(Updates with additional comments from Nvidia, share price.)
By Jerry A. DiColo
Of DOW JONES NEWSWIRES
NEW YORK -(Dow Jones)- Nvidia Corp. (NVDA) said Thursday its fiscal third-quarter profit--the company's second in the past five quarters--jumped 74%, helped by higher margins and strong demand for its graphics cards.
Shares climbed 6.6% to $13.08 in after-hours trading. The graphics-chip maker's results far exceeded its own and Wall Street's expectations and it predicted fiscal fourth-quarter revenue above analysts' estimate.
"Demand is really strong. We came into this quarter with very, very strong demand again," said Chief Executive Jen-Hsun Huang during a conference call to discuss earnings.
"In this quarter, it is pretty clear that everything grew," he said.
In particular, the company's GPU business, which sells the graphics cards used to play video games and process other video-intensive data, posted 25% growth from the second quarter.
Nvidia, which makes graphics chips for desktop and notebook computers, as well as mobile devices and high-end workstations, has seen demand pick up as sales of computers and other tech products increase. Though the stock is down by about 25% from its 52-week high in September, it has more than doubled from a four-year low last November.
However, the company faces renewed competition from rival Advanced Micro Devices Inc. (AMD) as well as a licensing dispute with Intel Corp. (INTC). Industry analysts say that Nvidia has lost market share over the past quarter to AMD.
Nvidia expects revenue to rise 2% from the third quarter to $921.3 million in the fourth quarter, while analysts on average were looking for $868.1 million, according to Thomson Reuters.
The relatively low sequential growth expectation is due to supply constraints that Nvidia faces after witnessing stronger-than-expected demand for new chips made with its 40-nanometer manufacturing process, said Chief Financial Officer David White.
White also blamed recent market share losses on Nvidia's constrained supply, which is expected to take a "a couple of quarters" to rectify.
"We came out of last quarter several million units short, and that is a lot of PCs," said Nvidia's Huang. "This surely constrains our growth." He added that the company probably had an opportunity to do $50 million to $100 million more in business in the previous quarter.
For the quarter ended Oct. 25, Nvidia reported a profit of $107.6 million, or 19 cents a share, up from $61.7 million, or 11 cents a share, a year earlier. The prior year had a net 9 cents in charges. Analysts estimated earnings of 10 cents in the latest quarter. An insurance gain in the latest quarter also helped profits.
Revenue rose 0.6% to $903.2 million. In August, Nvidia had predicted $815.3 million to $830.9 million, above analysts' then-estimate of $767 million.
Gross margin rose to 43.4% from 41% amid the sales gains.
In its mobile business, based on its new Tegra chip, Nvidia is working on more than 50 projects, Huang said, including media players, smartphones, tablet computers and gadgets for automobiles. The Tegra chip is "growing at a steady rate," he said.
-By Jerry A. DiColo, Dow Jones Newswires; 212-416-2155; jerry.dicolo@dowjones.com
(Kathy Shwiff contributed to this report.)