Q4 2021 NVIDIA Corp Earnings Call
T Force our T X 30 series graphics cards, where holidays sensation.
Just to their amazing performance, but also to the rich features including our second generation <unk> Ray tracing technology, and <unk> AI powered performance accelerator, which massively boost frame rates and graphically demanding titles.
3000 games now all support our TX, including the top Battle Royale games Fortnite, the top grossing game cyberpunk 2077.
Top massively multiplayer online game world of Warcraft, and the best selling game of all time Minecraft.
<unk> has clearly set the new standard and gaming.
Building on this momentum at CES in January we interest introduced a wave of <unk> architecture gaming products, including our biggest ever laptop launch powered by G Force RPX 30, 60, 40, 70, and 30 80 laptop Gpus.
And with our third generation Max Q technology.
These new thin and light weight gaming laptops increased performance energy efficiency by up to two <unk> from the prior generation.
Our T X 30, 60, laptops start $999 and are faster than the previous generation laptops, which sold for 2500.
Incredible performance design and price points of these new laptops will delight, the growing universe of gamers and creators as well as students and professionals.
Gaming laptop market has grown seven fold in the past seven years and momentum is building.
With top Oems, bringing to market a record 70, plus laptop models based on the G Force, our tier 30 series G Force laptops as a whole are the fastest growing and one of the largest gaming platforms.
Also at CES, we announced the G Force our T X 30, 60, GPU price to $329 extending the 30 series desktop lineup further into the mainstream.
We expect strong demand when it launches this Friday 60 class Gpus have traditionally been our most popular products.
Starting with a 30 60, we're taking an important step to maximize the supply of G Force Gpus for gamers users are constantly discovering new applications for our powerful programmable Gpus and crypto currency mining is one of them.
With rising ethereum prices there are indications that miners are buying Gpus, we would like G Force Gpus to end up with gamers. So we have created a new special software drivers that will detect the ethereum mining algorithm cutting in half the mining efficiency.
The G Force RPX 30 16.
We suspect the significant increase in the theory on network cash rate observed over the past few months was driven by a combination of previously installed mining capacity that was reactivated as well as new sales of Gpus and Asics since our Gpus are.
Bold to graphics card manufacturers and then onto distributions, we don't have the ability to accurately track or quantify their end use.
And most estimates suggest that crypto mining contributed $100 million to $300 million to our Q4 revenue.
Relatively small portion of our day named revenue in Q4.
Crypto currencies have recently started to be accepted by companies and financial institutions and show increased signs of staying power through a desk to address industrial ethereum mining demand last week, we announced a new line of Nvidia C. M P's.
Our crypto mining processors shipments will start in March.
PS lack display output and have other optimizations that improve crypto mining power efficiency.
E&P products will net us gain some visibility into the contribution of crypto mining to our overall revenue.
For Q1, we estimate that CMP will contribute approximately $15 million.
We plan to sell these products to industrial lineups, we will quantify their contribution each quarter for transparency.
Over the past year. It has become clear that we've entered a new era in which gaming is an integral part of global culture. The number of concurrent users on steam has more than doubled since 2018 and continues to hit New records in 2020 alone more than 100 billion out.
<unk> of gaming content, we're seeing on Youtube and half a billion people watched esports increasingly we arent just gaming we're also watching sports.
Attending concerts, creating content and connecting with their friends and virtual environments.
Additionally, we are excited about the new experiences like Dr. Significantly more content is now available, including arguably the first VR killer App eight sabre and.
And there is now almost 2 million VR users are interesting.
And with these powerful structural shifts we expect our gaming business to remain on a robust gross trajectory in G Force <unk> 30 series Gpus have kicked off a powerful upgrade cycle and we estimate only around 15% of G force gamers own an RPX cost GPU.
Which is needed to experience the beautiful ray traced graphics of modern games.
Moreover, the universe of gamers is rapidly expanding and the reach of G Force has extended beyond gamers to some 45 million creators. In addition gaming revenue continues to benefit from a favorable mix shift as gamers creators keep moving to higher end Gpus, we expect another.
Great year for GE Force.
Earlier this month, we celebrated the one year anniversary of the G Force now cloud gaming platform, which is now over 6 million members strong.
Force now offers 800 P. CS from over 300 publishers more than any other cloud gaming service, including 80 of the most played free to play games, starting with support for Windows, Pcs and Macs and Android devices, we added support in recent months to chromebooks.
Iphones and ipads TSN has grown globally with more than 65 countries on our service and more added regularly by our G Force now Alliance partners.
Moving to progress Q4 revenue was $307 million up 30% sequentially and down 10% year on year.
Ahead of our expectations full.
Full year revenue was $1 1 billion was down 13% strong sequential growth was driven primarily by a recovery in desktop workstations as some customers return to the office and enterprises resumed purchases that had been deferred by the pandemic.
Notebook Gpus grew sequentially to a record as enterprises continue to support remote workforce initiatives. Looking ahead, the reopening of businesses will benefit desktop workstations for longer term workforce trends will likely shift of mix to notebook Gpus and cloud offerings.
Health care was a standout vertical in the quarter with significant orders from GE, Siemens and Oxford metaphor technologies public sector and automotive also so strength.
Omni versus our real time, three D collaboration and stimulation platform is now an open beta over 500 creators and professionals have tested on <unk> through our early access program omni versus one of our most important and exciting platforms. We are divided by its initial acceptance and look.
Forward to sharing more details on its long term growth opportunity in the coming months.
Moving to automotive.
Q4 revenue was $145 million up 16% sequentially and down 11% year on year full year revenue of $536 million declined 23% sequential growth was driven by continued recovery in the global automotive production volumes and gross.
And AI cockpit revenue year on year decline reflects the expected ramp down of legacy Entertainment.
Nvidia has emerged as the industry's leading end to end full stack technology provider for self driving and AI enabled vehicles orand. So see that drive self driving platform is built on delivers an unrivaled 254 trillions of operations per second our perform.
<unk>, an industry leading power efficiency.
To revolutionize the transportation industry.
Our technology leadership is driven a robust rapidly growing set of opportunities we have great momentum with an expanding list of electric vehicle Oems, including deal, let's say I see the auto and X 10, which are all using the Nvidia drive platform to power their next generation of vehicles.
We look forward to growing with them as they continue to scale.
Our software defined platforms is the only solution that spans from the data center for training deep neural nets and running physically accurate simulations to a full stack incarcerations scaling from a dos to level five fully autonomous functionality.
This vehicle companies are harnessing this technology.
<unk> recently unveiled its level five bi directional robo taxi powered by Nvidia.
<unk> launched its next generation countless autonomous truck using Nvidia drive volume.
And earlier this year Mercedes announced a 56 inch wide amdocs hyper screen powered by Nvidia AI cockpit technology. This win builds on our momentum with Mercedes first generation and Buck system, which is now in one 8 million cars.
We are in the early innings of a significant opportunity we have built a multibillion dollar design win pipeline for our self driving the AI cockpit solutions, which will drive a material inflection in revenue over the next few years, our transformational partnership with Mercedes announced last June demonstrates the.
The power of our evolving business model as we expand our addressable market and layer in software revenue.
We are exceptionally well positioned to capitalize on the significant opportunity that lies ahead.
Moving to data center.
Revenue was 1.9 billion, which exceeded our expectations with comparable from last quarter.
97% from the year ago period, which did not include non ops data center compute revenue was up 45% year on year full year data center revenue rose, 125% to a record $6 7 billion, including almost 70% growth from data center compute.
Yes.
From a sequential perspective, the datacenter compute stronger than expected double digit growth more than offset the anticipated decline in melanoma revenue, which included a large non reoccurring network its sale to a single OEM in Q3.
Compute growth was denied by vertical industries, where OEM partners continued ramping up to 180 100 based servers and our own <unk> system sales were strong.
Critical industries, we're well over 50% of data center revenue across compute in networking with particular strength in supercomputing financial services higher education and consumer Internet protocols.
Additionally, hyperscale customers continue to deploy the 100 driving both sequential growth and exceptionally strong year on year growth in data center compute.
A 100 has been adopted by all major cloud customers globally and is being deployed by Hyperscale customers for internal workloads still here in the early stages of adoption and expect continued growth this year the ramp.
The eight 100 has been smoother and accomplished by better visibility the prior generation, it's universal AI training and inference capabilities as well as support for a wider set of applications and outstanding performance are driving high customer utilization.
Clear sign of the E 100 volume.
Turning to melanoma, we are seeing continued strong traction in robust momentum across our customer set its revenue was up over 30% from non <unk> Q4 revenue in calendar 2019, when it was still a standalone company year on year growth in the quarter was led by Hyperscale and large customers.
Consumer Internet customers, which grew over 60% from last year with several contributing record revenues consistent with our outlook melanoma had a sequential decline impacted by a non recurring sales to a China OEM in Q3.
We expect to return to sequential growth in Q1, driven by strong demand for our high speed networking products, including the ramp of connect ex adapters, we see asps and all major server Oems and their upcoming refresh. We also see strong momentum and high performance computing with HDR incentive.
Pam products. For example, we won six of the seven supercomputers awarded over the past few months by Euro HTC.
Starting next quarter, we will continue to provide color on networking as part of the datacenter market platform, but we will no longer breakout melanoma revenue separately.
Looking forward, we are incredibly excited about the opportunities in data center accelerated computing is not only delivering super more laws gains and performance, but it's also an energy efficient and cost effective method of computing and virtually every industry is adopting technology with greater urgency.
<unk> companies adapt to the new world of more distributed workers and customers as industries embark on this journey. They are also increasingly focused on combating climate change to that day.
A 100 performed AI computation with 120th the power consumption of Cpus empowers, our Sabine supercomputer, which is number one on the Green 500 list of the world's most efficient supercomputers.
The Nvidia powered machines recently captured 25 of the top pretty spot on the green side forgive us accelerated computing is not only serving the exponential growth in demand for compute. It can also help bend the power consumption curve with accelerated computing Nvidia is.
Pioneering a cow forward the computing industry.
Before I move to the P&L and outlook, let me give you an update on our proposed acquisition of <unk> in September we announced plans to acquire arm from Softbank group in a transaction that will create the premier computing company from the age of AI.
At that time, we said it would take approximately 18 months to secure regulatory approvals in the U S. The U K, the EU, China and other jurisdictions.
Thorough reviews are typical with the deal emphasize this process is moving forward as expected we are in constructive dialogue with the relevant authorities and are confident that regulators will see the benefits to the entire tech ecosystem as.
As we have said this combination combination will spur competition together arm and in video will provide greater choice to the data center ecosystem, a compelling alternative CPU architecture for the market and further enhance arms offering in mobile and embedded.
Our intention is to increase investment in arms existing roadmap, adding resources to stimulate growth in new markets with love and intend to maintain arms open licensing model a commitment guaranteed both by long term legally binding contracts as well as our own into.
Risk and ensuring this investment is a profitable one for us.
We're on the cusp of a new age in which AI fuels industries, ranging from healthcare to scientific research to the environment with this transaction are the vision is to boost arms potential. So it can thrive in this new era and grow into promising new markets.
Moving to the rest of the P&L.
Q4, GAAP gross margins was 63, 1% and non-GAAP gross margins were 65, 5% GAAP gross margins declined year on year due to amortization of developed technology acquired from non ops.
Partially offset by product mix the sequential increase was due to higher margins for gaming Gpus and lower IP related costs, partially offset by lower margin mix in our data center portfolio.
Non-GAAP gross margins increased by 10 basis points year on year and was flat sequentially in line with our expectations Q.
Q4, GAAP EPS was $2 three one.
51% from a year earlier non-GAAP EPS was $3 10 up 64% from a year ago.
Q4 cash from operations was a record 2.07 billion.
With that let me turn to the outlook for the first quarter of fiscal 2022.
Revenue is expected to be 5.3 billion, plus or minus 2% with most of the sequential growth driven by gaming.
GAAP and non-GAAP gross margins are expected to be 63, 8% from 6% to 6%, respectively, plus or minus 50 basis points GAAP and non-GAAP operating expenses are expected to be approximately 167 billion and $1 2 billion respectively.
The full year, we expect to grow non-GAAP opex in the mid 20% range GAAP.
GAAP and non-GAAP other income and expenses are both expected to be an expense of approximately $50 million GAAP and non-GAAP tax rates are both expected to be 10% plus or minus 1% excluding discrete items cash.
Capital expenditures are expected to be approximately 300 million to $325 million.
Further financial details are included in the CFO commentary and other information on our IR website.
In closing, let me highlight upcoming events from the financial community, we will be virtually attending from Raymond James Institutional investors Conference on March 1st from Morgan Stanley Technology Media and Telecom conference on March 3rd and May Aerotech Virtual <unk> conference.
On March 30 <unk>.
In addition, we will be hosting a virtual investor day on Monday April 12th following revive stream of Johnson's opening keynote at our GPU Technology Conference our earnings call to discuss our first quarter and full.
Our first quarter is scheduled for Wednesday may 26.
We will now open the call for questions. Operator would you. Please poll for questions. Thank you.
Yes at this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad flow.
For just a moment to compile the Q&A roster.
Your first question comes from the line of C. J Muse with Evercore ISI. Your line is open.
Good afternoon, and thank you for taking my question I guess Josef.
Higher level question for you on the enterprise side Youre now a couple of quarters into the ramp of day 100, and curious if you could speak to whether you've seen any surprises here any areas of specific strength worth calling out in any changes to how you're thinking about the size of this opportunity.
Thanks, Rob.
The JV as you know every 100 is a very different type of GPU. This is our first universal computing Gpus grid at a high performance computing is granted data analytics risk weighted training and and also for our highest end GPU with most of the firsthand the incredible for infant.
From 20 times faster than previous generation introduces.
Some from a really really exciting new competition formats, low tier 32 tenths of a flow through to for training.
Yeah.
With a multi instance, GPU.
Our GPU once you if you do a whole bunch of smaller Gpus economists Gpus.
To improve performance.
From.
And reducing latency and so the capability is really quite exciting we're seeing strength in hyperscale as they continue to accelerate the adoption of it.
Some of the some of the new applications, we've spoken about a couple of times before.
The transition to deep learning for conversational AI speech recognition natural language understanding all the way to speech synthesis is not based on a.
Based on deep learning the other the other area that's growing incredibly fast.
His deep learning recommend remodels just about everything that you do on the Internet is based on recommendation.
Hundreds of different breaking numbers out there whether you're shopping we're recommending to users who are recommending us making.
With many search and so on are recommending and so all of these different types of applications before the <unk>.
No.
For the first time.
So our industrial application.
Industrial data center.
Growing to be larger than hyperscale.
And we're seeing industrial applications of gross scientific computing, where we're.
Simulation based approaches are there'll be fused with our approaches for weather simulation genomics molecular dynamic simulations quantum chemistry, even senior living quantum computing, which is one of the relief from you.
We're seeing.
Being deployed.
Deployed for our big data analytics.
Rapid which is the Nvidia has created an open source platform for data analytics.
Sparks, a three point O, which Nvidia really mode.
Q2 weeks long weighted.
Now you could have.
Big data and cloud.
Well doing big data analytics in the cloud.
We are always in CSD.
I think you could you could we are seeing a lot of excitement around <unk>.
<unk> financial services.
Financial services and consumer Internet services.
All really good momentum.
So a 100% adoption.
It is.
Just starting we're going to see we're going to see some room.
Couple of years of continued Greenfield.
Universe.
Is it really gets adopted in closing.
Industries.
Your next question comes from the line of Vivek Arya with Securities. Your line is open.
Thanks for taking my question just a clarification and then a question for Jensen on the clarification.
Colette I was hoping if you could give a little more color around Q1.
Do you still expect to a data center to grow sequentially. In Q1, I know you said that most of the growth was coming.
Come from gaming, but any color on the data center would be useful and then Jensen. The question for you is in your press release you used the phrase.
Driving the smartphone moment for every industry could you help us quantify what that means.
I'm going with that is is there a number in terms of what percentage of servers.
Shipping today video of accelerators, and where can that ratio go overtime is that a fair way of looking at the adoption of your technology and AI.
So to think about that.
Your question regarding the guidance essentially baked into Q1.
<unk> indicated that yes, a good percentage of our growth between Q4 and Q1 gross come from gaming, but we also do expect data center to grow most of our sequential growth coming from gaming, but keep in mind. We also expect all of our market platforms will likely be able to grow.
After over quarter.
Doug Grimm.
Enemy.
And the third phase of the first phase III was was we invented the computing platforms.
The new chips, the immune system the use of from software the new middleware, the new way of working the new way of developing software, which the industry. The world has now started and ops.
The software is developed.
And the woodlands deployed is completely different from the pounds.
Something.
Thanks.
I heard a great term software to me from modest sense.
It's a computer that is writing software.
<unk> developed software is completely different the way computers.
And that was our first phase.
That started.
In the journey.
Some eight nine years ago now.
The second phase was the adoption of using this.
From an industrial wafer clouds.
And we saw we saw it Rob.
Evolution of new services.
Or whether it's speech only need the services or surgery into services recommended services. When you shop. The way you use the internet is completely different today.
And so that's really the second phase and those two phases are still continuing to grow.
You are still you still see.
The growth associated with that.
And thirdly is the industrialization of beyond.
And somebody from the Great example, when I say kind of the smartphone moment I meant that its a device with AI.
<unk> and connect it to a cloud service and its continuously learning.
So some of the exciting it's exciting.
The example that I saw that I've seen and we're working with with.
Companies all of them will be up from 7000, AI start ups or working with almost all of them are developing something like this.
Marge industrial companies, where there is John Deere, Wal Mart, low devoting applications kind of lumpy and basically it's an autonomous system autonomous machine in.
<unk>, it's called Jetson is a robotics machine.
That robotic machines of cards and it's called drive.
And and.
It's running autonomous <unk>.
Application on top of and he is still on top and it could be it could be moving devices and moving things around and can be picking and placing it could be.
Just watching Washington, warehousing monitoring traffic in.
Keeping traffic flow doing it could be connected to a card and whenever the current whenever the fleet of cars.
To be retrained because of the new circumstantial with discovery.
The cloud service Wood wood.
We do the <unk>.
<unk> deployed into into only be autonomous devices and so in the future. We're seeing that these industries, whether youre in retail or logistics or transportation or.
Farming bag tag.
Uh huh.
Lawnmowers consumer lawn mowers, they're going to they're not going to just the products that you buy and use from you.
From that point forward, but it will likely be a connected device with an AI service that runs on top of it and so.
These industries are so excited about it because it gives them an opportunity to change the way that they interact with their customers.
Rather than selling something once.
They sell something and provide services from top of the.
And they can stay engaged with the customers the customers could we get a product that's improving all the time.
Just like your smartphone.
That's kind of like that come from using that's the reason why I've been calling into smartphone moment.
For all these industry.
Yes.
The smart microphone, the smart speaker resolution youre going to see you're going to see.
Smart lawnmowers more track.
Yes.
Smart Air Conditioners.
Smart elevators smart building smart warehouses.
But robotics retail stores and tire stores into the entire.
Retail store.
The robot.
Hum.
From autonomous capability, there won't be driven by volume and so what's new what's new for the.
The industry therefore.
Is that right.
All of the enterprises in the world used to have computers from tier.
To facilitate two two.
The employees in.
In the supply chain.
But in the future.
All of these all of these industries.
Medical imaging or or.
We're more youre going to youre going to have.
Data centers that are hosting your products.
Just like the CSP.
And so that's a brand new industry.
And we have a we have a platform that we call <unk>, which is D.
By June.
Edge.
AI systems.
<unk>.
We have the autonomous systems, we call <unk>, which has been chosen to justin's and drones.
And between those two systems and the software stack that we have on top of it.
Sure.
In a great position to help these industries one of the time.
Transform their business model.
From the object oriented business model a fee based business model.
A connected device.
Paul.
Your next question comes from the line of Stacy <unk> with Bernstein research. Thanks for taking my question first I don't I don't.
Want to be pedantic, I suppose but.
I guess on the Q1 guide.
You're saying the gaming is the majority of the growth was was that an absolute statement or was that a percentage statement can you give us some idea of how your gaming versus data center versus other especially since it sounds like you've got $50 million in crypto specific stuff will go into the other and then I guess just on briefly could you give us some indication of where your supply situation and lead times are on your <unk>.
Pure parts within data Center, I think you'd said last quarter. They were many months on six months plus or are they still looking like that and is that sort of the limiting factor at this point in terms of what you can actually ship on the compute side data center.
Glen will take one and I'll take one.
Sure let me start off Stacy in terms of our guidance for Q1 as you know we're still in the early innings of our Applecare architecture, our <unk> architecture as it relates to gaming as well as what it relates to data center as we articulated in our call.
We have really seen continued uplift of folks adoption of a 100 and its going quite smoothly.
What we had seen in prior overall versions. So when we think about our guidance for Q1, there's many different types of concur.
Conclusions that will happen at the end of the quarter in terms of what we ship, but all of our platforms can grow.
But the majority of the majority of the gross from Q4 to Q1 will likely be gaming.
That's it.
You asked the question about non <unk>.
<unk>.
Our our company at the company level were supply constrained from our.
Our demand is.
Great.
Brian.
And.
Davidson are so long and so long as the customers more closely with us and we do a good job planning between our improvement.
There shouldn't be a supply there shouldn't be disappointed if you're producing you.
We just have to do a good job planning.
And.
We have direct relationships with each one of those each one of the world's history.
So we have terrific relationships with the Oems.
So we could do we could do excellent planning between US we shouldn't you shouldn't have to deploy you shouldn't be supply constrained there, but at the company level, we were supply constrained demand is pretty disciplined and we're going to.
We have enough supply we have enough supply.
We usually have enough supply to.
To achieve but even beyond low.
Yeah.
We had that we have.
Distribution in Q4, we expect net situation in Q1.
Yeah.
We have enough supply to grow through the year.
But the breakdown of supply is constrained and demand as you know.
Really really great.
So.
We just have to do a really good job.
Meanwhile, new low one of the things that really came through gross.
We have the world's both operations team.
Our company.
So it was really really.
It has an amazing operations to rebuild the most complex product from the world's most complex chips. The most complex packages the most complex systems.
And.
During Q4.
Yeah.
We improved our cycle time, and during Q1, and we expect them to improve our cycle time again.
<unk>.
We we really don't want us to have such an amazing operations team and so during these times it really comes in handy.
But overall overall at the company level, where we expect demand to degree the supply we have enough supply to.
Do those in the outlook.
<unk> with UBS Your line is open.
Okay.
Hi, Thanks, I had a question on crypto.
Generally I know that the CMP stuffs.
And the software drivers stuff that Youre doing for the 30 60, that's going to help a lot, but I think that there is.
In like four or five of the big currency Theyre going to move or at least they're moving where they are on a path to move from the proof of work to improve its stake which is going to be a lot less compute intensive. So I guess the question that I get a lot is how do you assess the degree to which that drives gpus back into the secondary market is there any way that you can get treated.
Again kind of a handle on that thanks.
Yes, if you look at if you look at the recent cash rates first.
First of all the transition from take some time you can't happen overnight.
And when people want to build trust in them from the conversions.
And so it will take a little bit of time.
But.
But I hope it does.
I hope to.
People use using simple timing.
And.
And a little bit of a little bit of these questions, but we don't have to they have to be answered.
However, I don't have that much optimism either that it will be all.
Proof of stake I think the.
Proof of work as a very low <unk>.
Moving on.
Security securing the currency and.
In the beginning.
While any currency as building's reputation into something like a piece of work to do so.
Alright, and so so I think proof of work is going to be a room for June.
We developed CMP for this very reason so the sort of the different versions, we have different versions of our products group.
Gaming.
Professional visualization for high performance computing for deep learning.
It stands to reason, we have the ability to do it.
Different version for CMP, and we can solar directly the way that we go to market would be to go to work into the industrial miners.
Two and it's a great benefit to them so that they don't have to chase around spot markets.
It's a great benefit to the gamers.
And because the one gig and begin to demand is just incredibly is off the chart.
And so I think this is going to be really beneficial to everyone.
The recent hatch rate growth.
What was really the result of several several dynamics. The first dynamic is the install base.
Most people thought.
Once the money the Gpus come back into into the aftermarket a small point, Doug that some people do that from the vast majority of them keep them and the reason for that is because obviously they believe in the theory.
And so they are industrial minus plus what they do.
And so they keep it around for when the profitability turns and they could kick start there.
The mine Mountain view.
We saw what we saw in the <unk>.
<unk> reported last year.
We sold the hash rates starting to grow.
Most of that.
Resulting from abroad.
The installed minors.
Activating too.
Reported.
It wasn't until earlier this year, we started to see Dominion.
Alrighty.
And our own Gpus and when that starts to happen there are some different dynamics there.
The primary the primary source these days.
Come from powerful Asics.
And then and then there's some that comes from <unk>.
The GPS in the market and so.
So I think that this is going to be.
A part of our business.
It will grow extremely large.
No matter what happens and the reason for that is because when the source of where large.
86 coming from comes from the market, which kind of muted.
And when the market becomes becomes smaller it's harder for <unk> to sustain the R&D and so on.
And some of the spot miners interest.
From minus come back and then we'll we'll create CMP.
So we expect it to be kind of the two.
A small part of our business.
As we go forward now one of the important things is to realize that.
In the near term.
Because we're in the beginning parts of our pure Ram.
Two quarters into it into a into a multi year cycle.
This is also the first time that we've completely changed.
The graphics Rts using decreasing.
Completely different than less position and so this is a fundamental change in the way, we do computer graphics and the results have been spectacular.
There are some 200 million installed base and desktops from $50 million and laptop.
The vast majority of them, we've only upgraded.
Approximately I think it's something like 50% of the installed base has been updated to two two on T X and so there's a there's a giant installed base and the installed base is growing.
Moving.
To upgrade to the next generation of computer graphics.
Your next question comes from the line of John Pitzer with Credit Suisse. Your line is open.
Guys. Thanks for let me ask the question I want to go back to data centers, you've been very kind over the last couple of quarters to call out <unk>. Both when it was a positive driver in what was a headwind I'm kind of curious.
When you look into the fiscal first quarter or is there anything of distinction to mentioned around melon ox versus core data center and I guess as a follow on.
The key metric that a lot of investors are looking at is when does the core data center business year over year growth.
To Reaccelerate and some of that is just simple math youre just comping very hard compares from last year, but just how would you think about data center year over year growth from the context of a reopening trade or of any sort of new applications out there I mean, what happened what helped the last time around was to move to natural language.
Is there another big sort of AI application, we should be thinking about as we think about data center growth re accelerating.
We're expecting we're expecting a non us was down this last quarter.
Our compute business.
Grew double digits and offset more than offset the decline in melanoma, we expect Q1 to be to be a growth quarter from Illinois and you expected.
This coming year to be quite exciting from a year.
From Illinois.
The business is growing and Ethernet has grown for CSP is green Infiniband force.
High performance computing and the switch the switches are grown switch business grew 60% year over year and so so we're seeing we're seeing really terrific growth there.
One of the new initiatives and we're going to see when you see success towards the second half because the number of adoption of the number of engagements from group.
Our new Bluefield.
Gpus.
Used for its use for virtualization.
Hyperscale.
It's also used for security.
As you know quite well the future of computing in cloud and it's multi tenant cloud.
And.
There is no there is no VPN from door to the cloud.
Millions of people, who are using every aspect of the computing so you need to help.
Distributed firewalls.
Can't have interest in one place.
The intense focus on security across all of the data from around the world is really creating a great condition from <unk>, which is route.
So I expect.
Our non answer networking business to grow very nicely. This year, and we expect Q1 to be a great growth quarter for compute as well as melanoma.
The killer.
The great driving applications.
Or AI or several day last year, not sure Youre actually right on with mutual interest interest in.
Transformers.
Model.
And what is the.
The core.
Birth and other versions Michael.
Really really made it possible for four non accruals.
To enable all kinds of new applications, so you're going to see on NAV.
Language understanding to do them.
<unk> completion.
It's going to be integrated I think it was just announced today that it was going to EBIT due to Microsoft word.
Looking at the more months for some time.
So there is some really exciting application.
The new ones that came.
Most recently our deep low.
<unk> based conversational.
We're the winner.
Our speech recognition.
As well as the speech synthesis are now based on deep learning it wasn't before.
And they were based on based on models that they ran.
On Cpus from now.
With these now deeply remodels the accuracy is much much higher and it has the ability to also mimic.
<unk> voice and be a lot more natural and from the ability to build these models are much more comprehensive much larger.
The other Rob.
A big huge driver.
Our recommendation.
Something really worth once a day.
Deep learning recommend remodel.
Alright recommended have historically.
Whether it's from shopping in personalizing web sites from personal loans personal loans and your store recommending your basket.
Recommending your music historically its been used.
Traditional machine learning algorithm to sprint.
The accuracy.
Just the extraordinary.
Economic impact.
That comes from an incremental 1% and accuracy.
For.
Most of this most of the world's large.
Internet businesses people.
People are moving moving very rapidly to deep learning based models and these models are gigantic utterly joint interest.
And so this is an area that.
Moving towards the high performance computing.
I expect us to see a lot of momentum going in the last one is the one that is a strength of minerals, which has to do with industrial.
By June.
And.
Edge Iot type of applications for all of the different industries, whether it's retailers logistics or transportation.
Agriculture one.
Warehouses to.
Two factors and so we're going to see Wednesday.
And robotics.
And a very large number of applications and industries and we're just seeing so much excitement there.
Your next question comes from the line of Aaron Rakers with Wells Fargo. Your line is open.
Yeah. Thanks for taking the questions I wanted to go back again on the data center business that you just mentioned Jansen.
Bluefield, two product poised to kind of ramp to materialize in the back half of the calendar year, how do you see that.
Is it an attach rate I think theres been discussions in the past about all servers could potentially over time incorporate this layer of acceleration how quickly should we think about that ramp and then the second question is can.
Can you just at a high level talk about how CPU power CPU strategy.
You're thinking about that in the context of the broader data center market.
Sure.
Right.
If I can just work backwards from I believe that every single data center node.
Will be.
We'll be outfitted with a GPU some day.
And Thats some day is probably call it five years from now and we spend.
The fundamental driver of it.
It's one of these securities.
Every single application.
In the data center and every single node in data center has to be has to be individually secured.
Zero Trust computing zero confidential computing and zero Trust computing.
These initiatives are going to cause every Davidson NAV every single application and everything will be secured.
Which is which means every every one of those computers.
<unk> have to have a control plane that.
Is that is isolated from.
The application.
And on the applications cannot share the same resources.
Because of that application could be nowhere.
Application could be an intruder.
No application could have access to the improvement and yet today the software defined data centers.
Software defined networking software defined storage all of the security agents are running in the same processors at the application and that Hasnt changed.
You see you see the cloud piece of the World are moving in this direction every single data center.
Moving this direction.
So every node will be.
It will be from GPU prop.
Profit for the software the infrastructure.
You're essentially moving to see.
The data center infrastructure be offloaded from the application from <unk>.
And it will be something like an <unk>.
So I think this is this is our next multibillion dollar opportunity.
<unk>.
We support every CPU in the world.
We're the only accelerated computing platform that accelerates every CPU.
Ironically, the OECD, we don't <unk>.
<unk>.
For for AI is fun.
One treatment.
Arm has such a such a such an exciting future.
Because the nature of their business model and the nature of their architecture is perfect for the future of Hyperscale data centers.
You wanted you want the most energy efficiency.
And alright.
And every single data center, because every day to centers power power constrained.
We're going to be power constrained in every aspect of computing going forward.
And so we would we would love to build.
Around the arm processor and invest in building a great ecosystem around it.
So the.
One of the world's peripherals, and all the world's applications and to work and work on any one of the Cpus.
We know today.
I wanted to start we're going to start with high performance computing just opening volume.
In areas, where we have a lot of expertise.
Build out build on a pump.
So you're starting to see.
Youre starting to see one one industry leader after another embraced arm.
And I think that's terrific.
Now we got to go to.
Energize that with all of the ecosystem support.
You can't we can't just be from a.
Vertical applications.
But we want accretive in <unk>.
On the channel.
As you have more R&D ecosystem.
Your next question comes from the line of Mark will impact just from Jefferies. Your line is now open.
Hi, Thanks for taking my question.
A question for Jensen I think Justin if you look at the past computing areas typically it's one ecosystem that captured 80% of the value of that computing era.
Mainframes with IBM, and many computers or attack Pcs wind tower cell phones, Nokia and then Apple.
So if you don't get the ecosystem right, then youre spending 20% of the market with a with a handful of players.
Next era of computing.
Parallel processing, our AI I think you've articulate the most compelling architectural vision of the data center of the future with data center scale computing devices with Cpus Gpus Gpus integrated in the same box.
Serving all workloads I imagined virtualized environment can you help us understand where is the market in embracing that vision and where some videos and <unk>.
Building out that ecosystem for that that data center scale.
Computing vision.
Maybe as part of that.
To what extent is cuda.
Colonel for that ecosystem. Thank you.
Yes.
We I think we've done a great job.
Building out to them.
The platforms for several ecosystems around the world.
And.
The domains that we do incredibly well out on the domains that I have to do with accelerated computing and pioneered this approach.
And we.
We brought it to a high performance computing at first and we so we accelerated some scientific computing in the market.
Supercomputing for own researchers anybody who wants to have a supercomputer now camp.
And computing will simply not be.
The obstacle to somebody discovering you did the same for artificial intelligence and put the same through visualization.
We brought we expanded the reach of gaining tremendous free.
G Force today is the largest gaming platform.
It's the largest single largest volume of computers.
Used for gaming.
<unk>.
And in each case, we expanded the mortgage from industry and we would like to do the same for Ford.
Data center scale computing as it applies to Virtualized in these applications.
These applications are are also in the process.
Historically required dedicated systems.
Moving into <unk>.
Into a virtualized data center environment.
We are best in doing that.
They run on our platform today.
We have the ability to virtualized, it and put it into the data center and make it available and so these applications.
These domains are some of the most important domains in the world.
And.
So we're in the process will be non baidu, so and making our architecture available to CSP and Oems.
We could we could create.
Creative accelerated computing.
<unk>.
Available too.
So everybody and so thats you.
Youre seeing our journey doing them.
First creating an architect this platform and then putting it literally into every single day in center in the room.
We would also like to the next step of our journey.
The phase III of AI and <unk>.
Has to do about it has to do with.
Turning every endpoint into a data center, whether it's a <unk> tower of warehouse, a retail store a self driving car a self driving trucks.
These are going to be they're all going to be.
Essentially autonomous data centers.
And are there going to one day on it but they're going to run a lot more youre going to do security in real time.
It's networking is going to be incredible, it's going to run software slide Julien and GPA Soldiering price you recall.
<unk>.
And so this.
These platforms are going to become data centers will be secure.
The software is protected.
You can't tamper with it will be tempered with it.
Of course more months.
And so the capability of these clouds will move all the way out to the edge.
And the best best positioned to be able to do that.
So I think the.
In this new world.
Posed.
Post Moore's law posted non gaming.
In this new world, where AI and <unk>.
With the right software in this new World where.
Data centers are.
We're going to be literally everywhere and they're unprotected.
No giant building with a whole bunch of people have been secured.
And in this new World where software.
Software is going to enable the autonomous future.
I think we are.
Perfect perfectly positioned for it.
This is all the time, we have for Q&A today, I will now turn the call back to CEO Jensen Huang.
Thanks for joining us today Q4 capped a truly breakout year for Nvidia.
The two biggest engines of our business gaming and data center posted powerful growth.
Amy has become the world's largest media and entertainment industry and will grow to be much larger.
And again gamers will create will play the learnings from connect the.
The medium of gaming can host any type of game.
<unk> volume in the countless meta vs.
Some for play from from work.
Gaming is simultaneously a great technology and a great business driving from our company.
This year we.
We also closed our Melanotic acquisition and successfully United the amazing talent of our companies.
Combined we possess deep expertise in all aspects of computing and networking.
To drive the architecture of modern data centers.
Cloud computing and hybrid standards have transformed the data center into the new unit of computing.
Chips on servers are just elements of the data center scaled computers now.
With our expertise in AI computing.
<unk> accelerated computing.
Our deep network to computing expertise and cloud to edge platforms.
And then there is helping to drive a great computer industry transformation.
And our planned acquisition of arm the world's most popular and energy efficient CPU companies will help position Nvidia to lead an age of AI.
This year was extraordinary.
The pandemic will pass.
But the world has been changed.
Technology adoption is accelerating across every industry.
Companies and products need to be more remote and Panama.
This will drive data centers AI and robotics.
This underlines the accelerated adoption of Nvidia is technology.
The urgency to digitize automate and accelerate innovation has never been higher.
We are ready.
We look forward to updating you on our progress next quarter. Thanks, a lot.
This concludes today's conference call you may now disconnect.
Okay.
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Yes.
Yes.
Hi.
Sure.
Yes.
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Alright.