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NVIDIA Announces Financial Results for Second Quarter Fiscal 2017

SANTA CLARA, CA -- (Marketwired) -- Aug 11, 2016 -- NVIDIA (NASDAQ: NVDA)

NVIDIA (NASDAQ: NVDA) today reported revenue for the second quarter ended July 31, 2016, of $1.43 billion, up 24 percent from $1.15 billion a year earlier, and up 9 percent from $1.30 billion in the previous quarter.

GAAP earnings per diluted share for the quarter were $0.40, compared with $0.05 a year ago and up 21 percent from $0.33 in the previous quarter. Non-GAAP earnings per diluted share were $0.53, up 56 percent from $0.34 a year earlier and up 15 percent from $0.46 in the previous quarter.

"Strong demand for our new Pascal-generation GPUs and surging interest in deep learning drove record results," said Jen-Hsun Huang, co-founder and chief executive officer, NVIDIA. "Our strategy to focus on creating the future where graphics, computer vision and artificial intelligence converge is fueling growth across our specialized platforms -- Gaming, Pro Visualization, Datacenter and Automotive."

"We are more excited than ever about the impact of deep learning and AI, which will touch every industry and market. We have made significant investments over the past five years to evolve our entire GPU computing stack for deep learning. Now, we are well positioned to partner with researchers and developers all over the world to democratize this powerful technology and invent its future," he said.

Capital Return
During the first half of fiscal 2017, NVIDIA paid $509 million in share repurchases and $124 million in cash dividends.

NVIDIA will pay its next quarterly cash dividend of $0.115 per share on September 16, 2016, to all shareholders of record on August 25, 2016.

Q2 FY2017 Summary

                                                                            
----------------------------------------------------------------------------
                                    GAAP                                    
----------------------------------------------------------------------------
($ in millions except                                                       
earnings per share)        Q2 FY17  Q1 FY17  Q2 FY16      Q/Q         Y/Y   
----------------------------------------------------------------------------
Revenue                     $1,428   $1,305   $1,153        Up 9%     Up 24%
----------------------------------------------------------------------------
Gross margin                 57.9%    57.5%    55.0%    Up 40 bps Up 290 bps
----------------------------------------------------------------------------
Operating expenses            $509     $506     $558        Up 1%    Down 9%
----------------------------------------------------------------------------
Operating income              $317     $245      $76       Up 29%    Up 317%
----------------------------------------------------------------------------
Net income                    $253     $196      $26       Up 29%    Up 873%
----------------------------------------------------------------------------
Diluted earnings per         $0.40    $0.33    $0.05       Up 21%    Up 700%
share                                                                       
----------------------------------------------------------------------------
                                                                            
                                                                            
----------------------------------------------------------------------------
                                  Non-GAAP                                  
----------------------------------------------------------------------------
($ in millions except                                                       
earnings per share)        Q2 FY17  Q1 FY17  Q2 FY16      Q/Q         Y/Y   
----------------------------------------------------------------------------
Revenue                     $1,428   $1,305   $1,153        Up 9%     Up 24%
----------------------------------------------------------------------------
Gross margin                 58.1%    58.6%    56.6%  Down 50 bps Up 150 bps
----------------------------------------------------------------------------
Operating expenses            $448     $443     $421        Up 1%      Up 6%
----------------------------------------------------------------------------
Operating income              $382     $322     $231       Up 19%     Up 65%
----------------------------------------------------------------------------
Net income                    $313     $263     $190       Up 19%     Up 65%
----------------------------------------------------------------------------
Diluted earnings per         $0.53    $0.46    $0.34       Up 15%     Up 56%
share                                                                       
----------------------------------------------------------------------------
                                                                            

NVIDIA's outlook for the third quarter of fiscal 2017 is as follows:

Second Quarter Fiscal 2017 Highlights

During the second quarter, NVIDIA achieved progress in each of its four major platforms:

Gaming:

Professional Visualization:

Datacenter:

Automotive:

CFO Commentary
Commentary on the quarter by Colette Kress, NVIDIA's executive vice president and chief financial officer, is available at http://investor.nvidia.com/.

Conference Call and Webcast Information
NVIDIA will conduct a conference call with analysts and investors to discuss its second quarter fiscal 2017 financial results and current financial prospects today at 2 p.m. Pacific time (5 p.m. Eastern time). To listen to the conference call, dial (877) 223-3864 in the United States or (574) 990-1377 internationally, and provide the following conference ID: 47401500. A live webcast (listen-only mode) of the conference call will be accessible at NVIDIA's investor relations website, http://investor.nvidia.com, and at www.streetevents.com. The webcast will be recorded and available for replay until the company's conference call to discuss its financial results for its third quarter of fiscal 2017.

Non-GAAP Measures

To supplement NVIDIA's Condensed Consolidated Statements of Income and Condensed Consolidated Balance Sheets 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 operating income, non-GAAP other income (expense), net, non-GAAP income tax expense, non-GAAP net income, non-GAAP net income, or earnings, per diluted share, non-GAAP diluted shares, 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, legal settlement costs, product warranty charge, acquisition-related costs, contributions, restructuring and other charges, gains from non-affiliated investments, interest expense related to amortization of debt discount, and the associated tax impact of these items, where applicable. Weighted average shares used in the non-GAAP diluted net income per share computation includes the anti-dilution impact of the company's Note Hedge. 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 its non-GAAP measures may be different from non-GAAP measures used by other companies.

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About NVIDIA
NVIDIA (NASDAQ: NVDA) is a computer technology company that has pioneered GPU-accelerated computing. It targets the world's most demanding users -- gamers, designers and scientists -- with products, services and software that power amazing experiences in virtual reality, artificial intelligence, professional visualization and autonomous cars. More information at http://nvidianews.nvidia.com/.

Certain statements in this press release including, but not limited to statements as to: surging interest in deep learning; the company's strategy fueling growth across the company's specialized platforms; deep learning and AI touching every industry and market; the company's next quarterly cash dividend; the company's financial outlook for the third quarter of fiscal 2017; the company's tax rates for the third quarter of fiscal 2017; and the impact and benefits of Pascal GPUs, NVIDIA VR Funhouse, NVIDIA Ansel, Quadro P6000, NVIDIA DesignWorks, NVIDIA VRWorks, Tesla M10, and Tesla P100 GPU accelerator 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 reports NVIDIA files with the Securities and Exchange Commission, or SEC, including its Form 10-Q for the fiscal period ended May 1, 2016. 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.

© 2016 NVIDIA Corporation. All rights reserved. NVIDIA, the NVIDIA logo, GeForce, Quadro, Tesla, NVIDIA DesignWorks, NVIDIA VRWorks, and Pascal 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         Six Months Ended     
                         ------------------------  ------------------------ 
                           July 31,     July 26,     July 31,     July 26,  
                             2016         2015         2016         2015    
                         -----------  -----------  -----------  ----------- 
                                                                            
Revenue                  $     1,428  $     1,153  $     2,733  $     2,304 
Cost of revenue                  602          519        1,156        1,018 
                         -----------  -----------  -----------  ----------- 
Gross profit                     826          634        1,577        1,286 
Operating expenses                                                          
  Research and                                                              
   development                   350          320          697          658 
  Sales, general and                                                        
   administrative                157          149          316          289 
  Restructuring and other                                                   
   charges                         2           89            3           89 
                         -----------  -----------  -----------  ----------- 
    Total operating                                                         
     expenses                    509          558        1,016        1,036 
                         -----------  -----------  -----------  ----------- 
Income from operations           317           76          561          250 
  Interest income                 12            9           23           18 
  Interest expense               (12)         (12)         (23)         (22)
  Other income (expense),                                                   
   net                             -           (1)          (3)          (2)
                         -----------  -----------  -----------  ----------- 
Income before income tax                                                    
 expense                         317           72          558          244 
Income tax expense                64           46          109           84 
                         -----------  -----------  -----------  ----------- 
Net income               $       253  $        26  $       449  $       160 
                         ===========  ===========  ===========  =========== 
                                                                            
Net income per share:                                                       
  Basic                  $      0.47  $      0.05  $      0.84  $      0.29 
                         ===========  ===========  ===========  =========== 
  Diluted                $      0.40  $      0.05  $      0.73  $      0.28 
                         ===========  ===========  ===========  =========== 
                                                                            
Weighted average shares                                                     
 used in per share                                                          
 computation:                                                               
  Basic                          534          541          536          545 
  Diluted                        631          556          617          563 
                                                                            
                                                                            
                                                                            
                             NVIDIA CORPORATION                             
                    CONDENSED CONSOLIDATED BALANCE SHEETS                   
                                (In millions)                               
                                 (Unaudited)                                
                                                                            
                                                                            
                                                    July 31,    January 31, 
                                                      2016          2016    
                                                 ------------- -------------
ASSETS                                                                      
                                                                            
Current assets:                                                             
  Cash, cash equivalents and marketable                                     
   securities                                    $       4,879 $       5,037
  Accounts receivable, net                                 644           505
  Inventories                                              521           418
  Prepaid expenses and other current assets                112            93
                                                 ------------- -------------
    Total current assets                                 6,156         6,053
                                                                            
Property and equipment, net                                485           466
Goodwill                                                   618           618
Intangible assets, net                                     138           166
Other assets                                                64            67
                                                 ------------- -------------
    Total assets                                 $       7,461 $       7,370
                                                 ============= =============
                                                                            
LIABILITIES, CONVERTIBLE DEBT CONVERSION OBLIGATION AND SHAREHOLDERS' EQUITY
                                                                            
Current liabilities:                                                        
  Accounts payable                               $         423 $         296
  Accrued and other current liabilities                    556           642
  Convertible short-term debt                            1,428         1,413
                                                 ------------- -------------
    Total current liabilities                            2,407         2,351
                                                                            
Other long-term liabilities                                494           453
Capital lease obligations, long-term                         8            10
                                                 ------------- -------------
    Total liabilities                                    2,909         2,814
                                                                            
Convertible debt conversion obligation                      72            87
                                                                            
Shareholders' equity                                     4,480         4,469
                                                 ------------- -------------
    Total liabilities, convertible debt                                     
     conversion obligation and shareholders'                                
     equity                                      $       7,461 $       7,370
                                                 ============= =============
                                                                            
                                                                            
                                                                            
                             NVIDIA CORPORATION                             
           RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES            
                    (In millions, except per share data)                    
                                (Unaudited)                                 
                                                                            
                             Three Months Ended          Six Months Ended   
                       ------------------------------  -------------------- 
                        July 31,   May 1,    July 26,   July 31,   July 26, 
                          2016      2016       2015       2016       2015   
                       ---------  --------  ---------  ---------  --------- 
                                                                            
GAAP gross profit      $     826  $    751  $     634  $   1,577  $   1,286 
  GAAP gross margin         57.9%     57.5%      55.0%      57.7%      55.8%
    Stock-based                                                             
     compensation                                                           
     expense (A)               4         4          3          8          6 
    Legal settlement                                                        
     costs (B)                 -        10          -         10          - 
    Product warranty                                                        
     charge (C)                -         -         15          -         15 
                       ---------  --------  ---------  ---------  --------- 
Non-GAAP gross profit  $     830  $    765  $     652  $   1,595  $   1,307 
                       =========  ========  =========  =========  ========= 
  Non-GAAP gross                                                            
   margin                   58.1%     58.6%      56.6%      58.4%      56.7%
                                                                            
GAAP operating                                                              
 expenses              $     509  $    506  $     558  $   1,016  $   1,036 
  Stock-based                                                               
   compensation                                                             
   expense (A)               (54)      (49)       (44)      (104)       (87)
  Legal settlement                                                          
   costs (B)                   -        (6)         -         (6)         - 
  Acquisition-related                                                       
   costs (D)                  (4)       (4)        (4)        (8)       (13)
  Contributions               (1)       (3)         -         (4)         - 
  Restructuring and                                                         
   other charges              (2)       (1)       (89)        (3)       (89)
                       ---------  --------  ---------  ---------  --------- 
Non-GAAP operating                                                          
 expenses              $     448  $    443  $     421  $     891  $     847 
                       =========  ========  =========  =========  ========= 
                                                                            
GAAP income from                                                            
 operations            $     317  $    245  $      76  $     561  $     250 
  Total impact of non-                                                      
   GAAP adjustments to                                                      
   income from                                                              
   operations                 65        77        155        143        211 
                       ---------  --------  ---------  ---------  --------- 
Non-GAAP income from                                                        
 operations            $     382  $    322  $     231  $     704  $     461 
                       =========  ========  =========  =========  ========= 
                                                                            
GAAP other income                                                           
 (expense), net        $       -  $     (4) $      (4) $      (3) $      (6)
  Gains from non-                                                           
   affiliated                                                               
   investments                 -        (3)         -         (3)         - 
  Interest expense                                                          
   related to                                                               
   amortization of                                                          
   debt discount               7         7          7         14         14 
                       ---------  --------  ---------  ---------  --------- 
Non-GAAP other income                                                       
 (expense), net        $       7  $      -  $       3  $       8  $       8 
                       =========  ========  =========  =========  ========= 
                                                                            
GAAP net income        $     253  $    196  $      26  $     449  $     160 
  Total pre-tax impact                                                      
   of non-GAAP                                                              
   adjustments                72        81        162        154        225 
  Income tax impact of                                                      
   non-GAAP                                                                 
   adjustments               (12)      (14)         2        (27)        (8)
                       ---------  --------  ---------  ---------  --------- 
Non-GAAP net income    $     313  $    263  $     190  $     576  $     377 
                       =========  ========  =========  =========  ========= 
                                                                            
Diluted net income per                                                      
 share                                                                      
  GAAP                 $    0.40  $   0.33  $    0.05  $    0.73  $    0.28 
                       =========  ========  =========  =========  ========= 
  Non-GAAP             $    0.53  $   0.46  $    0.34  $    0.99  $    0.68 
                       =========  ========  =========  =========  ========= 
                                                                            
Weighted average                                                            
 shares used in                                                             
 diluted net income                                                         
 per share computation                                                      
  GAAP                       631       597        556        617        563 
  Anti-dilution impact                                                      
   from note hedge (E)       (43)      (29)        (4)       (37)        (5)
                       ---------  --------  ---------  ---------  --------- 
  Non-GAAP                   588       568        552        580        558 
                       =========  ========  =========  =========  ========= 
                                                                            
GAAP net cash provided                                                      
 by operating                                                               
 activities            $     184  $    309  $     163  $     493  $     409 
  Purchase of property                                                      
   and equipment and                                                        
   intangible assets         (33)      (55)       (24)       (88)       (54)
                       ---------  --------  ---------  ---------  --------- 
Free cash flow         $     151  $    254  $     139  $     405  $     355 
                       =========  ========  =========  =========  ========= 
                                                                            
----------------------------------------------------------------------------
(A) Excludes stock-based compensation as follows:                           
                                                                            
                              Three Months Ended          Six Months Ended  
                       ------------------------------  -------------------- 
                        July 31,    May 1,   July 26,   July 31,   July 26, 
                          2016       2016      2015       2016       2015   
                       ---------  --------  ---------  ---------  --------- 
      Cost of revenue  $       4  $      4  $       3  $       8  $       6 
      Research and                                                          
       development     $      30  $     29  $      27  $      59  $      54 
      Sales, general                                                        
       and                                                                  
       administrative  $      24  $     20  $      17  $      44  $      33 
                                                                            
(B) Legal settlement with Advanced Silicon Technologies LLC and other       
 settlement related costs.                                                  
                                                                            
(C) Represents warranty charge associated with a product recall.            
                                                                            
(D) Consists of amortization of acquisition-related intangible assets,      
 transaction costs, compensation charges, and other credits related to      
 acquisitions.                                                              
                                                                            
(E) Represents the number of shares that would be delivered upon conversion 
 of the currently outstanding 1.00% Convertible Senior Notes Due 2018.      
 Under U.S. GAAP, shares delivered in hedge transactions are not considered 
 offsetting shares in the fully diluted share calculation until actually    
 delivered.                                                                 
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                             NVIDIA CORPORATION                             
                 RECONCILIATION OF GAAP TO NON-GAAP OUTLOOK                 
                                                                            
                                                                            
                                                             Q3 FY2017      
                                                              Outlook       
                                                        ------------------- 
                                                                            
GAAP gross margin                                                      57.8%
  Impact of stock-based compensation expense                            0.2%
                                                        ------------------- 
Non-GAAP gross margin                                                  58.0%
                                                        =================== 
                                                                            
                                                                            
                                                             Q3 FY2017      
                                                              Outlook       
                                                        ------------------- 
                                                           (In millions)    
                                                                            
GAAP operating expenses                                 $               530 
  Stock-based compensation expense, acquisition-related                     
   costs, and other costs                                               (65)
                                                        ------------------- 
Non-GAAP operating expenses                             $               465 
                                                        =================== 


For further information, contact:

Arnab Chanda
Investor Relations 
NVIDIA Corporation
(408) 566-6616

achanda@nvidia.com 

Robert Sherbin
Corporate Communications
NVIDIA Corporation 
(408) 566-5150

rsherbin@nvidia.com