What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-11-20 compared with 2024-08-28 · 98 added, 128 removed, 201 unchanged (53% of the section changed)

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Demand and Supply

Revenue growth in the second quarter of fiscal year 2025 was driven by data center compute platforms and networking for accelerated computing and AI solutions.

Hopper architecture demand is strong, and shipments are expected to increase in the second half of fiscal 2025.

We shipped customer samples of our Blackwell architecture in the second quarter.

We executed a change to the Blackwell GPU mask to improve production yield.

Blackwell production ramp is scheduled to begin in the fourth quarter and continue into fiscal year 2026.

In the fourth quarter of fiscal year 2025, we expect to ship several billion dollars in Blackwell revenue.

Demand estimates for our new products, applications, and services can be incorrect and create volatility in our revenue or supply levels.

Revenue growth in the third quarter of fiscal year 2025 was driven by data center compute and networking platforms for accelerated computing and AI solutions.

Demand for the Hopper architecture is strong and our H200 offering grew significantly in the quarter.

We completed a successful mask change for Blackwell, our next Data Center architecture, that improved production yields.

Blackwell production shipments are scheduled to begin in the fourth quarter of fiscal year 2025 and will continue to ramp into fiscal year 2026.

We will be shipping both Hopper and Blackwell systems in the fourth quarter of fiscal year 2025 and beyond.

Both Hopper and Blackwell systems have certain supply constraints, and the demand for Blackwell is expected to exceed supply for several quarters in fiscal year 2026.

Demand estimates for our products, applications, and services can be incorrect and create volatility in our revenue or supply levels.

We may not be able to generate significant revenue from them.

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.

Advancements in accelerated computing and generative AI models, along with the growth in model complexity and scale, have driven increased demand for our Data Center systems.

We continue to increase our supply and capacity purchases with existing and new suppliers to support our demand projections.

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The computing industry is experiencing a broader and faster launch cadence of accelerated computing platforms to meet a growing and diverse set of AI opportunities.

We have introduced a new cadence of our Data Center architectures where we seek to complete a new GPU computing architecture each year and we are providing a greater variety of Data Center offerings.

We have introduced a new architecture cadence of our Data Center solutions where we seek to complete a new computing architecture each year and we are providing a greater variety of Data Center offerings.

The increased frequency of these transitions and the larger number of products and product configurations may magnify the challenges associated with managing our supply and demand which may create volatility in our revenue.

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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.

For example, we executed a change to the Blackwell GPU mask to improve production yield.

Our gross margins in the second quarter of fiscal year 2025 were negatively impacted by inventory provisions for low-yielding Blackwell material and they may continue to be impacted in the future.

In August 2022, the U.S.

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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.

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, but not limited to, the 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.

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

Additionally, partners and customers have experienced delays in receiving licenses or have not received a license to ship these restricted products.

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 (removing the grace period granted by the official rule).

Our upcoming Blackwell systems, such as GB200 NVL 72 and NVL 36 as well as B200 will also be subject to these requirements and therefore require a license for any shipment to certain entities and to China and Country Groups D1, D4 and D5, excluding Israel.

To date, we have not received licenses to ship these restricted products to China.

Additionally, we understand that partners and customers have also not received a license to ship these restricted products.

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 grew sequentially in the second quarter of fiscal year 2025 and is a significant contributor to our Data Center revenue.

Our Data Center revenue in China grew sequentially in the third quarter of fiscal year 2025.

As a percentage of total Data Center revenue, it remains below levels seen prior to the imposition of export controls in October 2023.

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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.

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.

In addition to export controls, the USG may impose restrictions on the import and sale of products that incorporate technologies developed or manufactured in whole or in part in China.

For example, the USG is considering restrictions on the import and sale of certain automotive products in the United States, which if adopted and interpreted broadly, could impact our ability to develop and supply solutions for our automotive customers.

manufacturing locations and negatively impact our business.

Refer to “Item 1A.

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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.

Second Quarter of Fiscal Year 2025 Summary

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

Third Quarter of Fiscal Year 2025 Summary

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

Jul 28, 2024 Apr 28, 2024 Jul 30, 2023

Oct 27, 2024 Jul 28, 2024 Oct 29, 2023

($ in millions, except per share data)

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Data Center revenue was up 112% from a year ago and up 17% sequentially.

The strong sequential and year-on-year growth was driven by demand for our Hopper GPU computing platform for training and inferencing of large language models, recommendation engines, and generative AI applications.

Sequential growth was driven by consumer internet and enterprise companies.

Cloud service providers represented roughly 45% of our Data Center revenue, and more than 50% stemmed from consumer internet and enterprise companies.

Strong year-on-year growth was driven by all customer types from both compute and networking revenue.

Customers continue to accelerate their Hopper architecture purchases while gearing up to adopt Blackwell.

The strong year-on-year and sequential growth was driven by demand for our Hopper computing platform for training and inferencing of large language models, recommendation engines, and generative AI applications.

Cloud service providers represented approximately 50% of our Data Center revenue, and the remainder was represented by consumer internet and enterprise companies.

Strong year-on-year growth was driven by all customer types from both compute and networking.

Demand for the Hopper architecture is strong and our H200 offering grew significantly in the quarter.

Data Center compute revenue was $27.6 billion, up 132% from a year ago and up 22% sequentially.

Networking revenue was $3.7 billion, up 114% from a year ago driven by InfiniBand and Ethernet for AI revenue, which includes Spectrum-X end-to-end ethernet platform.

Networking revenue sequentially was up 16% and includes a doubling of Ethernet for AI revenue.

We shipped customer samples of our Blackwell architecture in the second quarter.

We executed a change to the Blackwell GPU mask to improve production yield.

Blackwell production ramp is scheduled to begin in the fourth quarter and continue into fiscal year 2026.

In the fourth quarter of fiscal year 2025, we expect to ship several billion dollars in Blackwell revenue.

Hopper demand is strong, and shipments are expected to increase in the second half of fiscal year 2025.

Networking revenue was $3.1 billion, up 20% from a year ago driven by Ethernet for AI, which includes Spectrum-X end-to-end ethernet platform.

Areas of sequential revenue growth include InfiniBand and Ethernet switches, SmartNICs, and BlueField DPUs.

Though networking revenue was sequentially down 15%, networking demand is strong and growing.

Gaming revenue was up 15% from a year ago and up 14% sequentially.

These increases reflect higher sales of our GeForce RTX 40 Series GPUs and game console SOCs.

We had solid demand in the second quarter for our gaming GPUs as part of the back-to-school season.

These increases were driven by sales of our GeForce RTX 40 Series GPUs and game console SoCs.

Professional Visualization revenue was up 17% from a year ago and up 7% sequentially.

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Automotive revenue was up 72% from a year ago and up 30% sequentially.

These increases were driven by AI Cockpit solutions and self-driving platforms.

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

Sequentially, gross margin decreased primarily driven by inventory provisions for low-yielding Blackwell material and a higher mix of new products within Data Center.

Operating expenses were up 48% from a year ago and up 12% sequentially, largely driven by compensation and benefits, reflecting growth in employees and compensation.

Market Platform Highlights

Data Center revenue for the second quarter of fiscal year 2025 was $26.3 billion, up 16% from the previous quarter and up 154% from a year ago.

We unveiled an array of NVIDIA Blackwell-powered systems featuring NVIDIA Grace CPUs, networking and infrastructure from top manufacturers.

We announced broad adoption of the NVIDIA Spectrum-X Ethernet networking platform by cloud service providers, GPU cloud providers and enterprises, as well as partners incorporating it into their offerings.

We released NVIDIA Inference Microservices, or NIM, for broad availability to developers globally and unveiled that more than 150 companies are integrating NIM into their platforms to speed generative AI application development.

We introduced an NVIDIA AI Foundry service and NIM inference microservices to accelerate generative AI for the world’s enterprises with the Llama 3.1 collection of models.

We announced that the combination of NVIDIA H200 and NVIDIA Blackwell architecture B200 processors swept the latest industry-standard MLPerf results for inference.

We also unveiled an array of Blackwell systems featuring NVIDIA Grace CPUs, networking and infrastructure.

Over the trailing four quarters, we estimate that inference drove over 40% of our Data Center revenue.

Gaming revenue for the second quarter of fiscal year 2025 was $2.9 billion, up 9% from the previous quarter and up 16% from a year ago.

We announced NVIDIA ACE generative AI microservices are in early access for RTX AI PCs.

We announced new RTX and DLSS titles bringing the total number of RTX games and apps to over 600.

We surpassed 2,000 games on GeForce NOW and expanded the service into Japan.

Professional Visualization revenue for the second quarter of fiscal year 2025 was $454 million, up 6% from the previous quarter and up 20% from a year ago.

We introduced generative AI models and NIM microservices for OpenUSD;

and announced major Taiwanese electronics makers are creating more autonomous factories with a new reference workflow that combines NVIDIA Metropolis vision AI, NVIDIA Omniverse simulation and NVIDIA Isaac AI robot development.

Automotive revenue for the second quarter of fiscal year 2025 was $346 million, up 5% from the previous quarter and up 37% from a year ago.

At the Computer Vision and Pattern Recognition conference, NVIDIA won the Autonomous Grand Challenge in the ‘End-to-End Driving at Scale’ category, highlighting the importance of generative AI in building applications for physical AI deployments in autonomous vehicle development.

These increases were driven by our self-driving platforms.

Gross margin increased from a year ago due to a higher mix of Data Center revenue.

Sequentially, gross margin decreased primarily driven by a mix shift from H100 systems to more complex and higher cost systems within Data Center.

Operating expenses were up 44% from a year ago and up 9% sequentially, driven by higher compensation and benefits expenses due to employee growth and compensation increases.

Financial Information by Business Segment and Geographic Data

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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 Six Months Ended

Jul 28, 2024 Jul 30, 2023 Jul 28, 2024 Jul 30, 2023

Three Months Ended Nine Months Ended

Oct 27, 2024 Oct 29, 2023 Oct 27, 2024 Oct 29, 2023

Revenue 100.0 % 100.0 % 100.0 % 100.0 %

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Revenue by Reportable Segments

Three Months Ended Six Months Ended

Jul 28, 2024 Jul 30, 2023 $

Change Jul 28, 2024 Jul 30, 2023 $

Three Months Ended Nine Months Ended

Oct 27, 2024 Oct 29, 2023 $

Change Oct 27, 2024 Oct 29, 2023 $

($ in millions)

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Operating Income by Reportable Segments

Three Months Ended Six Months Ended

Jul 28, 2024 Jul 30, 2023 $

Change Jul 28, 2024 Jul 30, 2023 $

Three Months Ended Nine Months Ended

Oct 27, 2024 Oct 29, 2023 $

Change Oct 27, 2024 Oct 29, 2023 $

($ in millions)

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Total $ 21,869 $ 10,417 $ 11,452 110 % $ 57,419 $ 19,358 $ 38,061 197 %

Compute & Networking revenue – The increase in the second quarter and first half of fiscal year 2025 compared to the second quarter and first half of fiscal year 2024 was due to strength in Data Center computing and networking for accelerated computing and AI solutions.

Revenue from GPU computing grew 166% year-on-year and 257% compared to the first half of fiscal year 2024, was driven by demand for our Hopper GPU architecture computing platform for training and inferencing of large language models, recommendation engines, and generative AI applications.

Networking was also up 114% year-on-year and 159% compared to the first half of last year driven by both InfiniBand and Ethernet for AI revenue.

Graphics revenue – The increase in the second quarter and first half of fiscal year 2025 compared to the second quarter and first half of fiscal year 2024 was led by higher sales of our GeForce RTX 40 Series GPUs.

Reportable segment operating income – The increase in the second quarter and first half of fiscal year 2025 compared to the second quarter and first half of fiscal year 2024 in Compute & Networking and Graphics operating income was driven by higher revenue.

All Other operating loss – The increase in the second quarter and first half of fiscal year 2025 compared to the second quarter and first half of fiscal year 2024 was due to an increase in stock-based compensation expense reflecting employee growth and compensation increases.

Compute & Networking revenue – The year over year increase in the third quarter and first nine months of fiscal year 2025 was due to strength in Data Center computing for accelerated computing and AI solutions.

Revenue from Data Center computing grew 133% year-on-year and 195% compared to the first nine months of fiscal year 2024 driven by demand for our Hopper computing platform for training and inferencing of large language models, recommendation engines, and generative AI applications.

Networking was up 20% year-on-year and 90% compared to the first nine months of fiscal year 2024 driven by Ethernet for AI revenue, which includes Spectrum-X end-to-end ethernet platform.

Graphics revenue – The year over year increase in the third quarter and first nine months of fiscal year 2025 was led by higher sales of our GeForce RTX 40 Series GPUs.

Reportable segment operating income – The year over year increase in Compute & Networking segment operating income in the third quarter and first nine months of fiscal year 2025 was primarily driven by growth in data center revenue.

The year over year increase in Graphics segment operating income in the third quarter of fiscal year 2025 was primarily driven by growth in revenue, partially offset by an increase of 52% in segment operating expense.

The year over year increase in Graphics segment operating income in the first nine months of fiscal year 2025 was primarily driven by growth in revenue.

All Other operating loss – The year over year increase in the third quarter and first nine months of fiscal year 2025 was due to an increase in stock-based compensation expense reflecting employee growth and compensation increases.

Concentration of Revenue

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 57% and 53% of total revenue for the second quarter and first half of fiscal year 2025, respectively, and 55% and 59% of total revenue for the second quarter and first half of fiscal year 2024, respectively.

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

Revenue from sales to customers outside of the United States accounted for 58% and 65% of total revenue for the third quarter, and 55% and 62% of total revenue for the first nine months, of fiscal years 2025 and 2024, respectively.

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

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Sales to direct customers which represented 10% or more of total revenue, all of which were primarily attributable to the Compute & Networking segment, are presented in the following table:

Three Months Ended Six Months Ended

Jul 28, 2024 Jul 28, 2024

Three Months Ended Nine Months Ended

Oct 27, 2024 Oct 27, 2024

Customer A 12 % *

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* Less than 10% of total revenue

For the second quarter of fiscal year 2025, two indirect customers which primarily purchase our products through system integrators and distributors, including through Customer B and Customer E, are estimated to each represent 10% or more of total revenue attributable to the Compute & Networking segment.

For the first half of fiscal year 2025, an indirect customer which primarily purchases our products from system integrators and distributors, including from Customer E, is estimated to represent 10% or more of total revenue, attributable to the Compute & Networking segment.

The customer references of A-D above may represent different customers than those reported in a previous period.

For the third quarter and first nine months of fiscal year 2025, an indirect customer which primarily purchases our products through system integrators and distributors, including through Customer C, is estimated to represent 10% or more of total revenue, attributable to the Compute & Networking segment.

Indirect customer revenue is an estimation based upon multiple factors including customer purchase order information, product specifications, internal sales data and other sources.

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

Our overall gross margin increased to 75.1% and 76.6% for the second quarter and first half of fiscal year 2025, respectively, from 70.1% and 68.2% for the second quarter and first half of fiscal year 2024, respectively.

The increases in the second quarter and first half of fiscal year 2025 compared to the second quarter and first half of fiscal year 2024 were primarily due to strong Data Center revenue growth of 154% and 234% for the second quarter and first half of 2025, respectively.

Provisions for inventory and excess inventory purchase obligations totaled $908 million and $1.3 billion for the second quarter and first half of fiscal year 2025, respectively, and were primarily due to low-yielding Blackwell material.

Sales of previously reserved inventory and settlements of excess inventory purchase obligations resulted in a provision release of $85 million and $199 million for the second quarter and first half of fiscal year 2025, respectively.

The net effect on our

gross margin was an unfavorable impact of 2.7% and 2.0% in the second quarter and first half of fiscal year 2025, respectively.

Provisions for inventory and excess inventory purchase obligations totaled $576 million and $709 million for the second quarter and first half of fiscal year 2024, respectively.

Sales of previously reserved inventory and settlements of excess inventory purchase obligations resulted in a provision release of $84 million and $134 million for the second quarter and first half of fiscal year 2024, respectively.

The net effect on our gross margin was an unfavorable impact of 3.6% and 2.8% in the second quarter and first half of fiscal year 2024, respectively.

We expect our Data Center mix to continue to shift to new products in the second half of fiscal year 2025.

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

Gross margins increased to 74.6% for the third quarter of fiscal year 2025 compared to 74.0% for the third quarter of fiscal year 2024, due to a higher mix of Data Center revenue.

Gross margins increased to 75.8% for the first nine months of fiscal year 2025 compared to 70.9% for the first nine months of fiscal year 2024, primarily due to higher mix of Data Center revenue.

Provisions for inventory and excess inventory purchase obligations totaled $865 million and $2.2 billion for the third quarter and first nine months of fiscal year 2025, respectively.

Sales of previously reserved inventory and settlements of excess inventory purchase obligations resulted in a provision release of $106 million and $305 million for the third quarter and first nine months of fiscal year 2025, respectively.

The net effect on our gross margin was an unfavorable impact of 2.2% and 2.0% in the third quarter and first nine months of fiscal year 2025, respectively.

Provisions for inventory and excess inventory purchase obligations totaled $681 million and $1.4 billion for the third quarter and first nine months of fiscal year 2024, respectively.

Sales of previously reserved inventory and settlements of excess inventory purchase obligations resulted in a provision release of $239 million and $372 million 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, respectively.

Operating Expenses

Three Months Ended Six Months Ended

Jul 28, 2024 Jul 30, 2023 $

Change Jul 28, 2024 Jul 30, 2023 $

Three Months Ended Nine Months Ended

Oct 27, 2024 Oct 29, 2023 $

Change Oct 27, 2024 Oct 29, 2023 $

($ in millions)

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% of net revenue 12.3 % 16.5 % 12.9 % 21.0 %

The increases in research and development expenses for the second quarter and first half of fiscal year 2025 were driven by 35% and 34% increase in compensation and benefits, including stock-based compensation, reflecting employee growth and compensation increases, and 118% and 117% increase in compute and infrastructure investments, respectively.

The increases in sales, general and administrative expenses for the second quarter and first half 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 mid to upper 40% range as we work on developing our next generation of products.

The increases in research and development expenses for the third quarter and first nine months of fiscal year 2025 were driven by a 29% and 32% increase in compensation and benefits, including stock-based compensation, reflecting employee growth and compensation increases, a 107% and 113% increase in compute and infrastructure, and a 317% and 209% increase in engineering development costs for new product introductions, respectively.

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

Other Income (Expense), Net

Three Months Ended Six Months Ended

Jul 28, 2024 Jul 30, 2023 $

Change Jul 28, 2024 Jul 30, 2023 $

Three Months Ended Nine Months Ended

Oct 27, 2024 Oct 29, 2023 $

Change Oct 27, 2024 Oct 29, 2023 $

($ in millions)

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$ 447 $ 105 $ 342 $ 1,390 $ 354 $ 1,036

The increases in interest income for the second quarter and first half of fiscal year 2025 was due to higher cash, cash equivalents, and publicly-held debt security balances.

The increases in interest income for the third quarter and first nine months of fiscal year 2025 was primarily due to growth in cash, cash equivalents, and publicly-held debt security 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 privately-held equity securities, publicly-held equity securities, and the impact of changes in foreign currency rates.

The change in Other, net, compared to the second quarter and first half of fiscal year 2024 was primarily driven by an increase in fair value of our privately-held and publicly-held equity securities.

The change in Other, net, compared to the third quarter and first nine months of fiscal year 2024, was primarily driven by an increase in fair value of our privately-held and publicly-held equity securities.

Refer to Note 6 and 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 privately-held and publicly-held equity securities.

We recognized income tax expense of $2.6 billion and $5.0 billion for the second quarter and first half of fiscal year 2025, respectively, and $793 million and $958 million for the second quarter and first half of fiscal year 2024, respectively.

Income tax expense as a percentage of income before income tax was 13.6% and 13.7% for the second quarter and first half of fiscal year 2025, respectively, and 11.4% and 10.4% for the second quarter and first half of fiscal year 2024, respectively.

The effective tax rate increased primarily due to a lower percentage of tax benefits from the foreign-derived intangible income deduction relative to the increase in income before income tax.

Given our current and anticipated future earnings, we believe that we may release the valuation allowance associated with certain state deferred tax assets in the near term, which would decrease our income tax expense for the period the release is recorded.

The timing and amount of the valuation allowance release could vary based on our assessment of all available evidence.

Income tax expense was $3.0 billion and $1.3 billion for the third quarter, and $8.0 billion and $2.2 billion for the first nine months, of fiscal years 2025 and 2024, respectively.

The income tax expense as a percentage of income before income tax was 13.5% and 12.2% for the third quarter, and 13.6% and 11.3% for the first nine months, of fiscal years 2025 and 2024, respectively.

The effective tax rate increased primarily due to a lower percentage of tax benefits from the foreign-derived intangible income deduction relative to the increase in income before income tax and a discrete benefit in fiscal year 2024 due to an IRS audit resolution.

Given our current and possible future earnings, we believe that we may release the valuation allowance associated with certain state deferred tax assets in the near term, which would decrease our income tax expense for the period the release is recorded.

The timing and amount of the valuation allowance release could vary based on our assessment of all available information.

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

Jul 28, 2024 Jan 28, 2024

Oct 27, 2024 Jan 28, 2024

(In millions)

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Cash, cash equivalents and marketable securities $ 38,487 $ 25,984

Six Months Ended

Jul 28, 2024 Jul 30, 2023

Nine Months Ended

Oct 27, 2024 Oct 29, 2023

(In millions)

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Our investment policy requires the purchase of high-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 half of fiscal year 2025 compared to the first half of fiscal year 2024 due to growth in revenue, partially offset by higher tax payments.

Our accounts receivable balance at the end of the first half of fiscal year 2025 reflects the strong revenue growth, partially offset by $2.8 billion from customer payments received prior to the invoice due date.

Cash used in investing activities increased in the first half of fiscal year 2025 compared to the first half of fiscal year 2024, primarily driven by net purchases of marketable securities, and acquisition of land and buildings.

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

Cash provided by operating activities increased in the first nine months of fiscal year 2025 compared to the first nine months of fiscal year 2024 due to growth in revenue, partially offset by advanced payments on supply agreements.

Our accounts receivable balance at the end of the first nine months of fiscal year 2025 reflects the strong revenue growth, partially offset by $1.7 billion from customer payments received prior to the invoice due date.

Cash used in investing activities increased in the first nine months of fiscal year 2025 compared to the first nine months of fiscal year 2024, primarily driven by net purchases of marketable securities, and purchase of land, property and equipment.

Cash used in financing activities increased in the first nine months of fiscal year 2025 compared to the first nine months 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 July 28, 2024, we had $34.8 billion in cash, cash equivalents, and marketable securities.

As of October 27, 2024, we had $38.5 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 and share repurchases.

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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 the U.S.

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

as of October 27, 2024 are available for use in the U.S.

without incurring additional U.S.

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Capital Return to Shareholders

During the second quarter and first half of fiscal year 2025, we paid $246 million and $344 million, respectively, in quarterly cash dividends.

We paid cash dividends to our shareholders of $245 million and $589 million during the third quarter and first nine months of fiscal year 2025, respectively.

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 June 7, 2024, we increased our quarterly cash dividend to $0.01 per share on a post-Stock Split basis to all shareholders of record on June 11, 2024.

Our quarterly cash dividend was paid on June 28, 2024.

During the second quarter and first half of fiscal year 2025, we repurchased 62.8 million and 162.1 million shares of our common stock for $7.0 billion and $15.1 billion, respectively.

As of July 28, 2024, we were authorized, subject to certain specifications, to repurchase up to $7.5 billion of our common stock.

We repurchased 92 million and 254 million shares of our common stock for $11.1 billion and $26.2 billion during the third quarter and first nine months of fiscal year 2025, respectively.

On August 26, 2024, our Board of Directors approved an additional $50 billion to our share repurchase authorization, without expiration.

As of August 26, 2024, a total of $53.9 billion was available for repurchase.

As of October 27, 2024, we were authorized, subject to certain specifications, to repurchase up to $46.4 billion of our common stock.

Our share repurchase program aims to offset dilution from shares issued to employees while maintaining adequate liquidity to meet our operating requirements.

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We plan to continue share repurchases this fiscal year.

From April 29, 2024 through August 26, 2024, we repurchased 31.5 million shares for $3.6 billion pursuant to a Rule 10b5-1 trading plan.

From October 28, 2024 through November 15, 2024, we repurchased 19 million shares for $2.7 billion pursuant to a pre-established 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.

The excise tax is included in our share repurchase cost and was not material for the second quarter and first half of fiscal year 2025.

The excise tax is included in our share repurchase cost and was not material for the third quarter and first nine months of fiscal year 2025.

Outstanding Indebtedness and Commercial Paper Program

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

Our aggregate debt maturities as of October 27, 2024, by year payable, are as follows:

(In millions)

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Unamortized debt discount and issuance costs (38)

Net carrying amount 8,461

Less short-term portion —

Total long-term portion $ 8,461

Net long-term carrying amount $ 8,462

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

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

As of October 27, 2024, we had no commercial paper 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

Unrecognized tax benefits were $1.7 billion, which includes related interest and penalties of $186 million recorded in non-current income tax payable as of July 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.

Unrecognized tax benefits were $1.9 billion, which includes related interest and penalties of $215 million recorded in non-current income tax payable as of October 27, 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.

7 unchanged sentences

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What changed 10-Q

Item 2. Management’s Discussion and Analysis