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NVIDIA's Q2 2017 Results: Now and Moving Forward

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Subject: Editorial
Manufacturer: NVIDIA

NVIDIA Today?

It always feels a little odd when covering NVIDIA’s quarterly earnings due to how they present their financial calendar.  No, we are not reporting from the future.  Yes, it can be confusing when comparing results and getting your dates mixed up.  Regardless of the date before the earnings, NVIDIA did exceptionally well in a quarter that is typically the second weakest after Q1.

NVIDIA reported revenue of $1.43 billion.  This is a jump from an already strong Q1 where they took in $1.30 billion.  Compare this to the $1.027 billion of its competitor AMD who also provides CPUs as well as GPUs.  NVIDIA sold a lot of GPUs as well as other products.  Their primary money makers were the consumer space GPUs and the professional and compute markets where they have a virtual stranglehold on at the moment.  The company’s GAAP net income is a very respectable $253 million.

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The release of the latest Pascal based GPUs were the primary mover for the gains for this latest quarter.  AMD has had a hard time competing with NVIDIA for marketshare.  The older Maxwell based chips performed well against the entire line of AMD offerings and typically did so with better power and heat characteristics.  Even though the GTX 970 was somewhat limited in its memory configuration as compared to the AMD products (3.5 GB + .5 GB vs. a full 4 GB implementation) it was a top seller in its class.  The same could be said for the products up and down the stack.

Pascal was released at the end of May, but the company had been shipping chips to its partners as well as creating the “Founder’s Edition” models to its exacting specifications.  These were strong sellers throughout the end of May until the end of the quarter.  NVIDIA recently unveiled their latest Pascal based Quadro cards, but we do not know how much of an impact those have had on this quarter.  NVIDIA has also been shipping, in very limited quantities, the Tesla P100 based units to select customers and outfits.

Click to read more about NVIDIA's latest quarterly results!

The combination of solid Maxwell/900 series sales combined with the first of the next generation GPUs that NVIDIA has introduced provided a very strong quarter.  Automotive is a growth area for the company and one they have been excited about for years.  Throw in the massive push towards deep learning and NVIDIA certainly looks to have a steady stream of income for years to come from these technical investments.  

The company has also invested a lot of time and development into addressing the VR market.  The future of this market looks bright, but so far the cost of entry is very high for acquiring an Oculus or Vive product.  Software support is slowly growing and we see much more inertia from the market and developers than we have in the past.  We can compare this directly with the 3D panel market for both the PC and consumer markets.  While many monitors and TVs supported 3D, it ended up being more of a checkmark than must-have technology.  We expect VR to succeed where 3D panels have failed, but that result is not set in stone.  NVIDIA’s technologies surrounding VR all add to the experience while cutting down or smoothing out the negatives.  They also have the fastest single GPU cards available that would be the target for those buying the VR products.  These investments have not quite paid out yet, but they set a solid foundation of software and support for the implementation of VR in a variety of applications and games.

 

Manufacturing Going Forward

NVIDIA was first to market with a new generation of large, standalone GPUs based on the latest process technology from any of the pure play foundries.  While the cellphone SOC makers have been leaning on the “early” and “high performance” process nodes with Mali, Adreno, and PowerVR units, this is the first we have seen from the big GPU manufacturers.

Samsung and TSMC both have flavors of FinFET process nodes that differ in some significant ways.  Samsung’s process is physically smaller than what TSMC offers, but in terms of electrical properties they in theory should be similar.  Apple has tapped both foundries for products, and basic results under test conditions have shown them to be fairly similar with Samsung having a slight edge in feature size.

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Samsung already showing off 10 nm wafers. Could this be the future foundry partner of choice for NVIDIA? (image courtesy of SemiWiki)

It is not simple to port a design from one process to another.  NVIDIA looks to have taken Maxwell, added more functional units without drastically redesigning the architecture, and applying it to TSMC’s 16nm FF+ process.  This is still a complex procedure.  It seems that NVIDIA is applying a “tic-toc” style of production here with taking a known architecture and applying a new process node to it rather than creating a new architecture on a new process.  When dealing with a product that is comprised of 8 billion transistors, removing as many variables as possible to achieve a working product is simply good business.

NVIDIA has a long and productive relationship with TSMC and they have been their primary foundry partner since the Riva TNT.  Times seem to be changing though.  TSMC’s 16nm FF+ is still a very new process that is constrained currently.  We have not heard detailed information about exact yields, design issues, or late changes to libraries that would affect the products in question.  We also know that Microsoft has placed significant orders with TSMC for their 16nm FF+ based XBox One S SOC.  It is surprising to find out that NVIDIA has entered into an agreement with Samsung to utilize their 14nm FFP process for future chips.  We do not know the full details here, but it seems as if NVIDIA is playing it safe by leveraging a second supplier.  Perhaps the relative scarcity of the high end GTX 1080 over the past few months had just as much to do with TSMC able to deliver product as much as demand?

This leads to other questions.  Why did NVIDIA seek out Samsung rather than attempting a contract with GLOBALFOUNDRIES?  Samsung has been doing brisk business with other companies while it is pretty well known that GF could certainly use more customers to fill up wafer orders and fab utilization.  AMD is utilizing GF for their latest Polaris parts, but many questions surround the actual implementation that we are seeing.  Polaris parts run about the same in terms of efficiency as the previous generation Maxwell parts, all the while being clocked well below what we are seeing with NVIDIA’s latest Pascal chips.  Is this due to design, or due to issues with GF’s version of the Samsung 14nm LPP.  If GF is still getting up to speed with 14 LPP, then it is understandable that NVIDIA would go straight to the source and deal directly with Samsung.  Also of note is that Samsung will likely get a 10nm process up and running before we see it used by GLOBALFOUNDRIES.  This is merely speculation, but these questions do come to mind when looking at the overall landscape of the industry.

 

The Next Quarter

NVIDIA is bullish about their upcoming quarter.  They are selling their next generation parts at a very brisk pace.  Reviews for these cards have been overwhelmingly positive and they compare very well to the latest offerings from AMD.  NVIDIA is also benefiting by moving good volumes of higher end products that support higher margins than those found in the $200 to $250 range.  While AMD is pushing out solid numbers of products in the $250 and below market, margins will be much slimmer there.

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Some may call it... the moneymaker.

The current estimate of what Q3 2017 will bring is in the area of $1.68 billion.  If I am not mistaken, this will be the highest revenue recorded for NVIDIA in any quarter over the lifespan of the company.  While it is too early to get excited, this could lead to another record once Q4 is completed.  NVIDIA is counting on continued strong sales of their GPUs across the line, their refreshed Quadro cards, and the automotive and deep learning enterprises.  Potentially diversifying foundry suppliers could lead to more available product to put on shelves for the important Holiday buying season.

NVIDIA has done very well over the past couple of years and through some rough patches.  They continue to move forward with design and are quite agile in addressing new markets and abandoning areas that were not profitable.  They seem to remain focused and have been able to capitalize on the mistakes of their competition.  We shall see if some of their new endeavors actually make money for the company, but for now their current products are propelling the company forward.

 

August 17, 2016 | 09:59 PM - Posted by Anonymous (not verified)

I wonder how much of that Nvidia Revenue increase is in "Founders" edition pricing! AMD's Polaris is going for the mainstream pricing with Nvidia doing a lot of extra removing of compute/features with its GTX 1060(No SLI) SKUs while continuing to price the 1060 higher than AMD's Polaris 10 based RX 480, and the RX 480 has a fair bit more FP compute than the GTX 1060, even with the 1060 in boost mode.

For consumers that want a little more compute AMD's non professional SKUs have always offered more in the compute area than Nvidia, and there will be more usage made of the Polaris GPU's async compute going forward with the Vulkan/DX12 APIs and the VR gaming market looking to make use of more GPU compute to go along with Graphics for VR gaming and low latency VR gaming compute accelerated on the GPU.

August 18, 2016 | 12:29 AM - Posted by johnc (not verified)

Looks like the 1060 is outselling the 480 at a pretty good clip.

August 18, 2016 | 01:43 PM - Posted by Anonymous (not verified)

But the RX 480 has more compute for its price range, and Polaris has the technology in its hardware to use that compute while Nvidia has to pour on the extra clocks to get the flops! And in the new Vulkan/DX12 world that extra AMD compute will be put to good use for gaming and VR gaming, you just stay in your DX11 world of the past.

I can get more Flops from 2 RX 480s than one $1200 Titan X(Pascal) at its Titan sized price.

Looks are not facts, Links please.

August 18, 2016 | 02:11 AM - Posted by renz (not verified)

nvidia cards are fine with VR. also comparing compute raw power between nvidia and AMD is a bit useless. AMD usually have higher peak but they usually have harder time to fully utilize it. and starting with Hawaii AMD also limiting their compute performance on consumer card. in DP for example 280X (7970) actually faster than 290X.

August 20, 2016 | 11:42 PM - Posted by ROdNEY

If I am not mistaken there is no VR app running on low level API, obviously nvidia is better at DX11 as AMD gets better at DX12/Vulkan.
So yes in very few VR titles we have today nvidia is getting very good results, but time will tell how well they got with newer APIs, especially in VR.

August 18, 2016 | 12:17 AM - Posted by Kung-Fu (not verified)

When I am fighting, I move fast as lighting.

I swear it's true.

August 18, 2016 | 01:23 AM - Posted by pdjblum

Are you for real? I sincerely hope you are long Nvidia. You actually believe half the shit you say in such an authoritative manner? And you find it necessary to bring AMD into it. What the fuck is difference if AMD's revenues were lower? AMD didn't start selling Polaris until the current quarter. You failed to mention that. It amazes me that you find it necessary to post such a piece while the site still has not even reviewed the 470 or 460 or posted the Saphire Nitro+ 480 review that Ryan was working on back when the Saphire guy did the interview. Yes, he did manage to review the Titan X, oddly, but given all the Nvidia cards he gave away at the hardware workshop, I get why. Is this site a public relations proxy for Nvidia or a enthusiast tech review site? It is becoming increasing clear which one.

August 18, 2016 | 02:27 AM - Posted by Ryan Shrout

Maybe you should just get your tech news elsewhere? Like for real dude.

August 18, 2016 | 02:32 AM - Posted by Josh Walrath

I am for real.  I have not invested in AMD nor NVIDIA.  Have you looked at AMD's Q2 earnings vs. NV's?  AMD exceeded expectations... but was just over $1 billion.  NV is closing on $1.5 billion and they have a narrower product line.  Do you think it is just as economical to support a GPU design group and a CPU group?  The ARM design group in NV is much, much smaller (and their ARM marketshare reflects that).  But their GPU group looks to be far stronger.  I don't know why you want to call bias on a report on two companies that report GAAP results and I write about them.  AMD is a larger company overall, yet they achieve lower revenues.  This is a reflection of reality rather than me looking through green-tinted glasses.  AMD is struggling, but this will not last forever.  They have new products coming out, and a new architecture that you will know more about soon (Hotchips).  You just have to take a balanced look at these companies, their product stacks, and the way they handle themselves quarter to quarter.  NVIDIA is reporting 58% margins while AMD is sub 40%.  This isn't bias, it is math.

August 18, 2016 | 06:43 AM - Posted by JohnGR

AMD never had a quarter where they where successfully selling both GPUs and CPUs. When they had good CPUs they had no GPUs. And after getting those GPUs from ATI, they didn't had the necessary designs in the CPU market. Going back over 1 billion with almost nothing to sell in the hi end, 2 billions in dept and while firing 1/3 of the company because they didn't have enough money for all those salaries, does makes you wonder how high they can go in 2-3 years, with a good Zen and a good Vega in the next 6 months. That is if they just go Samsung, because GlobalFoundries acts like a handbrake, or at least that's my assumption looking AMD having to use two different products, the RX480 and RX470, in shifts, to cover up almost the same market segment.

PS Latest rumors say that GF is going 7nm bypassing 10nm. Also that AMD is also testing Samsung manufacturing.

August 20, 2016 | 11:48 PM - Posted by ROdNEY

ZEN could be game changer for AMD, I would not worry about graphic division. they always had good GPUs and now with DX12 and consoles using their HW, they should have pretty good position in most of upcoming games, at least with those coming from xbox1.

August 18, 2016 | 02:33 AM - Posted by Ryan Shrout

Hey, you know what, I take it back.

Let's discuss this openly and honestly. I would like to invite you to Skype in for a segment on this week's podcast, recording on Wed the 24th.

Can you join me? If you have concerns over stuff, and actually want to discuss them, let's do it.

August 18, 2016 | 03:07 AM - Posted by Enzarch

May I be so bold to speak for the silent majority; We love you, Ryan (and crew). As a bit of an AMD GPU fan, dont offer this, as it only serves to disparage this community. Dont get me wrong, I want all journalists kept in check, but, a few words in a comment is not enough to give someone airtime.

August 18, 2016 | 05:33 AM - Posted by Anonymous (not verified)

Ooooooooh sheeeeeeeet.

August 18, 2016 | 09:28 AM - Posted by Kibrakul (not verified)

Very noble of you Ryan to invite a random internet troll or w/e to a podcast like that....
I would ignore these type of angry butthurt fanboys if I was you. They have nothing to contribute but their blind ignorant fanboyism no matter how many articles and explainations you give and they just ignore it. You guys already addressed this in numerous podcasts about the rabid nvidia & amd fanboys in the comments section, no need to waste any more time on these trolls.

August 18, 2016 | 01:42 PM - Posted by Jann5s

Haha, this I want to see! But life is not about what I want, Enzarch's remark is more sensible. Nevertheless, great gesture.

August 18, 2016 | 02:07 PM - Posted by John H (not verified)

This would be so awesome!

August 19, 2016 | 06:55 AM - Posted by Michael Rand (not verified)

No way this troll will come on the show as he knows he'd just get rek'd :)

August 22, 2016 | 07:53 PM - Posted by Mike P

Wow, Ryan you are a prince.. and now that I think about it, pretty intelligent. If they come on you get a spirited discussion and good content for the show. If they don't, well you get to stop a troll. Good Job!!

Personally, I would kill to be on the show, but only if I have something of value to add for the viewers and listeners. Not so sure that I do.

August 23, 2016 | 07:08 PM - Posted by 47Knucklehead (not verified)

Hahaha Go Ryan!

August 30, 2016 | 11:17 PM - Posted by Anonymous (not verified)

I like PCPER and I want Ryan and crew to stop getting under the bridge with the trolls. Take pcper to the next level. Thicken your hides and keep bringing us tech journalism.