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​NVIDIA's stock jumps on strong FQ2 results

NVIDIA, the world leading producer of 3D graphics processors and related software, recently issued strong financials for its fiscal 2017 second quarter ended July 31. Revenues increased 23.9% y-o-y to $1.428 bn, beating consensus estimate of $1.355 bn, on the back of solid growth across all the platforms. Revenues from GPU business rose 25% to $1.2 bn driven by strength in GeForce GPUs and Gaming revenues. Revenues from datacenter (including Tesla and Grid) came in at $151 mn, up more than 50% from the year-ago quarter. Tegra processor revenues jumped 30% to $166 mn. Adjusted operating income surged 76.1% to $324 mn, and operating margin expanded 670 basis points to 22.7%. Adjusted earnings per share of 44 cents surpassed analysts’ average projection by 7 cents.

NVIDIA ended the quarter with cash and marketable securities of $4.88 bn and total debt (including current portion) of $1.43 bn. In FQ2, the company generated operating free cash flow of $184 mn and repurchased shares worth $509 mn. NVIDIA also announced a quarterly dividend of 11.5 cents per share, which offers annualized dividend yield of 0.7%.

I believe that GPUs gaming platform, high-performance computing and datacenter will remain NVIDIA’s major growth drivers. I also expect that innovative product pipeline and the higher adoption of the company’s Tegra processors could act as a catalyst, going forward. For the third quarter of fiscal 2017, NVIDIA expects revenues of approximately $1.68 bn (+/-2). The company also anticipates capital expenditures in the range of $35-45 mn and non-GAAP tax rate at 21% (+/-1%).

Shares of NVIDIA jumped on strong FQ2 results. However, the stock, I believe, still has room for the further growth and can reach $68 in medium term.