Economic Excellence and Financial Literacy

Making Sense of Financial Statements: A Look at NVIDIA’s Q2 2024 Results

18/October/2024

With the upcoming release of Q3 2024 financial statements, it’s the perfect time to dive into how to read and understand financial statements. These documents provide crucial information about a company’s performance and financial health. To help you prepare for the wave of quarterly and yearly financial reports, let’s break down the key elements of NVIDIA’s Q2 2024 financial statements, released on August 28, 2024, as an example. If you would like to follow along, the financial statements we are using for this analysis can be found at: 

https://nvidianews.nvidia.com/news/nvidia-announces-financial-results-for-second-quarter-fiscal-2025  

In this section, we'll walk you through the three essential financial statements:

1. Income Statement

2. Balance Sheet

3. Cash Flow Statement

1. The Income Statement: Understanding Profit and Loss

The Income Statement (also known as the Profit & Loss Statement) gives you a summary of a company’s revenue, expenses, and profit over a specific period (usually a quarter or a year).

Here are the key elements from NVIDIA’s Q2 2024 Income Statement:

• Revenue: $30.04 billion

  • This is the total amount NVIDIA earned from selling products (like GPUs) and services. A 122% year-over-year (Y/Y) increase in revenue shows the company made more money this quarter compared to the same period last year.

• Operating Income: $18.64 billion

  • This is what’s left after subtracting the cost of running the business (like salaries, rent, and product costs) from revenue. It’s a huge 174% Y/Y increase, indicating that NVIDIA managed its expenses well while boosting sales.

• Net Income: $16.6 billion

  • Net income is the profit left after all expenses, taxes, and interest payments. This is what truly shows how profitable the company is. With a 168% Y/Y increase, NVIDIA’s profit has skyrocketed compared to Q2 2023.

• Earnings Per Share (EPS): $0.67 (diluted)

  • EPS tells shareholders how much of the company’s profit is allocated to each share of stock. The higher the EPS, the more valuable the stock is to investors.

Why it matters: The Income Statement tells you how much money a company made, how well it managed its costs, and how profitable it is. Investors use this information to determine if a company is performing well and growing.

2. The Balance Sheet: A Snapshot of Financial Health

The Balance Sheet shows what the company owns (assets) and what it owes (liabilities) at a specific point in time. It also shows the shareholders’ equity, which is the net worth of the company.

From NVIDIA’s Q2 2024 Balance Sheet:

• Total Assets: $85.23 billion

  • Assets include everything the company owns, like cash, equipment, inventory, and property. NVIDIA’s assets have grown significantly from $65.73 billion in January 2024, meaning the company has strengthened its financial position.

• Total Liabilities: $27.07 billion

  • Liabilities are what the company owes, such as debt and unpaid bills (accounts payable). A manageable liability load is key for long-term financial stability.

• Shareholders’ Equity: $58.16 billion

  • Equity is what’s left after subtracting liabilities from assets. It’s essentially the company’s net worth and represents the ownership value held by shareholders. A strong growth in equity shows NVIDIA is increasing its value for investors.

Why it matters: The Balance Sheet shows whether a company has enough assets to cover its debts and how much value is held by shareholders. It’s a critical tool for assessing the overall financial health of a company.

3. The Cash Flow Statement: Tracking Cash In and Out

The Cash Flow Statement tracks how much cash flowed into and out of the company. It’s divided into three sections: cash from operating, investing, and financing activities.

Key highlights from NVIDIA’s Q2 2024 Cash Flow Statement:

• Net Cash from Operating Activities: $14.49 billion

  • This shows how much cash NVIDIA generated from its core business operations. This strong cash inflow indicates that the company is generating substantial cash from its day-to-day activities.

• Net Cash Used in Investing Activities: -$3.18 billion

  • NVIDIA spent $3.18 billion on investments like new equipment or acquisitions. While this number is negative, investing in future growth is often a good sign for long-term performance.

• Net Cash Used in Financing Activities: -$10.32 billion

  • This includes payments related to repurchasing stock or paying off debt. NVIDIA is using its profits to reduce debt and return value to shareholders, which can indicate financial stability.

Why it matters: The Cash Flow Statement shows whether the company is generating enough cash to fund its operations, invest in growth, and manage its debts. Positive cash flow from operations is especially important because it shows the company’s core business is healthy.

What Do These Numbers Tell Us?

By reviewing NVIDIA’s Q2 2024 financial statements, we can see that the company is in an extremely strong financial position:

• Its revenues and profits have more than doubled compared to the same period last year.

• Its assets are growing, and it has manageable liabilities.

• NVIDIA is generating a solid amount of cash from its core business, and it’s wisely investing in future growth while returning value to shareholders.

Looking Ahead: Prepare for Q3 and Full-Year Reports

As Q3 and the year-end approach, companies like NVIDIA will release their updated financial results. Now that you know how to read and interpret income statements, balance sheets, and cash flow statements, you’ll be able to assess the financial health of any company. These skills will help you make informed decisions, whether you’re an investor, a student of finance, or just curious about the business world.

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Works Cited: 

“Daron Acemoglu | MIT Sloan.” MIT Sloan, 20 Dec. 2020, mitsloan.mit.edu/faculty/directory/daron-acemoglu.

Nvidia. “NVIDIA Announces Financial Results for Second Quarter Fiscal 2025.” NVIDIA Newsroom, 2024, nvidianews.nvidia.com/news/nvidia-announces-financial-results-for-second-quarter-fiscal-2025

“Prize in Economic Sciences.” NobelPrize.org, 14 Oct. 2024, www.nobelprize.org/economic-sciences/. Accessed 16 Oct. 2024.