What is Nvidia?
Nvidia is a US-based multinational technology company that operates from Santa Clara, California. The company started its operations in 1993 incorporated in Delaware. Nvidia is well-known for its graphics processing units (GPUs) which cater to gamers and professional markets. Within these GPUs, the GeForce line is highly sought-after in the market. However, it also develops a system on a chip (SoC) units which are a part of mobile computing and automotive markets.
Nvidia primarily competes with Advanced Micro Devices (AMD) and their line of Radeon graphic cards. Nvidia started its operations under Jensen Huang, a director of CoreWare at LSI logic. On top of that, he was also a designer at Advanced Micro Devices. The other founders include Chris Malachowsky and Curtis Priem. Both of them were previous employees of Sun Microsystems.
All three founders came together in 1993 due to their shared beliefs. They believe the future of computing was accelerated or graphics-based computing. Therefore, they sought to enter a relatively unexplored market at that point. The company started its operations in the same year with $40,000 from the three founders. Later, it received $20 million in venture capital from Sequoia Capital and others.
Nvidia initially started operations under the name “NV”. However, it wasn’t an official term used for the company and referred to as “next version”. However, when the company got incorporated, the owners came up with the name Nvidia. This term included their initial term used and was also the Latin word for envy. Since then, the company has continued its operations under this name.
Nvidia also went public in 1999. During these years, the company garnered attention for its capable graphics adapters. Similarly, Nvidia focused on providing innovative and unique solutions to issues, which no other company matched at that time. The company also won a contract from Microsoft’s Xbox console. This contract provided a significant boost to its revenues.
Over the years, Nvidia has excelled in the graphics processing units industry. The company faced some competition from AMD during the mid-years. However, due to its innovative and unique products, Nvidia trumped all competition. It also led to the company becoming the undisputed winner in the industry. Over the years, Nvidia invested in several companies, which have increased its revenues over the years.
What is the Nvidia Business Model?
Nvidia uses a complex business model to serve its customers from various segments. The primary product for the company includes its graphic processing units. Through these, the company sells cards to customers, who install them to their systems. Its customers from this segment consist of both individuals and corporate clients. Of these, the corporate clients make up the most prominent segment.
Nvidia also serves various enterprise industries. Therefore, it has multi-faceted value propositions depending on the customer profile and industry. In some industries, the customers are large clients and tech companies. However, it also serves smaller businesses, providing it access to a substantial market. The company does not have to change its products or services since the underlying technology is similar.
Apart from the gaming industry, Nvidia also serves the professional visualizations community. Within this field, the company provides similar products and services. However, these products come with different features compared to those offered to other industries. On top of that, Nvidia has several customer classes within this industry, which require distinguished features. Therefore, the company provides more specialized products to them.
Nvidia also provides data centre graphic processing units. These services are similar to other cloud-based products offered by companies. Within this segment, Nvidia uses a platform business model. Therefore, it sells the hardware and software that use this technology. By doing so, customers receive better services compared to standalone products.
Nvidia also serves other industries, for example, the automotive industry. Within this industry, the company provides customers with an end-to-end solution for autonomous driving. These products and services fall within its DRIVE brand. The company also offers a set of applications for autonomous driving. This segment differs from the other industries that the company serves. Therefore, it provides a more diversified range of products in this case.
Overall, Nvidia has expanded its operations into various industries and markets. While its primary services and products are similar, they may differ based on the customer. The company’s primary source of revenues includes its graphic processing units. These units cater to the needs of both individual and industrial clients. Apart from these, however, Nvidia also serves several other markets, as mentioned above.
How does Nvidia make money?
As mentioned above, Nvidia makes money from several segments. The company operates these segments, which cater to different customers. Overall, Nvidia generated revenues of $16.675 billion in 2021. These were the highest revenues that the company has earned to date. These revenues were a significant increase of $5.757 billion compared to the $10.918 billion it made in 2020.
Nvidia has also been profitable over the years. Apart from the highest revenues, Nvidia also made an operating income of $4.532 billion in 2021. This income was also the highest for the company to date. Similarly, its net income during the year was $4.332 billion, which is also the highest for the company. Overall, 2021 has been a highly successful year for Nvidia.
A summary of the company’s revenues for a decade until 2021 is as follows.
| Year | Revenue (in millions USD) | Operating income (in millions USD) | Net income (in millions USD) |
| 2011 | $ 3,543 | $ 256 | $ 253 |
| 2012 | $ 3,998 | $ 648 | $ 581 |
| 2013 | $ 4,280 | $ 648 | $ 563 |
| 2014 | $ 4,130 | $ 496 | $ 440 |
| 2015 | $ 4,682 | $ 759 | $ 631 |
| 2016 | $ 5,010 | $ 747 | $ 614 |
| 2017 | $ 6,910 | $ 1,934 | $ 1,666 |
| 2018 | $ 9,714 | $ 3,210 | $ 3,047 |
| 2019 | $ 11,716 | $ 3,804 | $ 4,141 |
| 2020 | $ 10,918 | $ 2,846 | $ 2,796 |
| 2021 | $ 16,675 | $ 4,532 | $ 4,332 |
Nvidia primarily divides its revenues into two operating segments. These include “Graphics” and “Compute & Networking”. An explanation of the products within these is as below.
Graphics
The Graphics segment includes GeForce GPUs for gaming and PCs. Similarly, it consists of the GeForce NOW game-streaming service and related infrastructure. The segment also contains solutions for gaming platforms. The Graphics segments also include Quadro/NVIDIA RTX GPUs for enterprise design. Similarly, it consists of GRID software for cloud-based visual and virtual computing.
Apart from these, it also consists of automotive platforms for infotainment systems. Overall, the Graphics segment is the highest-earning segment for Nvidia due to the wide range of products. It has also been a part of Nvidia’s initial operations, which have continued over the years. However, this segment has only existed since 2020.
In 2021, Nvidia generated revenues of $9.834 billion from the Graphics segment. These revenues increased by 28.7% from the $7.639 billion the company made from this segment in 2020. Similarly, the Graphics segment accounted for 59% of the total revenues that the company earned. However, it was significantly higher in 2020, when it made 70% from this segment.
Compute & Networking
The Compute & Networking segment is the second-highest earner for Nvidia. This segment includes data centre platforms and systems for AI, HPC, and accelerated computing. Similarly, it consists of Mellanox networking and interconnects solutions. Furthermore, this segment contains automotive AI cockpit and autonomous driving development agreements.
The Compute & Networking segment also includes autonomous vehicle solutions. Lastly, it consists of Jetson for robotics and other embedded platforms. This segment is also highly profitable for the company and earned significant revenues. Although not as prominent as the Graphics segment, the Compute & Networking segment is also crucial to Nvidia.
Overall, Nvidia generated revenues of $6.841 billion from the Compute & Networking segment in 2021. These revenues increased by 108.6% from the $3.279 billion Nvidia generated in 2021. Therefore, this segment experienced more than double gains in revenues. Similarly, the Compute & Networking segment accounted for 41% and 30% of the company’s total revenues.
Summary
Overall, a summary of the company’s revenues from different segments is as follows.
| Segment | 2021 | 2020 | 2019 |
| Graphics | $ 9,834 | $ 7,639 | $ 8,159 |
| Compute & Networking | $ 6,841 | $ 3,279 | $ 3,557 |
| Total Revenues | $ 16,675 | $ 10,918 | $ 11,716 |
In 2021, Nvidia also provided a different segmentation of its products. Instead of classifying revenues by segments, it shows those revenues by products. A summary of these revenues is as follows.
| Segment | 2021 | 2020 | 2019 |
| Gaming | $ 7,759 | $ 5,518 | $ 6,246 |
| Professional Visualization | $ 1,053 | $ 1,212 | $ 1,130 |
| Data Center | $ 6,696 | $ 2,983 | $ 2,932 |
| Automotive | $ 536 | $ 700 | $ 641 |
| OEM & Other | $ 631 | $ 505 | $ 767 |
| Total Revenues | $ 16,675 | $ 10,918 | $ 11,716 |
Conclusion
Nvidia is the most prominent name in the online graphical computing industry. The company offers several products that do not have any competitors or alternatives. Overall, Nvidia uses a complex business model to cater to the needs of different customers. The company makes money from various segments, as mentioned above.
