Record revenue from all platforms – Datacenter, Gaming, Professional Visualization, Automotive

Revenue of $3.12 billion, up 40 percent from a year ago

GAAP EPS of $1.76, up 91 percent from a year ago

NVIDIA today reported revenue for the second quarter ended July 29, 2018, of $3.12 billion, up 40 percent from $2.23 billion a year earlier, and down 3 percent from $3.21 billion in the previous quarter.

GAAP earnings per diluted share for the quarter were $1.76, up 91 percent from $0.92 a year ago and down 11 percent from $1.98 in the previous quarter. Non-GAAP earnings per diluted share were $1.94, up 92 percent from $1.01 a year earlier and down 5 percent from $2.05 in the previous quarter.

“Growth across every platform – AI, Gaming, Professional Visualization, self-driving cars – drove another great quarter,” said Jensen Huang, founder and CEO of NVIDIA. “Fueling our growth is the widening gap between demand for computing across every industry and the limits reached by traditional computing. Developers are jumping on the GPU-accelerated computing model that we pioneered for the boost they need.

“We announced Turing this week. Turing is the world’s first ray-tracing GPU and completes the NVIDIA RTX platform, realizing a 40-year dream of the computer graphics industry. Turing is a giant leap forward and the greatest advance for computing since we introduced CUDA over a decade ago.”

Capital Return

During the first half of fiscal 2019, NVIDIA returned $837 million to shareholders through a combination of $655 million in share repurchases and $182 million in quarterly cash dividends.

For fiscal 2019, NVIDIA intends to return $1.25 billion to shareholders through ongoing quarterly cash dividends and share repurchases.

NVIDIA will pay its next quarterly cash dividend of $0.15 per share on September 21, 2018, to all shareholders of record on August 30, 2018.

Q2 Fiscal 2019 Summary

GAAP ($ in millions except earnings per share) Q2 FY19 Q1 FY19 Q2 FY18 Q/Q Y/Y Revenue $3,123 $3,207 $2,230 Down 3% Up 40% Gross margin 63.3% 64.5% 58.4% Down 120 bps Up 490 bps Operating expenses $818 $773 $614 Up 6% Up 33% Operating income $1,157 $1,295 $688 Down 11% Up 68% Net income $1,101 $1,244 $583 Down 11% Up 89% Diluted earnings per share $1.76 $1.98 $0.92 Down 11% Up 91%

Non-GAAP ($ in millions except earnings per share) Q2 FY19 Q1 FY19 Q2 FY18 Q/Q Y/Y Revenue $3,123 $3,207 $2,230 Down 3% Up 40% Gross margin 63.5% 64.7% 58.6% Down 120 bps Up 490 bps Operating expenses $692 $648 $533 Up 7% Up 30% Operating income $1,290 $1,428 $773 Down 10% Up 67% Net income $1,210 $1,285 $638 Down 6% Up 90% Diluted earnings per share $1.94 $2.05 $1.01 Down 5% Up 92%

NVIDIA’s outlook for the third quarter of fiscal 2019 is as follows:

Revenue is expected to be $3.25 billion, plus or minus two percent.

GAAP and non-GAAP gross margins are expected to be 62.6 percent and 62.8 percent, respectively, plus or minus 50 basis points.

GAAP and non-GAAP operating expenses are expected to be approximately $870 million and $730 million, respectively.

GAAP and non-GAAP other income and expense are both expected to be income of approximately $20 million.

GAAP and non-GAAP tax rates are both expected to be 9 percent, plus or minus one percent, excluding any discrete items. GAAP discrete items include excess tax benefits or deficiencies related to stock-based compensation, which are expected to generate variability on a quarter by quarter basis.

Recent Highlights

This week, NVIDIA reinvented computer graphics with the launch of its Turing™ GPU architecture, the company’s most important innovation since the invention of the CUDA® GPU more than a decade ago. Turing is the world’s first ray-tracing GPU. It features new RT Cores to accelerate ray tracing and new Tensor Cores for AI inferencing -- which, together for the first time, make real-time ray tracing possible – as well as more powerful compute for simulation and enhanced rasterization. Turing completes the NVIDIA RTX™ platform, a new hybrid rendering graphics approach that combines rasterization, ray tracing, compute and AI to enable real-time ray tracing, the holy grail of computer graphics. Turing will reset the look of video games and open up the $250 billion visual effects industry to GPUs.

NVIDIA Research continues to push the possibilities of AI with deep learning inventions such as a new technique that produces high-quality slow-motion video from standard slow-motion video; a new technique that cleans up grainy or pixelated photos simply by looking at corrupted photos; and a new method to train robots to carry out actions by observing human activity. Its work received four honors at the recent Computer Vision and Pattern Recognition Conference. It also received a $23 million contract from the Defense Advanced Research Projects Agency to work with a team of university and industry researchers to develop post-Moore’s law systems.

Other highlights of each market platform since the first quarter earnings release include:



Datacenter

Grew Datacenter revenue by 83 percent from a year earlier to $760 million.

Marked the launch of Summit, the world’s fastest supercomputer, at Oak Ridge National Laboratory, powered by more than 27,000 NVIDIA® Volta Tensor Core GPUs.

Announced that five of the world’s seven fastest supercomputers are powered by NVIDIA GPUs, based on the new list of the world’s 500 fastest systems . NVIDIA GPUs provide 56 percent of the list’s new computing power.

NVIDIA GPUs provide 56 percent of the list’s new computing power. Introduced NVIDIA HGX-2™, the first unified computing platform for both AI and high performance computing. A number of partners around the world, including cloud service providers, server OEMs and ODMs, are building systems incorporating HGX-2.

Google Cloud integrated into its offerings the NVIDIA Tesla® P4 GPU optimized for AI inference and graphics virtualization.

Researchers at Fast.ai achieved the fastest-ever AI training time using NVIDIA Tesla V100 GPUs available on Amazon Web Services.

Launched AIRI Mini with Pure Storage and ONTAP AI with NetApp, providing enterprises with an easy-to-deploy, modular approach for implementing and scaling deep learning.

Gaming

Grew Gaming revenue by 52 percent from a year earlier to $1.80 billion.

Announced there are more than 25 Max-Q GeForce gaming notebook designs offered by all major OEMs, enabling high-end performance for thin and light notebooks.

Next-generation NVIDIA G-SYNC® HDR displays began shipping, delivering stunning 1,000 NIT HDR, stutter-free gaming.

Professional Visualization

Grew Professional Visualization revenue by 20 percent from a year earlier to $281 million.

Unveiled its first Turing-based GPUs -- NVIDIA® Quadro RTX™ 8000, RTX 6000 and RTX 5000 -- which will revolutionize the craft of some 50 million designers and artists.

Introduced the NVIDIA RTX Server, a full ray-tracing global illumination rendering server that will give a giant boost for the world’s render farms as Moore’s law ends.

Announced broad industry support for the NVIDIA RTX platform from the world’s top graphics software companies.

Automotive

Grew Automotive revenue by 13 percent from a year earlier to $161 million.

Announced that Daimler and Bosch have selected NVIDIA’s DRIVE™ platform to bring fully automated and driverless vehicles to city streets, with pilot testing to begin next year in Silicon Valley.

CFO Commentary

Commentary on the quarter by Colette Kress, NVIDIA’s executive vice president and chief financial officer, is available at https://investor.nvidia.com/home/default.aspx.

Conference Call and Webcast Information

NVIDIA will conduct a conference call with analysts and investors to discuss its second quarter fiscal 2019 financial results and current financial prospects today at 2:30 p.m. Pacific time (5:30 p.m. Eastern time). To listen to the conference call, dial (877) 223-3864 in the United States or (574) 990-1377 internationally, and provide the following conference ID: 3298827. A live webcast (listen-only mode) of the conference call will be accessible at NVIDIA’s investor relations website, https://investor.nvidia.com/home/default.aspx, and at www.streetevents.com. The webcast will be recorded and available for replay until NVIDIA’s conference call to discuss its financial results for its third quarter of fiscal 2019.

Non-GAAP Measures

To supplement NVIDIA’s Condensed Consolidated Statements of Income and Condensed Consolidated Balance Sheets presented in accordance with GAAP, the company uses non-GAAP measures of certain components of financial performance. These non-GAAP measures include non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP income from operations, non-GAAP other income (expense), non-GAAP income tax expense, non-GAAP net income, non-GAAP net income, or earnings, per diluted share, non-GAAP diluted shares, and free cash flow. In order for NVIDIA’s investors to be better able to compare its current results with those of previous periods, the company has shown a reconciliation of GAAP to non-GAAP financial measures. These reconciliations adjust the related GAAP financial measures to exclude stock-based compensation expense, legal settlement costs, acquisition-related costs, contributions, gains from non-affiliated investments, interest expense related to amortization of debt discount, debt-related costs, and the associated tax impact of these items, where applicable. Weighted average shares used in the non-GAAP diluted net income per share computation includes the anti-dilution impact of our Note Hedge. Free cash flow is calculated as GAAP net cash provided by operating activities less purchases of property and equipment and intangible assets. NVIDIA believes the presentation of its non-GAAP financial measures enhances the user’s overall understanding of the company’s historical financial performance. The presentation of the company’s non-GAAP financial measures is not meant to be considered in isolation or as a substitute for the company’s financial results prepared in accordance with GAAP, and the company’s non-GAAP measures may be different from non-GAAP measures used by other companies.

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NVIDIA CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In millions, except per share data) (Unaudited) Three Months Ended Six Months Ended July 29, July 30, July 29, July 30, 2018 2017 2018 2017 Revenue $ 3,123 $ 2,230 $ 6,330 $ 4,167 Cost of revenue 1,148 928 2,287 1,715 Gross profit 1,975 1,302 4,043 2,452 Operating expenses Research and development 581 416 1,124 827 Sales, general and administrative 237 198 467 383 Total operating expenses 818 614 1,591 1,210 Income from operations 1,157 688 2,452 1,242 Interest income 32 15 57 31 Interest expense (14 ) (15 ) (29 ) (31 ) Other, net 5 (4 ) 11 (21 ) Total other income (expense) 23 (4 ) 39 (21 ) Income before income tax 1,180 684 2,491 1,221 Income tax expense 79 101 146 130 Net income $ 1,101 $ 583 $ 2,345 $ 1,091 Net income per share: Basic $ 1.81 $ 0.98 $ 3.86 $ 1.83 Diluted $ 1.76 $ 0.92 $ 3.74 $ 1.71 Weighted average shares used in per share computation: Basic 607 597 607 595 Diluted 626 633 627 637

NVIDIA CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (In millions) (Unaudited) July 29, January 28, 2018 2018 ASSETS Current assets: Cash, cash equivalents and marketable securities $ 7,943 $ 7,108 Accounts receivable, net 1,662 1,265 Inventories 1,090 796 Prepaid expenses and other current assets 136 86 Total current assets 10,831 9,255 Property and equipment, net 1,162 997 Goodwill 618 618 Intangible assets, net 51 52 Other assets 220 319 Total assets $ 12,882 $ 11,241 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 800 $ 596 Accrued and other current liabilities 648 542 Convertible short-term debt 14 15 Total current liabilities 1,462 1,153 Long-term debt 1,987 1,985 Other long-term liabilities 638 632 Total liabilities 4,087 3,770 Shareholders' equity 8,795 7,471 Total liabilities and shareholders' equity $ 12,882 $ 11,241

NVIDIA CORPORATION RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (In millions, except per share data) (Unaudited) Three Months Ended Six Months Ended July 29, April 29, July 30, July 29, July 30, 2018 2018 2017 2018 2017 GAAP gross profit $ 1,975 $ 2,068 $ 1,302 $ 4,043 $ 2,452 GAAP gross margin 63.3 % 64.5 % 58.4 % 63.9 % 58.8 % Stock-based compensation expense (A) 8 8 4 16 8 Non-GAAP gross profit $ 1,983 $ 2,076 $ 1,306 $ 4,059 $ 2,460 Non-GAAP gross margin 63.5 % 64.7 % 58.6 % 64.1 % 59.0 % GAAP operating expenses $ 818 $ 773 $ 614 $ 1,591 $ 1,210 Stock-based compensation expense (A) (124 ) (121 ) (77 ) (246 ) (150 ) Acquisition-related costs (B) (2 ) (2 ) (4 ) (4 ) (8 ) Legal settlement costs - (2 ) - - - Contributions - - - - (2 ) Non-GAAP operating expenses $ 692 $ 648 $ 533 $ 1,341 $ 1,050 GAAP income from operations $ 1,157 $ 1,295 $ 688 $ 2,452 $ 1,242 Total impact of non-GAAP adjustments to income from operations 133 133 85 266 168 Non-GAAP income from operations $ 1,290 $ 1,428 $ 773 $ 2,718 $ 1,410 GAAP other income (expense) $ 23 $ 16 $ (4 ) $ 39 $ (21 ) Gains from non-affiliated investments (C) (2 ) (6 ) - (8 ) - Interest expense related to amortization of debt discount - 1 1 1 3 Debt-related costs (D) - - 3 - 17 Non-GAAP other income (expense) $ 21 $ 11 $ - $ 32 $ (1 ) GAAP net income $ 1,101 $ 1,244 $ 583 $ 2,345 $ 1,091 Total pre-tax impact of non-GAAP adjustments 131 128 89 259 188 Income tax impact of non-GAAP adjustments (E) (22 ) (87 ) (34 ) (109 ) (108 ) Non-GAAP net income $ 1,210 $ 1,285 $ 638 $ 2,495 $ 1,171 Diluted net income per share GAAP $ 1.76 $ 1.98 $ 0.92 $ 3.74 $ 1.71 Non-GAAP $ 1.94 $ 2.05 $ 1.01 $ 3.99 $ 1.87 Weighted average shares used in diluted net income per share computation GAAP 626 627 633 627 637 Anti-dilution impact from note hedge (F) (1 ) (1 ) (4 ) (1 ) (10 ) Non-GAAP 625 626 629 626 627 GAAP net cash provided by operating activities $ 913 $ 1,445 $ 705 $ 2,358 $ 987 Purchase of property and equipment and intangible assets (128 ) (118 ) (55 ) (247 ) (108 ) Free cash flow $ 785 $ 1,327 $ 650 $ 2,111 $ 879 (A) Stock-based compensation consists of the following: Three Months Ended Six Months Ended July 29, April 29, July 30, July 29, July 30, 2018 2018 2017 2018 2017 Cost of revenue $ 8 $ 8 $ 4 $ 16 $ 8 Research and development $ 76 $ 74 $ 44 $ 150 $ 85 Sales, general and administrative $ 48 $ 47 $ 33 $ 96 $ 65 (B) Consists of amortization of acquisition-related intangible assets and compensation charges. (C) Consists of unrealized gains from non-affiliated investments. (D) Consists of loss on early debt conversions and termination of interest rate swap. (E) Income tax impact of non-GAAP adjustments, including the recognition of excess tax benefits or deficiencies related to stock-based compensation under GAAP accounting standard (ASU 2016-09). (F) Represents the number of shares that would be delivered upon conversion of the currently outstanding 1.00% Convertible Senior Notes Due 2018. Under GAAP, shares delivered in hedge transactions are not considered offsetting shares in the fully diluted share calculation until actually delivered.