Key Points
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Nvidia’s data center segment now breaks out revenue between hyperscalers and other customers.
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Revenue from hyperscalers more than doubled in the past year and accounts for half of its data center business.
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When Nvidia (NASDAQ: NVDA) reported earnings last month, much of the focus was on its impressive numbers and encouraging outlook. And it’s hard to argue with that, given that the growth story around the tech giant and its artificial intelligence (AI) chips is what makes the stock a buy. As long as its results are strong, demand is robust, and the outlook is solid, investors are likely to continue to load up on the company’s shares.
But what investors may have missed recently is an important change to its financial reporting. While it may seem like a modest move, the implications could be significant moving forward. Here’s what’s changed, and why it may play a big role in determining how the AI stock performs from here on out.
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Its data center segment now breaks out hyperscale revenue
In the past, Nvidia broke out its revenue according to segments such as data center, gaming, auto, and professional visualization. Now, however, its main segments are data center and edge computing. And within data center, it breaks out revenue in terms of hyperscale and ACIE, which includes AI clouds, industrial, and enterprise. Effectively, it’s a breakout between revenue from the largest tech companies (hyperscalers) and other businesses.
For investors, this can be crucial because it underlines just how much growth Nvidia is generating from hyperscalers and how dependent and potentially vulnerable it is to a small group of tech giants. In its most recent quarter, revenue from hyperscale totaled $37.9 billion, which accounted for almost exactly half of its data center revenue ($75.2 billion).
If investors see more growth coming from outside of hyperscale, that can be an encouraging sign that the business is diversifying and potentially capitalizing on new growth opportunities.
Nvidia’s business looks solid regardless of how it breaks out its revenue
Nvidia’s been a growth beast, and that’s evident no matter how you look at its business. Hyperscale revenue rose by 115% in the most recent quarter while ACIE sales increased by 74%. The company’s chips are go-to options for many companies investing in AI across all types of industries and sectors.
The reporting change does, however, show an encouraging sign that the business is growing well outside of just hyperscalers, and that’s inevitably something investors will keep an eye on in future earnings reports. With a strong, diversified business, Nvidia’s stock looks to remain in excellent shape due to ongoing opportunities in AI, making it a good buy for the foreseeable future.
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David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
