By coinnews 
00:00 Speaker A
for more on the results, let’s welcome in here, the man to ask. That would be Cody Cree, Benchmark Company Managing Director, Senior Semiconductor Research Analyst. Cody, it is great to have you on the show. So, when Nvidia reports Cody, at least the stock initially in the after-hours were popping about two or three percent. What do you make of these results, Cody?
00:17 Cody Cree
Well, thanks for having me back. Um, you know, I thought it was a really strong quarter, uh all things considered. And I think that’s really the the caveat that we’ve got to deal with is that all things considered, uh given all the uh the issues with China, um and all of the uh the concerns about uh slowing of capital budgets, um to see uh the company come in uh with a uh uh an eight billion dollar um loss for the uh the the Chinese revenue and still come within um within a marginal um uh range of of estimates. I think is a a victory, and I think you’re seeing it in the after-hours.
00:59 Speaker A
And so, what how do we make sense though, Cody, of the China business and what the company is saying about going forward?
01:07 Cody Cree
Well, I I think uh unfortunately, we don’t have clarity yet. We’ll get more on the call. Uh but I think that um that it’s going to to be a matter of what do they uh rearchitect for China, uh and how do they manage to deal with uh Trump’s tariffs and uh and the overall AI regulations that that are hamstringing the H20 revenue. Uh so I I think that Nvidia has done this in the past, they’ve dealt with it, the regulations in the past and they’ve uh they’ve overcome. I expect them to do the same again and to be back on track uh into China in the second half, um and that to help drive their gross margins uh back into that mid-70% range. And I think that’s that’s one of the the standouts this quarter is a uh a mid 60% gross margin, much better than the mid 50% margin uh that I had expected, uh and hence the the earnings beat uh on the bottom line, um 81 cents versus 73, even considering the charge. Uh without the charge, it was 96 cents versus 73 cent street. And so, uh I think overall, um it was a very strong quarter.
02:21 Speaker B
So I’m curious, you know, you you talked about the China factor not being, you know, perhaps as big of a concern because obviously it’s people, they’ve compensated for it. But what other pieces did you feel like is giving the street confidence based on the reaction that we’re seeing? Are there specific elements within other parts of the business that you think really is is giving people that confidence to keep the stock moving upward?
02:49 Cody Cree
Well, I think what you’re seeing is uh is just an overall broad adoption of Blackwell. Uh they saw, what was it, uh um data center revenue up 73%, up 10% sequentially, and their overall revs up 69%. So obviously led by data center strength and their Blackwell uh adoption continues to uh to build momentum. And and that really is is going to be the key to their future earnings is going to be a uh um the growth of Blackwell and whether or not that is um is uh carrying them into uh the the future quarters.
03:43 Speaker A
Um Cody, what about in terms of market share then that Nvidia has, you know? And they of course just opened up their their ecosystem, that was announced at computex. Um you know, are we going to see how much of these sort of contract chip making is going to start to eat in or is demand so great that there’s enough to go around?
04:09 Cody Cree
Well, I think it was a brilliant stroke on Jensen’s part uh to open the architecture uh to include and embrace uh the guys like Marvell, um and AI chip and and others that um are making these uh these custom ASIC uh competitors, uh frankly, and to embrace them into the NVLink Fusion architecture just means that he gets revenue regardless of who the hyperscalers decide to use. If they do develop and uh utilize their own tailored solutions, uh which work, which are optimized for their own tailored workloads, uh then so be it. Uh Nvidia will benefit from selling them the uh uh the nuts and bolts and the the networking uh piece of their architecture. Uh it may not sell as many GPUs, uh but it would not have gotten anything for Marvell’s uh custom ASIC sales. Now, they can uh uh carry into uh those custom ASIC revenue trends.
05:27 Speaker B
Yeah, I was just going to say, you know, I mean, the other thing is they are bringing even more companies involved with this. I happened to have a a brief chat last night with Cristiano Amon, who’s the CEO of Qualcomm. They were celebrating their 40th anniversary and and they were talking about the fact that they’re now getting into this piece as well. So you’ve got a lot of different players and I agree with you, I think it was a very smart move. Clearly, we’re not going to see the revenues from that for quite some time, but just them opening up uh their ecosystem a bit more, and they’re doing this on the software side as well. They’ve really been working towards opening up some of their software ecosystem pieces as well. So I think the combination of those things does set them up nicely to deal with some of the obviously competition that’s growing all around them.
06:21 Cody Cree
I think you’re exactly right. I think that the uh uh the opening of the architecture is going to take some time to materialize. Uh but efforts are already underway and the hyperscalers are already working with Nvidia’s architecture, their their Cuda platform, and uh the broad NVLink uh systems uh in their data centers today. And so, um it just frees them to continue uh and to um benefit from the investment they’ve already made. And uh and there therefore, they leverage uh the best of both worlds, both Nvidia’s GPUs and uh any tailored custom ASICs that work specifically for their workloads.
07:20 Speaker A
Hey Cody, just to go back, if you can help us with a bit of housekeeping that we are trying to understand here and you alluded to it earlier. The company reported 81 cents in diluted earnings per share. If you exclude the H20 charge and the taxes related to that, you get to 96 cents a share. When you were estimating earnings, which one were you comping against? Which which number is the sort of more relevant number here?
07:51 Cody Cree
We had 73 cents, 74 cents for the quarter. And so we were estimating gross margins where the bulk of that charge was taken uh to pressure down into the mid-50% range. Instead, it it fell uh into the 60s. And so, um it it held up much better than uh we thought. Um the the charge ended up being smaller, 4.5 billion uh versus their uh communicated five and a half uh billion estimate uh earlier. So some of that will be taken in the in future periods, I’m sure. Uh but also some of that uh some of that inventory has probably found a home. Uh there’s such strong demand for uh Nvidia’s processors, whether it’s the Hopper generation or or uh slim down H20 versions that that I’m sure that Jensen is finding uh room for that extra billion dollars of uh of of uh inventory that wasn’t accounted for in this charge.
09:01 Speaker A
Yeah. Cody, thank you so much. Uh interesting stuff as we continue to digest these numbers. Appreciate it.
09:08 Cody Cree
Thank you.