NVIDIA Profitability Health Analysis
5 points to consider following the latest financial report
The profitability health of NVIDIA, as indicated in their financial report, can be summarized by the following key points:
Gross Profit Margin: NVIDIA's gross profit margin was 70.1% for the three months ended July 30, 2023, and 68.2% for the six months ended on the same date. This is a significant improvement from the 43.5% and 55.7% gross profit margins for the comparable periods in 2022, respectively. A higher gross profit margin indicates that NVIDIA is earning more per dollar of sales, which is a positive sign of profitability health (Page 28).
Operating Income: The operating income for the second quarter of fiscal year 2024 was $6.80 billion, which is a dramatic increase of 1,263% compared to the same quarter in the previous year. For the first half of fiscal year 2024, the operating income was $8.94 billion, up 278% from the first half of fiscal year 2023. These increases reflect a very strong profitability performance (Page 30).
Net Income Margin: NVIDIA's net income as a percentage of revenue was 45.7% for the three months ended July 30, 2023, and 39.8% for the six months ended on the same date. This compares to 9.8% and 15.2% for the respective periods in the prior year. The substantial increase in net income margin is indicative of robust profitability (Page 28).
Research and Development (R&D) and SG&A Expenses: While R&D expenses increased by 12% and SG&A expenses by 5% for the second quarter of fiscal year 2024, as a percentage of net revenue, these expenses decreased. R&D expenses were 15.1% of net revenue, down from 27.2% in the previous year, and SG&A expenses were 4.7%, down from 8.8%. This indicates improved efficiency in managing operating expenses relative to revenue (Page 30).
Acquisition Termination Cost: There was no acquisition termination cost in fiscal year 2024, compared to a $1.35 billion cost in fiscal year 2023. This removal of a one-time expense has positively impacted the operating income for the current period (Page 30).
These indicators suggest that NVIDIA has experienced significant improvements in profitability over the past year, with increased margins and income, as well as more efficient management of operating expenses.