"NVIDIA supplies graphics processing units (GPUs) to all the major cloud providers, and its sales growth in that market has been explosive. Its data center revenue soared from $339 million in fiscal 2016 to $2.99 billion in fiscal 2020. Sales in that segment totaled $1.14 billion in the first quarter of fiscal 2021, up 80% year over year.
NVIDIA just launched the A100 GPU, which will be deployed by Alibaba Cloud, AWS, Baidu Cloud, Dell Technologies, Alphabet's Google Cloud, and Microsoft Azure. Its DGX A100 can use up to 56 GPUs to handle the most demanding high-performance workloads, such as artificial intelligence applications.
Selling this high-powered hardware is great for margins. Non-GAAP gross margin increased to 65.8% last quarter, up 6.8 percentage points year over year. This was due to a favorable sales mix of GeForce GPUs for gaming and higher data center sales.
NVIDIA just completed its acquisition of Mellanox, a leading supplier of switches, cables, and other networking solutions for data centers. Mellanox will be included in NVIDIA's data center segment and gives the company a much wider catalog of offerings with which to compete for business as the big cloud providers expand their data center operations.
With the addition of Mellanox, NVIDIA expects fiscal second-quarter revenue to reach approximately $3.65 billion, up 41% year over year. NVIDIA is in a great position to benefit from the growth of cloud computing..."