Analysis: NVDA ATVI FB BABA AMZN BIDU GOOGL IBM MSFT ORCL

Nvidia (NVDA) reported a top and bottom line beat with its fourth-quarter earnings release after today's closing bell. Revenue of $2.91 billion (up 34% year over year) beat the consensus of $2.68 billion, and non-GAAP earnings per share of $1.72 (up 52% year over year) smashed the consensus of $1.16. In addition to the monstrous top line growth, Nvidia improved its non-GAAP gross margins by 190 basis points year over year and 240 basis points sequentially.

Nvidia smoked this quarter, delivering terrific revenue numbers and earnings per share growth, and the quarter even included improving margins. Further boosting Nvidia's sentiment, management issued first quarter fiscal 2019 guidance above expectations. Nvidia expects next quarter's revenue will be about $2.9 billion, plus or minus two percent. That figure's midpoint is well above the consensus of $2.47 billion. Investors are digesting this quarter very well as the stock is up about 10% in the after-hours market, however, given the recent volatility in pre/post hours trading, we cannot fully estimate where the stock will be tomorrow morning.

Digging deeper into the quarter, Gaming revenue of $1.739 billion came in well ahead of expectations of $1.567. Demonstrating the rise in popularity of video games (and part of our thesis in Activision Blizzard (ATVI) ), the quarter's result is a 29% year over year increase and is also more than 11% higher sequentially. In addition to many popular titles that were released during the holiday season, sales of the Nintendo Switch continue to drive Nvidia's growth. CFO Colette Kress also highlighted that eSports continues to grow, and she even mentioned how the sign of its popularity was the successful launch of Activision Blizzard's (ATVI) Overwatch league.

Cryptocurrency related revenue wiggles its way in both the gaming and OEM segments, and Kress said on the call that strong demand in this market exceeded expectations. The strong crypto-related demand for Nvidia's GPU's contributed to the lower than historical channel inventory levels, causing pent up demand for gamers. Kress also added that crypto related revenue contributed a higher percentage to the overall business compared to the previous quarter. Going forward, CEO Jensen Huang said that they model crypto revenue as flat as the management team is persistent in telling the community that crypto is not part of the Nvidia story.

Professional Visualization revenue was $254 million, and this also beat consensus of $244 million. This segment's revenue total increased about 13% year over year and about 6% sequentially. Growth in this business was driven by real-time rendering and emerging applications like artificial intelligence and virtual reality. We expect growth to continue as virtual reality becomes more mainstream. Major tech companies like Facebook (FB) have been developing ways to utilize VR, and the industry will be powered by Nvidia.

The Data Center segment also beat analyst expectations as the company achieved $606 million, which is $55 million more than the consensus view. This segment's growth continued its torrid pace as revenue increased about 105% year over year and 20% from the previous quarter. Strong adoption of the Tesla V100 GPU continues to drive these figures. Recall that two quarters ago, investors were concerned that the switch to this GPU, which began shipping in Q2, would be slow to adopt, however, this ramp has been strong as the GPU is used by all the major cloud providers, like Alibaba (BABA) , Amazon (AMZN) Web Services, Baidu (BIDU) , Google (GOOGL) , IBM (IBM) , Microsoft (MSFT) Azure, Oracle (ORCL) , and Tencent, who all need artificial intelligence and the best computing performance in the industry. Speaking more on the data centers, Huang added that they are seeing repeat business with existing customers, and the second wave is just now ramping up. The third wave, which are internet service applications for consumers, is also ramping, according to Huang, and he added that he is very excited about this growth.

Auto revenue increased slightly year over year from $128 million to $132 million, but this result missed expectations of $149 million. This decline, a rarity for Nvidia, was due to the company's transition from infotainment. Instead, Nvidia is focusing on its DRIVE Xavier, the world's first autonomous machine processor. This chip will be available to customers this quarter, and this chip and the Nvidia DRIVE, the world's first functionally safe AI self-driving platform, should "drive" future sales as this technology is a must have in autonomous driving. Providing his timeline of this revolutionary market, Huang believes that we are going to see a large deployment of robot taxis this year and next, and autonomous driving vehicles will start in late 2019 with more in 2020. By 2022, Huang expects that almost every premium car will have automatic driving capabilities.

Lastly, OEM and IP revenue came in at $180 million, beating expectations of $167 million. This segment grew about 2% year over year but fell $11 million from the previous quarter's result. Again, this segment partially includes some crypto-related revenue.

Overall, it was a lights-out quarter for the company. Nvidia is at the center of gaming, the cloud, and autonomous driving, which all are trends with plenty of runway to grow. Gaming will rise alongside the popularity of eSports, the growth potential of the cloud is still being underappreciated by the market, and Nvidia's autonomous driving technology is pioneering the future of transportation. This quarter fully validates the current premium on Nvidia's shares, and we think the potential of the company, which has its hands in all key areas of the future of tech, deserves even more. Accordingly, we are raising our price target to $250, which reflects roughly 40x consensus 2020 earnings that analysts will likely increase after this blow out quarter.

At the time of publication, Action Alerts PLUS, which Cramer co-manages as a charitable trust, was long NVDA, FB, GOOGL, ATVI and MSFT.