Nvidia (NVDA), one of the major artificial intelligence and graphics chip makers in the United States, submitted its long-awaited fourth-quarter financial report on 13th February 2020. In the report, both the company's revenue and earning per share were beyond the expected analysis. This shows that even with the effect of coronavirus on the production of electronics around the world, Nvidia can still keep profitability up. The company revenue increased by 41%, just a little above the third-quarter report, while the revenue generated is $3.11 billion.
However, significant in the report is the company's gross margin which increased from 54.7% to 64.9%. Added to this, the net income reported in the fourth quarter is $950 million. This tremendous improvement created a ripple effect such that in the space of some hours, investment in stock increased by 6.3%.
Unfortunately, the positive impact does not help the company fiscal number. The fiscal revenue generated and recorded in the new report was below that of 2019. Added to this, operating income, operating expenses, diluted earnings, and net incomes did not turn out well. In fact, in some cases, most of them reduced by almost 30%.
The Major Cause Of The Challenge.
The company's challenges are not just a product of the difficulties in the chipmaker section of the business as last year was generally difficult for the chip makers industry. Most of the challenges are caused by a number of factors such as less demand in some parts of the business and oversupply in another part of the business. More importantly, the current trade tension between the United States, China, Japan, and South Korea contributed to this.
Also, the company itself has been facing a lot of ups and downs in the past years. This started with a share price of about $150 and today the price has risen to almost $271. The gain achieved is more than 80%. The major reason for this is simply because most of the business including automotive and high-performance computing that Nvidia got Mellanox for $6.9 billion at the beginning of the year has moved to silicon.
What To Look Out For
Irrespective of the major volatility in the company's stock, the demand for the product in the company has risen significantly than it was in the past years. It is therefore okay to assume that what investors would focus more on is the FY2020 Q4 report. The aspect of the report investors would be concerned with is Nvidia's gross margin and the ability of the company to withstand the current turmoil in businesses.
Although, as regards this, analysts already estimate that both earning and gross margin will increase in Q4. The predicted gain in the rise is 34.3% on revenue of $3 billion.
For the company to achieve this, it means it would have to retain more money from every sale it makes. This aspect is measured by investors through keeping track of the company's gross margin and the sales it retains after the cost of production and cost of service.