billion in cash, cash equivalents, and marketable securities.

Our marketable securities consist of debt securities issued by the USG and its agencies, highly rated corporations and financial institutions, and foreign government entities, as well as certificates of deposit issued by highly rated financial institutions.

These marketable securities are primarily denominated in U.S.

Refer to Note 7 of the Notes to Condensed Consolidated Financial Statements for additional information.

We believe that we have sufficient liquidity to meet our operating requirements for at least the next twelve months, and for the foreseeable future, including our debt obligations, future supply obligations and vendor and supplier prepayments.

Cash provided by operating activities increased in the first quarter of fiscal year 2025 compared to the first quarter of fiscal year 2024 due to growth in revenue.

Our accounts receivable balance in the first quarter of fiscal year 2025 reflected $429 million from customer payments received prior to next quarter's invoice due date.

Cash used in investing activities increased in the first quarter of fiscal year 2025 compared to the first quarter of fiscal year 2024, primarily driven by higher purchases of marketable securities, partially offset by higher maturities of marketable securities.

Cash used in financing activities increased in the first quarter of fiscal year 2025 compared to the first quarter of fiscal year 2024, mainly due to higher share repurchases and higher tax payments related to RSUs.

Our primary sources of liquidity include cash, cash equivalents, and marketable securities, and the cash generated by our operations.

As of April 28, 2024, we had $31.4 billion in cash, cash equivalents, and marketable securities.

We believe that we have sufficient liquidity to meet our operating requirements for at least the next twelve months, and for the foreseeable future, including our future supply obligations, $1.3 billion of debt repayment due in the second quarter of fiscal year 2025, and share repurchases.

We continuously evaluate our liquidity and capital resources, including our access to external capital, to ensure we can finance future capital requirements.

Our marketable securities consist of debt securities issued by the U.S.

government and its agencies, highly rated corporations and financial institutions, and foreign government entities, as well as certificates of deposit issued by highly rated financial institutions.

Our corporate debt securities are publicly traded with generally no restrictions.

These marketable securities are primarily denominated in U.S.

Refer to Note 6 of the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information.

Except for approximately $1.4 billion of cash, cash equivalents, and marketable securities held outside the U.S.

for which we have not accrued any related foreign or state taxes if we repatriate these amounts to the U.S., substantially all of our cash, cash equivalents and marketable securities held outside of the U.S.

as of October 29, 2023 are available for use in the U.S.

as of April 28, 2024 are available for use in the U.S.

without incurring additional U.S.

federal income taxes.

paid $4.35 billion in cash taxes in the third quarter of fiscal year 2024, largely for previously deferred federal income tax payments related to the disaster relief made available by the IRS for certain California taxpayers.

We did not make any estimated federal or state tax payments in the first quarter and expect our cash taxes to substantially increase in the second quarter as we will make two federal and state estimated tax payments.

Capital Return to Shareholders

During the third quarter and first nine months of fiscal year 2024, we returned $3.72 billion and $7.01 billion, respectively, in share repurchases and $99 million and $296 million, respectively, in cash dividends.

Our cash dividend program and the payment of future cash dividends under that program are subject to the continuing determination by our Board of Directors that the dividend program and the declaration of dividends thereunder are in the best interests of our shareholders.

On August 21, 2023, our Board of Directors approved an increase to our share repurchase program of an additional $25.00 billion, without expiration.

As of October 29, 2023, we were authorized, subject to certain specifications, to repurchase additional shares of our common stock up to $25.24 billion.

From October 30, 2023 through November 17, 2023, we repurchased 0.8 million shares for $366 million pursuant to a Rule 10b5-1 trading plan.

During the first quarter of fiscal year 2025, we paid $98 million in quarterly cash dividends.

Our cash dividend program and the payment of future cash dividends under that program are subject to our Board of Directors' continuing determination that the dividend program and the declaration of dividends thereunder are in the best interests of our shareholders.

On May 22, 2024, we announced an increase in our quarterly cash dividend by 150% from $0.04 per share to $0.10 per share of common stock.

The increased dividend is equivalent to $0.01 per share on a post-forward stock split basis, and will be paid on June 28, 2024, to all shareholders of record on June 11, 2024.

Refer to Note 15 of the Notes to Condensed

Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information regarding the forward stock split.

During the first quarter of fiscal year 2025, we repurchased 9.9 million shares of our common stock for $8.0 billion.

As of April 28, 2024, we were authorized, subject to certain specifications, to repurchase up to $14.5 billion of additional shares of our common stock.

Our share repurchase program aims to offset dilution from shares issued to employees.

1 unchanged sentence

We plan to continue share repurchases this fiscal year.

From April 29, 2024 through May 24, 2024, we repurchased 2.3 million shares for $2.1 billion pursuant to a Rule 10b5-1 trading plan.

Inflation Reduction Act of 2022 requires a 1% excise tax on certain share repurchases in excess of shares issued for employee compensation made after December 31, 2022.

This provision has not had a material effect on our consolidated financial statements.

Outstanding Indebtedness and Commercial Paper

Our aggregate debt maturities as of October 29, 2023, by year payable, are as follows:

October 29, 2023

The excise tax was not material for the first quarter of fiscal year 2025.

Outstanding Indebtedness and Commercial Paper Program

Our aggregate debt maturities as of April 28, 2024, by year payable, are as follows:

(In millions)

8 unchanged sentences

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

As of October 29, 2023, we had not issued any commercial paper.

As of April 28, 2024, no commercial paper was outstanding.

Refer to Note 11 of the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for further discussion.

Material Cash Requirements and Other Obligations

We have unrecognized tax benefits of $1.10 billion, which includes related interest and penalties of $115 million recorded in non-current income tax payable as of October 29, 2023.

We are unable to reasonably estimate the timing of any potential tax liability, interest payments, or penalties in individual years due to uncertainties in the underlying income tax positions and the timing of the effective settlement of such tax positions.

Unrecognized tax benefits were $1.4 billion, which includes related interest and penalties of $161 million recorded in non-current income tax payable as of April 28, 2024.

We are unable to estimate the timing of any potential tax liability, interest payments, or penalties in individual years due to uncertainties in the underlying income tax positions and the timing of the effective settlement of such tax positions.

Refer to Note 5 of the Notes to Condensed Consolidated Financial Statements for further information.

1 unchanged sentence

Refer to Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources” in our Annual Report on Form 10-K for the fiscal year ended January 28, 2024 for a description of our contractual obligations.

For a description of our operating lease obligations, long-term debt, and purchase obligations, refer to Note 3, Note 12, and Note 13 of the Notes to Condensed Consolidated Financial Statements, respectively.

For a description of our operating lease obligations, long-term debt, and purchase obligations, refer to Notes 2, 11, and 12 of the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q, respectively.

Climate Change

3 unchanged sentences

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 2. Management’s Discussion and Analysis