NVIDIA has reported a 62.3% YoY increase in its 2021 revenues to $26 billion. In Q4 2021, revenues were at $7.5 billion, a 52% YoY increase. Gaming, data center and professional visualization segments contributed to the overall growth in revenues. In terms of products, high-end desktop/laptop gaming processors, data center GPUs and AI rendering workload-specific hybrid workstations contributed to revenue growth. Networking revenues suffered most from the shortages and disruptions in the supply chain, followed by GPUs.

Annual revenues are CY estimates; Source: Company Earnings, Counterpoint estimates

Segment Revenues

Gaming gets biggest slice of revenues with 46.7% share at $12.2 bn

• Gaming revenue grew 63.7% YoY to $12.2 billion in 2021

The revenue came primarily from its RTX 30 series of GPUs. Steam grew 50% over 2 years and had nearly 28 million active users by the end of Q4 2021, the second largest for a cloud gaming platform.

RTX GPUs help NVIDIA realize $2 bn in professional visualization segment

• Professional visualization revenue almost doubled to $2 billion in 2021, realizing the best year for the segment.

Growth due to the COVID-19 driven consumer and enterprise shift to remote workstations that can take higher workloads of AI, 3D renderings and visualizations.

Supercomputer compute helps data center to shine in best revenue year ever

• Data Center segment reported a growth of 59.1% to $10.2 billion in 2021 to make it a record year for NVIDIA.

Offerings across GPU, networking and software, along with synchronization of technologies stemming from the Mellanox acquisition, have made NVIDIA the leader in accelerated computing. The whole suite of offerings and mass adoption of AI technologies in enterprise applications fueled the demand for accelerators. Supercomputing contributed to <1% of overall Data Center revenues.

Additionally, demand from hyperscalars and cloud focusing on inference workloads and AI workloads contributed to the sales of NVIDIA A100 GPUs, a high-end accelerator. Specifically, Meta has purchased over 6,000 GPUs for SuperCluster, its AI supercomputer for natural language processing and visualization workloads.

Slower lap for automotive revenues with growth of 5.6%

• This segment proved to be the outlier in NVIDIA's growth story, posting only 5.6% growth at $573 million and a decline of 18.2% from its best year in 2019.

We believe the decline is due to shift from legacy cockpit processors and an increased focus on software suites that will contribute to revenues over a period of time.

‘OEM and Others’ segment sees 5.7% revenue growth on volatility

• OEM and others reported $574 million in revenue, up only 5.7% from previous year
• Crypto mining contributed about $24 million in the ‘OEM and Others’ segment for Q4 2021. The annual revenues from CMPs (cryptomining processors) were estimated to be about $550 million in 2021.

The visibility of crypto revenues is due to the changes in GPU software launched in Q1 2021 to detect Ethereum Mining Algorithm to ensure the intended supply of GPUs to gamers and dedicated CMPs.

The segment continues to be among the company’s key volatile segments as the revenues fell 77% sequentially from the previous quarter. The factors contributing to this volatility include limited stocks of the GPU processors, geopolitical tensions at the Russia-Ukraine border (Ukraine is one of the leading crypto miners in the world) and the increasing climate impact.

Strategic SHIFT Observation: Becoming Software HERO

According to NVIDIA CEO Jensen Huang, “NVIDIA is a software-driven business. Accelerated computing is a software-driven business”.

As the company comes close to executing its triple chip strategy – CPU, GPU & DPU, with the data center CPU coming next year and sampling late this year, it is extensively focusing on building next-generation software suites that support Metaverse, 3D and robotics.

FOCUS: The company is focusing on creating an end-to-end complete stack of firmware that complements and augments the functionalities of hardware that serves as a one-stop solution to implement upcoming technologies and the required compute demanded by them.

With the introduction of three prominent software suites, the company intends to have a comprehensive software portfolio covering all hardware products:

1. NVIDIA DRIVE for automotive
2. NVIDIA AI for data centers and enterprises
3. NVIDIA Omniverse for individuals and enterprises for creation of virtual content

At last year’s Nvidia GPU Technology Conference, the company announced that the software suites, particularly the Omniverse, would be made available for free to all creators. The company is betting on the business that would materialize from the connection between a real-world entity like robots or connected cars and the virtual world through digital twins. The software would act as a bridge and the company would reap benefits as the bridge becomes busy and populated!

Analyst Takeaways and Future Outlook

Gaming: As announced at CES 2022, the introduction of the RTX 30 GPU series to laptops will bring the AAA gaming experience and accelerated computing to wider audiences, adding to revenues. Penetration of GeForce NOW in 5G mobile devices, smart TVs and newer titles will continue to augment revenues through software subscription.

Data Centers: As the hyperscalars enter the rush of the metaverse and enterprises focus on weaving the AI technologies across all processes, the workloads will increasingly demand the accelerators to achieve objectives. In the short term, the company would be looking to fill the demand gap due to semiconductor shortages in the networking product portfolio.

Cryptomining: In the short term, as economies around the world reel under inflation, rising fuel prices and geopolitical tensions in the East, we expect a limited demand coming from miners this year. However, as the metaverse gains momentum, crypto regulations become more clear and enterprises get familiar with the possibilities of the virtual world, the demand will again start shooting up from later this year/early next year.

Future Deals: Due to the termination of the ARM-NVIDIA deal, the company has now over $20 billion in cash and will look to augment its growing suite of software and hardware peripheries in networking to develop efficient solution stacks.