NVIDIA Corp Q4 for fiscal year 2020 (hereinafter expressed in natural year 2019) the results came late and, as expected, EPS exceeded expectations as always. Overall, Q4 revenue was in line with expectations, with shares rising 5% in after-hours trading to a 52-week high.

The morale-boosting results swept away the gloom after the 2018 mining accident.

Q4 Financial report Overview

Overall, the revenue of this financial report slightly exceeded market expectations, and the profit level greatly exceeded expectations. In 2019, NVIDIA Corp experienced a bitter cold at the beginning of the year and completely recovered in the second half of the year.Simultaneous timeEvery other year, NVIDIA Corp returned to the $3 billion mark for the first time in two consecutive quarters.

The gross profit margin and cash flow hit new highs, and the knife method is really high.

Q4 in 2018 was the darkest moment for NVIDIA Corp. Affected by the high inventory of the mining accident, revenue and gross profit margin plummeted to the lowest level in recent years. AMD narrowed the revenue gap to $800m and Non-GAAP 's net profit gap to $400m.

However, in Q4 in 2019, Nvidia announced a return to its state with a 40% year-on-year increase.Revenue in a single quarter reached the highest level in Q4 history, and gross profit margin reached NVIDIA Corp's all-time high with 64.9%.

Compared with the gross profit margin of Intel and AMD, NVIDIA Corp is currently in the lead.The substantial increase in gross profit margin, in addition to the increase in the game GPU ASP, but also benefited from the improvement in the cost of raw materials, as well as the expansion of the product line.In view of NVIDIA Corp's strategic determination of software, gross profit margin has the potential to continue to rise in the future.

If you want to know how exquisite the old yellow knife is, you can take a look at the inventory data.

As early as in NVIDIA Corp's Q3 financial report,Raw materials in inventory fell by $358 million in the first three quarters of 2019., nearly 58%. Because the kernel of RTX Super series and GTX 16 series products has not made a new design, it is only the change of video memory bandwidth, bit width and stream processor. At present, as a result of NVIDIA Corp 10Muk K document has not yet submitted SEC,2019 annual raw material data is not known.

The most intuitive feedback of destocking on performance is the change of operating cash flow. NVIDIA Corp benefits from inventory managementOperating cash flow reached an all-time high of $4.761 billion in 2019, while free cash flow also hit an all-time high of $4.272 billion.

Now that the Turing inventory is almost ready, maybe the next generation of Ampere will be available to you soon.

Q4 sub-business overview

From a business point of viewThis quarter is a year after NVIDIA Corp, the four major business revenue growth at the same time compared with the same period last year.

First, let's talk about the near-stagnant growth of the auto business this quarter. NVIDIA Corp Q2 signed an one-time revenue recognition agreement with Toyota and other manufacturers, leading to an all-time high in auto performance in the quarter.

However, NVIDIA Corp's Q3 and Q4 auto revenue basically stagnated, lagging far behind Intel's Mobileye. No matter how powerful the self-driving chip Orin is, it still needs to be promoted by the automobile industry.

In view of the obvious downward trend in the global automobile market, the promotion of self-driving at L3 and above has also been hindered. Although NVIDIA Corp is rich in technology reserves in this field, we believe that NVIDIA Corp's automobile business is difficult to achieve better-than-expected performance in the short term. Accumulate a wide range of grain and slow to become king.

The game book continues to be strong, and there is room for imagination in cloud games.

NVIDIA Corp Q4 game business revenue of 1.491 billion US dollars per quarter, up 56.3 per cent from the same period last year, there is a gap of about 250 million US dollars from the all-time high of Q4, down 10.1 per cent from the previous month. In 2019, the gaming business had revenue of $5.518 billion, the second highest in the business's history, after Shenka GTX1060's 2018 when it swept the currency circle.

Game graphics card business as a whole, RTX Super series performance is better than expected, GTX Super series fill role is obvious.

This quarter NVIDIA Corp continuously reduced prices, continuously launched several GTX16 series of mid-range graphics cards, and achieved certain results. According to Steam statistics, not long after the listing of GTX 1660 / GTX1650 market share increased rapidly, Super series of market performance is also very eye-catching. At present, the top 10 shares of Steam graphics cards are all taken by NVIDIA Corp, and RTX 2060 is also on the list.

The strongest performance of the game business is still the game business. The game has grown by double digits for eight consecutive quarters compared with the same period last year.As we pointed out in the external research paper, we have always emphasized that "the game-based business has strong certainty and Max-Q will write the future of laptops". Because NVIDIA Corp Max-Q technology has achieved a better balance between performance and frivolity, and the future development trend of the game will be the unity of performance and portability.

In terms of mainframe, Switch behaves in a regular way. Tegra's revenue for the quarter was $331 million, up 47.1% from a year earlier and down 26% from a month earlier. As the automobile business is basically flat, the decline in Tegra basically reflects the decline in Switch revenue. But it is also basically in line with NVIDIA Corp's Q3 financial report conference call on Switch business.

In terms of cloud games, GeForce Now cloud service is officially launched abroad at US $4.99 per month, which is much cheaper than Google Stadia. Officials say 80% of users use GeForce Now on Mac and Android devices.

Of course, the service does not support the Chinese market. The layout of Nvidia games in China is mainly GPU cooperation with Tencent Cloud games.

In the future, the main growth point of the game business, we are still optimistic about the game business, graphics card technology direction is still optimistic about ray tracing. Also looking forward to the RTX 3000 series game graphics card.

The data center has completely released itself, and the AI revolution is not over yet.

NVIDIA Corp Q4 data center business revenue of 968 million US dollars, exceeding all market expectations. Year-on-year growth of 42.56%, month-on-month growth of 33.3%! Revenue in a single quarter hit an all-time high. Data center revenue of $2.983 billion in 2019 also hit an all-time high.

It is worth noting that NVIDIA Corp Q4 data center revenue accounts for 31%, which is also an all-time high.Since 2015, data center revenue has grown by 54.5% in the past five years!From less than $340 million in 2015 to $2.983 billion now, it's scary.

We think NVIDIA Corp has a stable position in the GPU data center market. From the revenue scale, NVIDIA Corp data center revenue scale compared with Intel, there is still a large gap. According to our estimates, the quarterly revenue of AMD data centers is close to $400m, thanks to EPYC sales. But the performance of AMD's GPU data center business is weak.

Specifically, NVIDIA Corp's annual data center business mainly benefits from the warming of large-scale computing and the AI revolution in more and more vertical industries.NVIDIA Corp T4Jing V100 graphics card Q4 shipments, revenue set a record again. Among them, the shipment of T4 graphics card, which is mainly used for reasoning, has increased 4 times compared with the same period last year.

The customers of large-scale computing are mainly several major cloud computing manufacturers. For example, Azure and AWS have deployed a large number of NVIDIA Corp V100 graphics cards and DGX servers in Q4. In addition to Internet companies, vertical industry customers also have takeout companies, traditional retail companies and so on. The main application scenarios are algorithm recommendation, conversational AI and so on.

We believe that the main competitor of AMD data center is Intel, while NVIDIA Corp still has a deep software and hardware moat in the field of data center GPU.On the whole, we think that the TAM of the data center market is too large, and the three manufacturers of red, green and blue are a win-win situation, not the growth and decline of each other.

The neglected professional visualization business has a bright future.

Another business to look forward to is the professional design visualization business. We have proposed"the market prospect of professional design and visualization is bright, and GPU adds color to creativity."The point of view.

NVIDIA Corp Q4 professional design and visualization business revenue of US $331 million, an increase of 12.97% over the same period last year and 2% month-on-month growth, once again setting a record quarterly revenue record.

NVIDIA Corp's professional design and visualization business is mainly supported by hardware + software platform. At the hardware level, the main product is the Quadro RTX graphics card with Turing architecture, which supports ray tracing and can render more beautiful scenes, and its ASP is about 80% higher than that of the previous generation.

Professional visualization is the only one of NVIDIA Corp's businesses that has seen revenue growth for 16 consecutive quarters since 2016.In the 5G era, we are optimistic about the application of GPU in professional rendering, video creation, engineering design and other subdivision fields. Perhaps the professional visualization business will become the next stable output point after the data center.

Summary

On the whole, NVIDIA Corp has handed in a satisfactory answer in the past year. The game business has recovered strongly, the data center has rebounded across the board, and the overall performance has returned to its peak in 2018.

NVIDIA Corp's revenue guidance for Q1 in fiscal 2021 was about $3 billion, which was cut by $100m by the epidemic, but remained at a high level, equivalent to an increase of about 35 per cent year-on-year. The guidance of GAAP gross profit margin is very high, reaching an unprecedented 65%!

In terms of specific business, Q1 game business mainly expects a seasonal decline in notebook GPU and Switch, with an overall decline of about 5% month-on-month. But the company believes that the data center business will continue to be strong. As for the merger and acquisition of Mellanox, it still needs to wait for China's antitrust approval, which is expected to be reached in the first half of this year.

In short, NVIDIA Corp, the former eldest brother of AI, is back.