Last year was a difficult one for the components industry. A massive trade war, a backlog of inventory, stifled demand, and several smaller issues gave many companies poor results on the year. However, things are finally looking up.
Nvidia, a major player in the graphics chip sector, reported its 2020 Q4 earnings for the period ending on January 26. Fortunately, it seems that things are starting to get better. The firm reported positive numbers, including $3.11 billion in revenue for the quarter. That marks a 41 percent increase over the same period last year and a small improvement over Q3.
Although 2019 wasn’t kind to Nvidia (or the rest of the chip industry) there are some signs that things are beginning to turn around. The GPU maker is one of several corporations that have reported positive earnings and growth following the market’s downturn.
Nvidia’s FQ4 supports the fact that the chip sector is on the road to recovery. Aside from its huge jump in revenue on a year-by-year basis, the company also saw improvement in its gross margin. That figure jumped from 54.7 percent to 64.9 percent over the course of the fiscal year. For Q4 specifically, Nvidia reports a net income of $950 million.
Unsurprisingly, the good news helped the company’s stock during after-hours trading in the wake of Thursday’s report. Per Yahoo Finance, Nvidia’s stock value rose by more than 6 percent following the announcement.
Sadly, the company’s impressive fourth quarter wasn’t enough to cancel out its otherwise sluggish year. For the 2020 fiscal period, Nvidia’s total revenue was down compared to 2019. Meanwhile, its operating expenses rose while its net income dropped. Those figures aren’t a great sign for the company as they are both moving in the wrong direction.
However, they certainly don’t mean that it’s time to panic. Nvidia isn’t alone with its disappointing numbers for the year. In fact, it did better than some other companies in the chip sector.
Better Days to Come
For Nvidia and its investors, the positive FQ4 results should be viewed as a sign of hope. With the market re-stabilizing it should be smoother sailing in 2020. In fact, it already has been.
Nvidia’s stock price has enjoyed an electric start to the calendar year. It has steadily gained more than 15 percent so far, well outpacing the S&P 500’s 4.7 increase.
A large part of Nvidia’s growth in the previous quarter can be attributed to its gaming and data center businesses. Those two branches helped lead the way.
Specifically, the company’s data center segment saw record quarterly and annual revenues. Those can mainly be attributed to the wider tech industry’s rapidly growing obsession with artificial intelligence (AI). As a result, more companies are in need of powerful GPU chips to run their systems.
It’s obvious that AI isn’t going anywhere. Thanks to that fact, Nvidia should continue to hold its place as an important company in the components world. It will certainly be a top supplier of crucial GPUs in the coming years.