Nvidia Corporation

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 ______FORM 8-K

CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): May 21, 2020 NVIDIA CORPORATION

(Exact name of registrant as specified in its charter)

Delaware 0-23985 94-3177549 (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.)

2788 San Tomas Expressway, Santa Clara, CA 95051

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (408) 486-2000 Not Applicable (Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: ☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) ☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class Trading Symbol(s) Name of each exchange on which registered Common Stock, $0.001 par value per share NVDA The Nasdaq Global Select Market Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Item 2.02 Results of Operations and Financial Condition.

On May 21, 2020, NVIDIA Corporation, or the Company, issued a press release announcing its results for the quarter ended April 26, 2020. The press release is attached as Exhibit 99.1 and is incorporated herein by reference.

Attached hereto as Exhibit 99.2 and incorporated by reference herein is financial information and commentary by Colette M. Kress, Executive Vice President and Chief Financial Officer of the Company, regarding results of the quarter ended April 26, 2020, or the CFO Commentary. The CFO Commentary will be posted to http://investor.nvidia.com immediately after the filing of this Current Report.

The press release and CFO Commentary are furnished and shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or subject to the liabilities of that Section or Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended. The information in this Current Report shall not be incorporated by reference in any filing with the U.S. Securities and Exchange Commission made by the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

Exhibit Description 99.1 Press Release, dated May 21, 2020, entitled "NVIDIA Announces Financial Results for First Quarter Fiscal 2021" 99.2 CFO Commentary on First Quarter Fiscal 2021 Results SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

NVIDIA Corporation Date: May 21, 2020 By: /s/ Colette M. Kress Colette M. Kress Executive Vice President and Chief Financial Officer FOR IMMEDIATE RELEASE: NVIDIA Announces Financial Results for First Quarter Fiscal 2021

• Revenue of $3.08 billion, up 39 percent from a year earlier • Record Data Center revenue of $1.14 billion, up 80 percent from a year earlier • Record GAAP gross margin of 65.1 percent

SANTA CLARA, Calif.-May 21, 2020- NVIDIA (NASDAQ: NVDA) today reported revenue for the first quarter ended April 26, 2020, of $3.08 billion, up 39 percent from $2.22 billion a year earlier, and down 1 percent from $3.11 billion in the previous quarter. GAAP earnings per diluted share for the quarter were $1.47, up 130 percent from $0.64 a year ago, and down 4 percent from $1.53 in the previous quarter. Non-GAAP earnings per diluted share were $1.80, up 105 percent from $0.88 a year earlier, and down 5 percent from $1.89 in the previous quarter. NVIDIA completed its acquisition of Mellanox Technologies Ltd. on April 27, 2020, for a transaction value of $7 billion. It also transitioned its GPU Technology Conference to an all-digital format, drawing more than 55,000 registered participants, while NVIDIA founder and CEO Jensen Huang’s keynote videos were viewed 3.8 million times in their first three days.

“As the world battles COVID-19, we salute the first responders, healthcare workers, and service workers who courageously step in harm’s way to save lives and keep the world going,” Huang said. “We also thank the scientists around the world racing to find a vaccine for COVID-19. “NVIDIA had an excellent quarter. The acquisition of Mellanox expands our cloud and data center opportunity. We raised the bar for AI computing with the launch and shipment of our Ampere GPU. And our digital GTC conference attracted a record number of developers, highlighting the accelerating adoption of NVIDIA GPU computing.

“Our Data Center business achieved a record and its first $1 billion quarter. NVIDIA is well positioned to advance the most powerful technology forces of our time – cloud computing and AI,” he said.

In the first quarter of fiscal 2021, NVIDIA paid dividends of $98 million. Due to current market uncertainties, NVIDIA is evaluating the timing of resuming share repurchases and will remain nimble based on market conditions. NVIDIA is currently authorized to repurchase up to $7.24 billion in shares through December 2022. It remains committed to paying its quarterly dividend.

Q1 Fiscal 2021 Summary

GAAP ($ in millions, except earnings per share) Q1 FY21 Q4 FY20 Q1 FY20 Q/Q Y/Y Revenue $3,080 $3,105 $2,220 Down 1% Up 39% Gross margin 65.1 % 64.9 % 58.4 % Up 20 bps Up 670 bps Operating expenses $1,028 $1,025 $938 -- Up 10% Operating income $976 $990 $358 Down 1% Up 173% Net income $917 $950 $394 Down 3% Up 133% Diluted earnings per share $1.47 $1.53 $0.64 Down 4% Up 130% Non-GAAP ($ in millions, except earnings per share) Q1 FY21 Q4 FY20 Q1 FY20 Q/Q Y/Y Revenue $3,080 $3,105 $2,220 Down 1% Up 39% Gross margin 65.8 % 65.4 % 59.0 % Up 40 bps Up 680 bps Operating expenses $821 $810 $753 Up 1% Up 9% Operating income $1,205 $1,220 $557 Down 1% Up 116% Net income $1,120 $1,172 $543 Down 4% Up 106% Diluted earnings per share $1.80 $1.89 $0.88 Down 5% Up 105%

NVIDIA’s outlook for the second quarter of fiscal 2021 includes the impact from the acquisition of Mellanox, which closed on the first day of the second quarter. The combined second quarter outlook is as follows: • Revenue is expected to be $3.65 billion, plus or minus 2 percent. Mellanox is expected to contribute a low-teens percentage of combined second quarter revenue.

• GAAP and non-GAAP gross margins are expected to be 58.6 percent and 66.0 percent, respectively, plus or minus 50 basis points. The sequential decline in GAAP gross margins primarily reflects an increase in acquisition-related costs, most of which are non-recurring in nature.

• GAAP and non-GAAP operating expenses are expected to be approximately $1.52 billion and $1.04 billion, respectively. The sequential change in GAAP operating expenses reflects an increase in stock-based compensation and acquisition- related costs. GAAP and non-GAAP operating expenses for the full year, which will include Mellanox starting with the second quarter, are expected at approximately $5.7 billion and $4.1 billion, respectively.

• GAAP and non-GAAP other income and expense are expected to be an expense of approximately $50 million and $45 million, respectively.

• GAAP and non-GAAP tax rates are both expected to be 9 percent, plus or minus 1 percent, excluding any discrete items. GAAP discrete items include excess tax benefits or deficiencies related to stock-based compensation, which are expected to generate variability on a quarter by quarter basis.

Highlights Since its previous earnings report, NVIDIA has achieved progress in these areas:

Gaming • First-quarter revenue was $1.34 billion, down 10 percent sequentially and up 27 percent from a year earlier. • Launched Minecraft with RTX as an open beta on Windows 10, bringing real-time ray tracing, more realistic materials and DLSS 2.0 to the world’s best-selling videogame. • Announced the release of more than 100 new laptop models powered by NVIDIA GeForce® GPUs, bringing the RTX 2080 SUPER™ and RTX 2070 SUPER high-end GPUs to laptops for the first time, and enabling RTX 2060 laptop price points as low as $999 for a mass market audience.

• Expanded the RTX Studio lineup with 10 new laptops from Acer, Gigabyte, MSI and Razer, powered by new GeForce RTX SUPER GPUs. • Released DLSS 2.0, the second generation of its deep learning neural network, which allows gamers on RTX GPUs to boost frame rates as much as two times and increase image resolution for supported games. • Expanded NVIDIA GeForce NOW™, which provides access to 650 games, with 1,500 more waiting to get on board, and has added 2 million users since going live in February. Data Center • First-quarter revenue was $1.14 billion, up 18 percent sequentially and up 80 percent from a year earlier. • Introduced the NVIDIA A100™ data center GPU, the first based on the new NVIDIA Ampere architecture, now in full production and shipping worldwide. • Launched the NVIDIA DGX A100™ – a 5-petaflops AI system that delivers elastic, software-defined data center infrastructure for the most demanding workloads – with the first system being used by Argonne National Laboratory on COVID-19 research. • Introduced two products for the NVIDIA EGX™ Edge AI platform — the EGX A100 for larger commercial off-the-shelf servers – combining the latest A100 GPU and Mellanox SmartNIC technology — and the EGX Jetson Xavier NX for micro-edge servers.

• Released NVIDIA Jarvis™, an application framework enabling companies to offer real-time language-based AI services customized for their own industry, products and customers.

• Collaborated with the open-source community to bring end-to-end GPU acceleration to Apache Spark 3.0, the world’s largest data analytics platform used by more than 500,000 data scientists.

• Announced NVIDIA Merlin™, an application framework that democratizes AI-based deep recommender systems.

• Launched the Mellanox ConnectX-6® Lx Smar tNIC – a highly secure, efficient 25/50 gigabit per second Ethernet smart network interface controller.

Professional Visualization • First-quarter revenue was $307 million, down 7 percent sequentially and up 15 percent from a year earlier.

• Powered Autodesk’s latest 3D visualization software, VRED 2021, with NVIDIA Quadro RTX — giving designers the ability to create with interactive ray tracing and AI-powered denoising.

• Accelerated Altair’s AccuSolve and TheaRender engineering software with NVIDIA CUDA to speed the creation of high- quality simulations. • Brought Quadro professional graphics to HP’s ZBook Create and ZBook Studio mobile workstation lineup, offering outstanding performance, mobility and reliability to creatives. Automotive • First-quarter revenue was $155 million, down 5 percent sequentially and down 7 percent from a year earlier. • Announced that the Xpeng P7 all-electric sports sedan, with production deliveries beginning next month, uses the NVIDIA DRIVE AGX platform and DRIVE OS software to deliver level 3 automated driving. COVID-19 Efforts • NVIDIA and its employees have committed to donate more than $10 million to those affected during this period. • Accelerated promotions and raises for employees by several months. • Released AI models in collaboration with the National Institutes of Health to help researchers detect COVID-19 in lung scans. • Joined the White House’s COVID-19 High Performance Computing Consortium, alongside leaders from the U.S. government, industry and academia, to accelerate COVID-related research. • Provided a free 90-day license to NVIDIA Parabricks™, a genomics software stack that uses GPUs to accelerate the analysis of gene-sequencing data, to researchers working on COVID-related topics.

CFO Commentary Commentary on the quarter by Colette Kress, NVIDIA’s executive vice president and chief financial officer, as well as a presentation of first-quarter earnings, are available at http://investor.nvidia.com/.

Conference Call and Webcast Information NVIDIA will conduct a conference call with analysts and investors to discuss its first quarter fiscal 2021 financial results and current financial prospects today at 2:30 p.m. Pacific time (5:30 p.m. Eastern time). A live webcast (listen-only mode) of the conference call will be accessible at NVIDIA’s investor relations website, http://investor.nvidia.com. The webcast will be recorded and available for replay until NVIDIA’s conference call to discuss its financial results for its second quarter of fiscal 2021.

Non-GAAP Measures To supplement NVIDIA’s condensed consolidated financial statements presented in accordance with GAAP, the company uses non-GAAP measures of certain components of financial performance. These non-GAAP measures include non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP income from operations, non-GAAP other income net, non-GAAP other expense net, non-GAAP income tax expense, non-GAAP net income, non-GAAP net income, or earnings, per diluted share, and free cash flow. In order for NVIDIA’s investors to be better able to compare its current results with those of previous periods, the company has shown a reconciliation of GAAP to non-GAAP financial measures. These reconciliations adjust the related GAAP financial measures to exclude stock-based compensation expense, acquisition-related and other costs, legal settlement costs, losses from non-affiliated investments, interest expense related to amortization of debt discount, and the associated tax impact of these items, where applicable. Free cash flow is calculated as GAAP net cash provided by operating activities less purchase of property and equipment and intangible assets. NVIDIA believes the presentation of its non-GAAP financial measures enhances the user’s overall understanding of the company’s historical financial performance. The presentation of the company’s non-GAAP financial measures is not meant to be considered in isolation or as a substitute for the company’s financial results prepared in accordance with GAAP, and the company’s non-GAAP measures may be different from non-GAAP measures used by other companies.

About NVIDIA NVIDIA’s (NASDAQ: NVDA) invention of the GPU in 1999 sparked the growth of the PC gaming market, redefined modern computer graphics and revolutionized parallel computing. More recently, GPU deep learning ignited modern AI ― the next era of computing ― with the GPU acting as the brain of computers, robots and self-driving cars that can perceive and understand the world. More information at http://nvidianews.nvidia.com/.

### For further information, contact:

Simona Jankowski Robert Sherbin Investor Relations Corporate Communications NVIDIA Corporation NVIDIA Corporation [email protected] [email protected]

Certain statements in this press release including, but not limited to, statements as to: saluting first responders, healthcare workers and service workers and thanking scientists; Mellanox expanding our cloud and data center opportunities; raising the bar for AI computing with Ampere; digital GTC attracting record attendance and highlighting the accelerating adoption of NVIDIA GPU computing; NVIDIA’s position to advance cloud computing and AI; NVIDIA’s capital return program and evaluating the timing of share repurchases; the impact of COVID-19; NVIDIA’s next quarterly cash dividend; NVIDIA’s financial outlook for the second quarter of fiscal 2021, including the impact of the Mellanox acquisition; NVIDIA’s expected tax rates for the second quarter of fiscal 2021; NVIDIA’s expectation to generate variability from excess tax benefits or deficiencies; our operating expenses for the full year; Mellanox’s expected contribution to our revenue; NVIDIA projects being used for COVID-19 research; NVIDIA Merlin democratizing AI-based deep recommender systems; and the benefits, abilities and impact of: the RTX Studio lineup and GeForce RTX SUPER GPUs; NVIDIA A100, NVIDIA DGX A100, EGX A100, EGX Jetson Xavier NX, NVIDIA Jarvis, NVIDIA CUDA, Quadro, NVIDIA Parabricks, collaborating with the open-source community for Apache Spark 3.0, Mellanox ConnectX-6 SmartNIC, NVIDIA Merlin, DLSS 2.0 and what it allows, launching Minecraft with RTX, NVIDIA GeForce NOW and Xpeng P7 using NVIDIA DRIVE AGX Xavier AI compute platform and when deliveries will begin; the number of games waiting to get on NVIDIA GeForceNOW; the COVID-19 High Performance Computing Consortium and accelerating COVID-related research; NVIDIA Jarvis enabling companies to offer real-time language-based customized AI-services; global OEMs releasing new laptops, bringing RTX 2080 SUPER and RTX 2070 SUPER GPUs to laptops for the first time and enabling RTX 2060 laptops at low price points; and VRED 2021 giving designers the ability to create with ray tracing and AI-powered denoising are forward-looking statements that are subject to risks and uncertainties that could cause results to be materially different than expectations. Important factors that could cause actual results to differ materially include: global economic conditions; our reliance on third parties to manufacture, assemble, package and test our products; the impact of technological development and competition; development of new products and technologies or enhancements to our existing product and technologies; market acceptance of our products or our partners’ products; design, manufacturing or software defects; changes in consumer preferences or demands; changes in industry standards and interfaces; unexpected loss of performance of our products or technologies when integrated into systems; as well as other factors detailed from time to time in the most recent reports NVIDIA files with the Securities and Exchange Commission, or SEC, including, but not limited to, its annual report on Form 10-K and quarterly reports on Form 10-Q. Copies of reports filed with the SEC are posted on the company’s website and are available from NVIDIA without charge. These forward-looking statements are not guarantees of future performance and speak only as of the date hereof, and, except as required by law, NVIDIA disclaims any obligation to update these forward-looking statements to reflect future events or circumstances.

© 2020 NVIDIA Corporation. All rights reserved. NVIDIA, the NVIDIA logo, GeForce, Quadro DGX A100, DRIVE AGX Xavier, EGX A100, GeForce NOW, GeForce RTX SUPER, Mellanox ConnectX-6, Mellanox SmartNIC, NVIDIA A100, NVIDIA AGX, NVIDIA CUDA, NVIDIA DGX A100, NVIDIA DRIVE AGX Xavier, NVIDIA EGX Edge AI, NVIDIA EGX Jetson Xavier, NVIDIA Jarvis, NVIDIA Merlin, NVIDIA Parabricks, and NVIDIA RTX are trademarks and/or registered trademarks of NVIDIA Corporation in the U.S. and/or other countries. Other company and product names may be trademarks of the respective companies with which they are associated. Features, pricing, availability, and specifications are subject to change without notice. NVIDIA CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In millions, except per share data) (Unaudited)

Three Months Ended April 26, April 28, 2020 2019

Revenue $ 3,080 $ 2,220 Cost of revenue 1,076 924 Gross profit 2,004 1,296 Operating expenses Research and development 735 674 Sales, general and administrative 293 264 Total operating expenses 1,028 938 Income from operations 976 358 Interest income 31 44 Interest expense (25) (13) Other, net (1) — Other income, net 5 31 Income before income tax 981 389 Income tax expense (benefit) 64 (5) Net income $ 917 $ 394

Net income per share: Basic $ 1.49 $ 0.65 Diluted $ 1.47 $ 0.64

Weighted average shares used in per share computation: Basic 614 607 Diluted 622 616 NVIDIA CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (In millions) (Unaudited)

April 26, January 26, 2020 2020 ASSETS

Current assets: Cash, cash equivalents and marketable securities $ 16,354 $ 10,897 Accounts receivable, net 1,907 1,657 Inventories 1,128 979 Prepaid expenses and other current assets 195 157 Total current assets 19,584 13,690

Property and equipment, net 1,715 1,674 Operating lease assets 595 618 Goodwill 628 618 Intangible assets, net 80 49 Deferred income tax assets 533 548 Other assets 119 118 Total assets $ 23,254 $ 17,315

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities: Accounts payable $ 761 $ 687 Accrued and other current liabilities 1,142 1,097 Total current liabilities 1,903 1,784

Long-term debt 6,959 1,991 Long-term operating lease liabilities 519 561 Other long-term liabilities 774 775 Total liabilities 10,155 5,111

Shareholders' equity 13,099 12,204 Total liabilities and shareholders' equity $ 23,254 $ 17,315 NVIDIA CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions) (Unaudited) Three Months Ended April 26, April 28, 2020 2019 Cash flows from operating activities: Net income $ 917 $ 394 Adjustments to reconcile net income to net cash provided by operating activities: Stock-based compensation expense 224 178 Depreciation and amortization 107 91 Deferred income taxes 16 (42) Other 4 (2) Changes in operating assets and liabilities: Accounts receivable (249) 182 Inventories (151) 153 Prepaid expenses and other assets (8) 5 Accounts payable 71 (123) Accrued and other current liabilities (32) (129) Other long-term liabilities 10 13 Net cash provided by operating activities 909 720 Cash flows from investing activities: Proceeds from sales of marketable securities 1 26 Proceeds from maturities of marketable securities — 2,219 Purchases of marketable securities (861) (622) Purchases of property and equipment and intangible assets (155) (128) Acquisition of business, net of cash acquired (34) — Investments and other, net (6) — Net cash provided by (used in) investing activities (1,055) 1,495 Cash flows from financing activities: Issuance of debt, net of issuance costs 4,979 — Proceeds related to employee stock plans 88 83 Payments related to tax on restricted stock units (222) (211) Dividends paid (98) (97) Other (3) — Net cash provided by (used in) financing activities 4,744 (225) Change in cash and cash equivalents 4,598 1,990 Cash and cash equivalents at beginning of period 10,896 782 Cash and cash equivalents at end of period $ 15,494 $ 2,772 NVIDIA CORPORATION RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (In millions, except per share data) (Unaudited)

Three Months Ended April 26, January 26, April 28, 2020 2020 2019

GAAP gross profit $ 2,004 $ 2,015 $ 1,296 GAAP gross margin 65.1 % 64.9 % 58.4 % Stock-based compensation expense (A) 21 12 4 Acquisition-related and other costs 1 — — Legal settlement costs — 3 10 Non-GAAP gross profit $ 2,026 $ 2,030 $ 1,310 Non-GAAP gross margin 65.8 % 65.4 % 59.0 %

GAAP operating expenses $ 1,028 $ 1,025 $ 938 Stock-based compensation expense (A) (203) (208) (174) Acquisition-related and other costs (4) (7) (10) Legal settlement costs — — (1) Non-GAAP operating expenses $ 821 $ 810 $ 753

GAAP income from operations $ 976 $ 990 $ 358 Total impact of non-GAAP adjustments to income from operations 229 230 199 Non-GAAP income from operations $ 1,205 $ 1,220 $ 557

GAAP other income, net $ 5 $ 26 $ 31 Losses from non-affiliated investments 3 — — Interest expense related to amortization of debt discount 1 — — Non-GAAP other income, net $ 9 $ 26 $ 31

GAAP net income $ 917 $ 950 $ 394 Total pre-tax impact of non-GAAP adjustments 232 230 199 Income tax impact of non-GAAP adjustments (B) (29) (8) (50) Non-GAAP net income $ 1,120 $ 1,172 $ 543 Three Months Ended April 26, January 26, April 28, 2020 2020 2019 Diluted net income per share GAAP $ 1.47 $ 1.53 $ 0.64 Non-GAAP $ 1.80 $ 1.89 $ 0.88

Weighted average shares used in diluted net income per share computation 622 621 616

GAAP net cash provided by operating activities $ 909 $ 1,465 $ 720 Purchase of property and equipment and intangible assets (155) (144) (128) Free cash flow $ 754 $ 1,321 $ 592

(A) Stock-based compensation consists of the following: Three Months Ended April 26, January 26, April 28, 2020 2020 2019 Cost of revenue $ 21 $ 12 $ 4 Research and development $ 134 $ 140 $ 114 Sales, general and administrative $ 69 $ 68 $ 60

(B) Income tax impact of non-GAAP adjustments, including the recognition of excess tax benefits or deficiencies related to stock-based compensation under GAAP accounting standard (ASU 2016-09). NVIDIA CORPORATION RECONCILIATION OF GAAP TO NON-GAAP OUTLOOK

Q2 FY2021 Outlook ($ in millions) GAAP gross margin 58.6 % Impact of stock-based compensation expense, acquisition-related costs, and other costs 7.4 % Non-GAAP gross margin 66.0 %

GAAP operating expenses $ 1,515 Stock-based compensation expense, acquisition-related costs, and other costs (475) Non-GAAP operating expenses $ 1,040

GAAP other expense, net $ 50 Interest expense from amortization of debt discount and other costs (5) Non-GAAP other expense, net $ 45

FY2021 Outlook ($ in millions) GAAP operating expenses $ 5,700 Stock-based compensation expense, acquisition-related costs, and other costs (1,600) Non-GAAP operating expenses $ 4,100

CFO Commentary on First Quarter Fiscal 2021 Results

Q1 Fiscal 2021 Summary

Non-GAAP ($ in millions, except earnings per share) Q1 FY21 Q4 FY20 Q1 FY20 Q/Q Y/Y Revenue $3,080 $3,105 $2,220 Down 1% Up 39% Gross margin 65.8 % 65.4 % 59.0 % Up 40 bps Up 680 bps Operating expenses $821 $810 $753 Up 1% Up 9% Operating income $1,205 $1,220 $557 Down 1% Up 116% Net income $1,120 $1,172 $543 Down 4% Up 106% Diluted earnings per share $1.80 $1.89 $0.88 Down 5% Up 105%

New Reportable Segments Through fiscal 2020, our reportable segments were GPU and Tegra Processor. Starting with the first quarter of fiscal 2021, our reportable segments have changed to “Graphics” and “Compute & Networking.”

Our Graphics segment includes GeForce GPUs for gaming and PCs, the GeForce NOW game streaming service and related infrastructure, and solutions for gaming platforms; Quadro GPUs for enterprise design; GRID software for cloud-based visual and virtual computing; and automotive platforms for infotainment systems. Our Compute & Networking segment includes Data Center platforms and systems for AI, HPC, and accelerated computing; DRIVE for autonomous vehicles; and Jetson for robotics and other embedded platforms. Starting with the second quarter of fiscal 2021, we will also include Mellanox revenue in this segment.

All prior period comparisons presented reflect our new reportable segments. Our market platforms – Gaming, Professional Visualization, Data Center, Automotive, OEM and Other – remain unchanged. We will incorporate Mellanox in our Data Center market platform. Revenue by Reportable Segments ($ in millions) Q1 FY21 Q4 FY20 Q1 FY20 Q/Q Y/Y Graphics $1,906 $2,084 $1,526 Down 9% Up 25% Compute & Networking 1,174 1,021 694 Up 15% Up 69% Total $3,080 $3,105 $2,220 Down 1% Up 39%

Revenue by Market Platform ($ in millions) Q1 FY21 Q4 FY20 Q1 FY20 Q/Q Y/Y Gaming $1,339 $1,491 $1,055 Down 10% Up 27% Professional Visualization 307 331 266 Down 7% Up 15% Data Center 1,141 968 634 Up 18% Up 80% Automotive 155 163 166 Down 5% Down 7% OEM and Other 138 152 99 Down 9% Up 39% Total $3,080 $3,105 $2,220 Down 1% Up 39%

Revenue Revenue for the first quarter was $3.08 billion, up 39 percent from a year earlier and down 1 percent sequentially.

COVID-19 created challenges in supply and demand. Early in the quarter, our partners’ supply chains were disrupted. Shelter-in- place resulted in closure of retail outlets and China iCafes, affecting sales of our gaming products. However, work from home, learn at home, and gaming drove a surge in e-tail demand. Automobile infotainment system demand and autonomous development infrastructure builds declined, and the impact is expected to continue for the next several quarters.

Graphics segment revenue for the first quarter was $1.91 billion, up 25 percent from a year earlier and down 9 percent sequentially.

Compute & Networking segment revenue for the first quarter was $1.17 billion, up 69 percent from a year ago and up 15 percent sequentially. From a market-platform perspective, Gaming revenue for the first quarter was $1.34 billion, up 27 percent from a year ago and down 10 percent sequentially. The year-on-year increase reflects higher sales across our major gaming products. The sequential decrease reflects seasonally lower sales of GeForce desktop GPUs for gaming, partially offset by higher sales of SoCs for gaming platforms and GeForce laptop GPUs.

Professional Visualization revenue for the first quarter was $307 million, up 15 percent from a year earlier and down 7 percent sequentially. The year-on-year growth reflects strength in laptop and desktop workstations. The sequential decrease was driven by lower sales of desktop workstations, partially offset by strength in laptop workstations. Data Center record revenue for the first quarter was $1.14 billion, up 80 percent from a year ago and up 18 percent sequentially, driven by higher vertical industries and hyperscale demand. Automotive revenue was $155 million, down 7 percent a year earlier and down 5 percent sequentially, primarily reflecting lower legacy infotainment revenue. OEM and Other revenue for the first quarter was $138 million, up 39 percent from a year ago and down 9 percent sequentially. The year-on-year increase was primarily due to higher demand for entry-level laptop GPUs from PC OEMs. The sequential decrease reflects seasonally lower sales of entry-level GPUs for PC OEMs.

Gross Margin GAAP gross margin for the first quarter was 65.1 percent, up 670 basis points from a year earlier and up 20 basis points sequentially. The year-on-year increase was primarily driven by GeForce GPU product mix and higher data center sales. The sequential increase was driven by Data Center, partially offset by product mix in GeForce GPUs. Non-GAAP gross margin for the first quarter was 65.8 percent, up 680 basis points from a year earlier and up 40 basis points sequentially.

Expenses GAAP operating expenses for the first quarter were $1.03 billion, including $207 million in stock-based compensation and other charges, up 10 percent from a year earlier and flat sequentially. The year-on-year growth primarily reflects employee additions and increases in employee compensation and other related costs, including stock-based compensation and infrastructure costs. Non-GAAP operating expenses for the first quarter were $821 million, up 9 percent from a year earlier and up 1 percent sequentially.

Operating Income GAAP operating income for the first quarter was $976 million, up 173 percent from a year earlier and down 1 percent sequentially. Non-GAAP operating income for the first quarter was $1.20 billion, up 116 percent from a year earlier and down 1 percent sequentially.

Other Income & Expense and Income Tax GAAP other income and expense, or OI&E, was $5 million, down 84 percent from a year earlier and down 81 percent sequentially. The year-on-year and sequential decreases reflect lower interest income due to lower rates and increased interest expense due to our $5 billion note issuance in March 2020. Non-GAAP OI&E for the first quarter was $9 million.

GAAP effective tax rate for the first quarter was 6.6 percent, inclusive of excess tax benefits related to stock-based compensation. Non-GAAP effective tax rate for the first quarter was 7.7 percent.

Net Income and EPS GAAP net income for the first quarter was $917 million. GAAP earnings per diluted share for the first quarter were $1.47, up 130 percent from a year earlier and down 4 percent sequentially.

Non-GAAP net income for the first quarter was $1.12 billion. Non-GAAP earnings per diluted share for the first quarter were $1.80, up 105 percent from a year earlier and down 5 percent sequentially.

Capital Return In the first quarter, we paid dividends of $98 million. Due to the current market uncertainties, we are evaluating the timing of resuming share repurchases and will remain nimble based on market conditions. We are currently authorized to repurchase up to $7.24 billion through December 2022. We remain committed to paying quarterly dividends.

Balance Sheet and Cash Flow Cash, cash equivalents and marketable securities at the end of the first quarter were $16.35 billion, up from $7.80 billion a year earlier and $10.90 billion in the prior quarter, reflecting the issuance of the $5 billion of notes and strong operating cash flow. Accounts receivable at the end of the quarter was $1.91 billion compared with $1.24 billion a year earlier and $1.66 billion in the prior quarter. DSO at quarter-end was 56 days, up from 51 days a year earlier and up from 49 days in the prior quarter primarily due to linearity of sales reflecting supply chain disruptions caused by COVID-19. Inventory at the end of the quarter was $1.13 billion, down from $1.43 billion a year earlier and up from $979 million in the prior quarter. Outstanding inventory purchase obligations at the end of the quarter were $1.76 billion, up from $782 million a year earlier and up from $1.16 billion in the prior quarter. DSI at quarter-end was 95 days, down from 140 days a year earlier and up from 82 days in the prior quarter. Cash flow from operating activities was $909 million in the first quarter, up from $720 million a year earlier and down from $1.46 billion in the prior quarter. The year-on-year increase reflects growth in operating income partially offset by changes in working capital. The sequential decrease reflects changes in working capital primarily driven by an increase in inventory, changes in operating liabilities, and an increase in accounts receivable. Free cash flow was $754 million in the first quarter, compared with $1.32 billion in the previous quarter and $592 million a year earlier. Depreciation and amortization expense was $107 million and capital expenditures were $155 million for the first quarter.

Second Quarter of Fiscal 2021 Outlook Our outlook for the second quarter of fiscal 2021 includes a full-quarter impact from the Mellanox acquisition. The combined second quarter outlook is as follows:

• Revenue is expected to be $3.65 billion, plus or minus 2 percent. Mellanox is expected to contribute a low-teens percentage of combined second quarter revenue.

• GAAP and non-GAAP gross margins are expected to be 58.6 percent and 66.0 percent, respectively, plus or minus 50 basis points. The sequential decline in GAAP gross margin primarily reflects an increase in acquisition-related costs, most of which are non-recurring in nature.

• GAAP and non-GAAP operating expenses are expected to be approximately $1.52 billion and $1.04 billion, respectively. The sequential change in GAAP operating expenses reflects an increase in stock-based compensation and acquisition- related costs. GAAP and non-GAAP operating expenses for the full year, which will include Mellanox, are expected to be approximately $5.7 billion and $4.1 billion, respectively.

• GAAP and non-GAAP other income and expense are expected to be an expense of approximately $50 million and $45 million, respectively.

• Capital expenditures are expected to be approximately $225 million to $250 million.

______For further information, contact:

Simona Jankowski Robert Sherbin Investor Relations Corporate Communications NVIDIA Corporation NVIDIA Corporation [email protected] [email protected]

Non-GAAP Measures To supplement NVIDIA’s condensed consolidated financial statements presented in accordance with GAAP, the company uses non-GAAP measures of certain components of financial performance. These non-GAAP measures include non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP income from operations, non-GAAP other income net, non-GAAP other expense net, non-GAAP income tax expense, non-GAAP net income, non-GAAP net income, or earnings, per diluted share, and free cash flow. In order for NVIDIA’s investors to be better able to compare its current results with those of previous periods, the company has shown a reconciliation of GAAP to non-GAAP financial measures. These reconciliations adjust the related GAAP financial measures to exclude stock-based compensation expense, acquisition-related and other costs, legal settlement costs, losses from non-affiliated investments, interest expense related to amortization of debt discount, and the associated tax impact of these items, where applicable. Free cash flow is calculated as GAAP net cash provided by operating activities less purchases of property and equipment and intangible assets. NVIDIA believes the presentation of its non-GAAP financial measures enhances the user's overall understanding of the company’s historical financial performance. The presentation of the company’s non-GAAP financial measures is not meant to be considered in isolation or as a substitute for the company’s financial results prepared in accordance with GAAP, and the company’s non-GAAP measures may be different from non-GAAP measures used by other companies.

Certain statements in this CFO Commentary including, but not limited to, statements as to: our new reportable segments and including Mellanox networking revenue in our Compute & Networking segment; our plan to incorporate Mellanox in our Data Center market platform; evaluating the timing of our share repurchase program; the impact of COVID-19; our financial outlook for the second quarter of fiscal 2021, including the impact of the Mellanox acquisition; our expected tax rates for the second quarter of fiscal 2021; our expectation to generate variability from excess tax benefits or deficiencies; our expected capital expenditures for the second quarter of fiscal 2021; our operating expenses for the full year; and the expected Mellanox contribution to our revenue are forward- looking statements that are subject to risks and uncertainties that could cause results to be materially different than expectations. Important factors that could cause actual results to differ materially include: global economic conditions; our reliance on third parties to manufacture, assemble, package and test our products; the impact of technological development and competition; development of new products and technologies or enhancements to our existing product and technologies; market acceptance of our products or our partners’ products; design, manufacturing or software defects; changes in consumer preferences or demands; changes in industry standards and interfaces; unexpected loss of performance of our products or technologies when integrated into systems; as well as other factors detailed from time to time in the most recent reports NVIDIA files with the Securities and Exchange Commission, or SEC, including, but not limited to, its annual report on Form 10-K and quarterly reports on Form 10-Q. Copies of reports filed with the SEC are posted on the company’s website and are available from NVIDIA without charge. These forward-looking statements are not guarantees of future performance and speak only as of the date hereof, and, except as required by law, NVIDIA disclaims any obligation to update these forward-looking statements to reflect future events or circumstances.

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