NVIDIA Reports Operating Results for the Third Quarter of Fiscal Year 2007

Strong Segment Share Gains in Core Business Units Produce Record Revenue

SANTA CLARA, Calif., Nov. 9 /PRNewswire-FirstCall/ -- NVIDIA Corporation (NASDAQ: NVDA) today reported financial results for the third quarter of fiscal 2007 ended October 29, 2006.

(Logo: http://www.newscom.com/cgi-bin/prnh/20020613/NVDALOGO )

For the third quarter of fiscal 2007, revenue increased to a record $820.6 million, compared to $583.4 million for the third quarter of fiscal 2006, an increase of 41 percent. Net income computed in accordance with U.S. generally accepted accounting principles (GAAP) for the third quarter of fiscal 2007 was $106.5 million, or $0.27 per diluted share. GAAP net income for the third quarter of fiscal 2007 includes expenses of $42.6 million, net of tax, which is comprised primarily of stock-based compensation expense plus a one-time charge associated with licensing certain patents.

Non-GAAP net income for the third quarter of fiscal 2007, which excludes SFAS 123R and other stock-based compensation charges and the related tax impact, was $149.2 million, or $0.39 per diluted share.

For the second quarter of fiscal 2007 ended July 30, 2006, previously reported revenue was $687.5 million. GAAP net income for the second quarter of fiscal 2007 was $86.8 million, or $0.22 per diluted share. GAAP net income for the second quarter of fiscal 2007 includes stock-based compensation expense net of tax of $25.3 million.

Non-GAAP net income for the second quarter of fiscal 2007, which excludes SFAS 123R and other stock-based compensation charges and the related tax impact, was $112.0 million, or $0.29 per diluted share.

Revenue for the nine months ended October 29, 2006 was a record $2.19 billion, compared to revenue of $1.74 billion for the nine months ended October 30, 2005, an increase of 26 percent.

"The third quarter was one of the best in NVIDIA's history," said Jen-Hsun Huang, president and CEO of NVIDIA. "For the third consecutive quarter, we delivered record revenue as we continued to gain share in each of our core businesses."

"This week, we made two announcements that set the foundation for continued strong growth in the coming year and beyond. First, we announced the GeForce 8800 and nForce 680i, which represent the most ambitious undertaking in the history of the company. The GeForce 8800 is the world's first DX10 unified shader GPU. The nForce 680i is the highest performance motherboard supporting Intel's exciting Core 2 Duo processors. The combination of GeForce 8800 and nForce 680i delivers what we believe are the perfect technologies to support the biggest confluence of technology changes to hit our industry in the last 10 years -- Windows Vista, DX10 and Blu-ray/HD. Second, we announced the acquisition of PortalPlayer. By combining our GPU technology with PortalPlayer's application processor expertise, we intend to be a major player in the mobile industry by delivering the two most essential technologies for next generation handheld devices," Huang said.

    Third Quarter Fiscal 2007 and Recent Highlights:

    -- Non-GAAP gross margin reached a Company high of 42.9 percent, an
       increase of 20 basis points sequentially from the second quarter of
       fiscal 2007.  GAAP gross margin was 40.6 percent.
    -- NVIDIA launched and shipped the NVIDIA GeForce(R) 8800 series GPUs, the
       PC industry's first unified shader architecture GPU to support the
       Microsoft DirectX 10 API.
    -- NVIDIA launched and shipped the nForce(R) 680i SLI MCP, designed to
       deliver the highest performance for Intel Core2 Quad and Core2
       Duo-based PCs.
    -- NVIDIA grew share in total standalone graphics, which includes desktop
       and notebook PCs, to 55 percent, and is now the largest supplier of
       standalone GPUs according to the Mercury Research Third Quarter 2006 PC
       Graphics Report.
    -- NVIDIA grew share in total desktop graphics to 33 percent, and is now
       the largest supplier of desktop PC graphics according to Mercury
       Research.
    -- The NVIDIA GeForce Go notebook GPU product line achieved record revenue
       for the third consecutive quarter.  NVIDIA grew share to a leading 52
       percent of the notebook standalone GPU segment.  Notebook GPU revenue
       grew 46 percent sequentially from fiscal Q2 2007 and more than 100
       percent in revenue year-over-year.
    -- The NVIDIA nForce MCP product line achieved record revenue for its
       ninth consecutive quarter.  NVIDIA nForce MCP revenue grew 35 percent
       sequentially from fiscal Q2 2007 and more than doubled in revenue
       year-over-year.
    -- NVIDIA nForce MCPs increased their share of the AMD64 segment to 61
       percent as reported in the Mercury Research Third Quarter Worldwide
       Chipset Report 2006.  NVIDIA is now the second largest core logic
       supplier in the world, according to the Mercury Research Third Quarter
       2006 PC Processors and Chipsets: Market Strategy and Forecast Report.
    -- NVIDIA signed a definitive agreement to acquire Portal Player, Inc., a
       leading supplier of semiconductors, firmware, and software for personal
       media players and secondary display-enabled computers.

As previously announced, in June 2006 the Audit Committee of the Board of Directors of NVIDIA began a review of the Company's stock option practices based on results of an internal review voluntarily undertaken by management. The Audit Committee's review covered the time from the Company's initial public offering in 1999 to the current fiscal year and as previously disclosed, found instances of the use of incorrect measurement dates for certain option grants. The Audit Committee is being assisted by independent legal counsel and outside accounting experts. At this time, the Audit Committee has completed its forensic review of the option grants and is now working with the Company's management to finalize the financial impact of using incorrect measurement dates. NVIDIA will publish the balance sheet as of the end of the third quarter and the statement of income for the nine months ended October 29, 2006, as well as restated statements of income for the comparable periods of fiscal 2006 as soon as practical upon completion of the Audit Committee's review.

The Company's current and former independent registered public accounting firms have not completed their review of the findings of the Audit Committee. Our financial results for the second and third quarters of fiscal year 2007 are not audited and may change as a result of the ongoing Audit Committee review. The stock option practices under review and related matters could also lead to potential claims and proceedings relating to such matters, including litigation or action by the Securities and Exchange Commission and/or other regulatory agencies.

NVIDIA will conduct a conference call with analysts and investors to discuss its third quarter fiscal 2007 financial results and current financial prospects today at 2:00 P.M. Pacific Time (5:00 P.M. Eastern Time). To listen to the call, please dial (706) 679-0543. A live Web cast (listen-only mode) of the conference call will be held at the NVIDIA investor relations Web site http://nvidia.com/ir and at http://www.streetevents.com . The Web cast will be recorded and available for replay until the Company's conference call to discuss its financial results for its fourth quarter fiscal 2007.

Non-GAAP Measures

To supplement the Company's Consolidated Statements of Income presented in accordance with GAAP, we use non-GAAP measures of certain components of financial performance. These non-GAAP measures include non-GAAP net income, non-GAAP basic and diluted net income per share, and other non-GAAP line items from the Consolidated Statements of Income, including cost of revenue information, gross profit, gross margin, operating expenses (including research and development, and sales, general and administrative expenses) and income tax expense. In order for our investors to be better able to compare our current results with those of previous periods, we have shown a non-GAAP presentation of our Consolidated Statements of Income as reconciled against the GAAP presentation. Our non-GAAP results adjust our GAAP results to exclude stock-based compensation and certain non-recurring charges associated with settling IP matters and related tax differences. We believe the presentation of our non-GAAP results enhances the user's overall understanding of our historical financial performance. The presentation of our non-GAAP financial results is not meant to be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP, and our non-GAAP measures may be different from non-GAAP measures used by other companies.

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