NVIDIA (NASDAQ: NVDA) reported third-quarter fiscal 2020 results after the market closed last Thursday. The graphics processing unit (GPU) specialist’s revenue fell 5% year over year to $3.01 billion, and earnings per share (EPS) adjusted for one-time items slipped 3% to $1.78.

Year-over-year declines were expected due to temporary issues in the company’s gaming and data center businesses that began about a year ago. On the positive side, both the top and bottom lines were up solidly from the second quarter. Moreover, strong year-over-year growth is on track to resume in the fourth quarter.

Earnings releases only tell part of the story. NVIDIA’s Q3 earnings call left me feeling even more confident that its stock is poised to be a big long-term tech stock winner from here. Here are three artificial intelligence (AI) topics from the call that you should know about.

1. AI inferencing revenue continues to grow briskly

From CEO Jensen Huang’s remarks:

We had a strong Q3 in hyperscale data centers. … [W]e shipped a record number of V100s and T4s, and for the very first time we shipped more T4s than V100. … In fact, our inference business [revenue] is now a solid double-digit [percentage of data center revenue] and it doubled year over year. [Emphasis mine.]

T4s are NVIDIA’s data center inference GPUs, and V100s are its training GPUs. Inferencing is the second of the two-step process of deep learning, a burgeoning type of AI, that involves machines applying their training to new data. (Training is the first step.) NVIDIA’s GPUs reign supreme in the market for AI training, but it’s only been within the last two years that they’ve made inroads into inferencing, which has traditionally been dominated by CPUs.

Huang’s statement is amazing when you consider that as recently as the second quarter of fiscal 2018 — less than two years ago — he said that “0% of our business [is] in inferencing.” Now it comprises a “solid double-digit” percentage of a business that has an annual run rate of $2.9 billion.

2. Google’s breakthrough BERT model is driving demand for NVIDIA’s GPUs

From CFO Colette Kress’ remarks:

Hyperscale [data center business] is being driven by conversational AI, the ability of computers to engage in human-like dialog, capturing context and providing intelligent responses. Google’s breakthrough introduction of the BERT model, with its super-human levels of natural language understanding, is driving…demand for our GPUs on two fronts.

BERT (Bidirectional Encoder Representations from Transformers) is a natural-language processing (NLP) model. It was widely hailed as a breakthrough because it excels at understanding context, which is a weak point for traditional NLP models. So, for instance, like you did, it should understand from the context in Kress’ quote that she’s talking about an NLP model, not some good-looking guy named Bert walking down a fashion runway.

Alphabet‘s (NASDAQ: GOOG) (NASDAQ: GOOGL) Google has begun using BERT internally to handle searches. More importantly for NVIDIA, it open-sourced BERT, in the English language, in November 2018. So many entities have begun using BERT to train their language-processing systems for question answering and other applications.

The “two fronts” Kress mentioned refer to AI training and inferencing.

3. CEO: “The Intelligent Edge will likely be the largest AI industry in the world.”

While AI inferencing has traditionally been done in data centers, it’s increasingly being performed “at the edge,” which means by devices that are located where the data is being collected.

While I quoted Huang above, it was Kress who summed up NVIDIA’s quarterly activities on the AI edge front:

[W]e announced a software-defined 5G [the fifth generation of cellular network tech] wireless RAN [radio access network] solution accelerated by GPUs in collaboration with Ericsson. With this opens up the wireless RAN market to NVIDIA GPUs. It enables new AI applications as well as AR [augmented reality], VR [virtual reality], and gaming to be more accessible to the telco edge.

We announced the NVIDIA EGX Intelligent Edge Computing Platform. With an ecosystem of more than 100 technology companies worldwide, early adopters include Walmart, BMW, Procter & Gamble, Samsung Electronics, and […] the cities of San Francisco and Las Vegas.

The company also announced a partnership with Microsoft on intelligent edge computing aimed at helping various industries “better manage and gain insights from the growing flood of data” they collect. Moreover, after the quarter ended, NVIDIA announced that the U.S. Postal Service is adopting its AI tech to help it process package data more quickly and accurately.

It’s not too late to buy NVIDIA stock

It’s reasonable to wonder if it could be too late to buy NVIDIA stock. After all, despite its tumble a year ago (from which it’s rebounding nicely), this is a stock that has returned 995% over the last three years through Nov. 18, making the S&P 500‘s respectable 68.6% return look paltry.

But all indications are that this stock party is far from over. The company is profiting from many growth trends that are only in the early innings: data center AI, driverless vehicles, gaming, and various AI edge applications. (There is some overlap in these categories.)

The post NVIDIA Stock Is Set to Soar on Artificial Intelligence’s Next Huge Waves of Applications appeared first on The Motley Fool Canada.

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Facebook (NASDAQ: FB) is slated to report its third-quarter 2019 results after the market closes on Wednesday, Oct. 30.

The social networking behemoth is going into its report on a mixed note. Last quarter, it beat Wall Street’s revenue and earnings expectations, but investors sent shares tumbling nearly 2% because of concerns about declining margins and increased regulatory scrutiny.

Nonetheless, Facebook stock has gained 40.5% in 2019 through Friday, Oct. 11, making it one of the top performers among the larger tech stocks. Given this strong performance, investors are likely to be unforgiving of any hiccups in the company’s upcoming earnings report. The S&P 500 has returned 20.4% so far this year.

Here’s what to watch when Facebook reports.

Key quarterly numbers

Here are Facebook’s year-ago results and Wall Street’s estimates to use as benchmarks. The company doesn’t provide guidance.

Data sources: Facebook and Yahoo! Finance.

Revenue growth

Last quarter, Facebook’s revenue grew 28% year over year (32% in constant currency) — up from 26% (30% in constant currency) in the first quarter. This was a nice surprise for investors as management had previously said that it expected sequential constant currency revenue growth rate to decelerate throughout the year. On the second quarter’s earnings call, management reiterated its projection that constant currency revenue growth will slow down sequentially in the third and fourth quarters.

Margins

The Street expects Facebook’s revenue to grow significantly faster than its earnings. That reflects declining margins driven by the company’s ramped-up spending to improve data security and user privacy.

Last quarter, Facebook’s adjusted operating margin (adjusted operating profit divided by revenue) came in at 39%, down from 44% in the year-ago period. Its adjusted profit margin (adjusted net income divided by revenue) was 34%, down from 39% in the second quarter of 2018. Investors can expect this dynamic to continue in the third quarter.

Key user stats

Last quarter, daily active users (DAUs) of the company’s flagship platform increased 8% year over year to 1.59 billion, while monthly active users (MAUs) also grew 8%, to 2.41 billion. User growth has been flattish in the developed world for some time, with growth coming from developing countries. This factor, along with the mix of ads shifting toward Stories ads, has resulted in a slow and steady decline in the price per ad. But powerful growth in the number of ad impressions has been more than compensating for the drop in average ad price.

The bigger picture: More than 2.7 billion people used at least one of the company’s services — Facebook, Instagram, WhatsApp, or Messenger — on a monthly basis in June.

Regulatory update

Investors can expect an update on regulatory matters if there have been any material changes since last quarter. Last quarter, along with officially announcing that it had entered a $5 billion settlement with the Federal Trade Commission related to its data security and privacy practices, Facebook also shared in its earnings release that it was the subject of two additional regulatory actions, the first of which was not public news: “In June 2019, we were informed by the FTC that it had opened an antitrust investigation of our company. In addition, in July 2019 , the Department of Justice announced that it will begin an antitrust review of market-leading online platforms.”

Once again, Facebook is scheduled to report its Q3 results after the market closes on Wednesday, Oct. 30.

The post Will Facebook Earnings Beat Expectations Again? appeared first on The Motley Fool Canada.

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Google parent Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) is slated to report its third-quarter 2019 results after the market close on Monday, Oct. 28.

The tech behemoth is going into its report on a solid note. Last quarter, it breezed by Wall Street’s earnings expectations, though revenue came in a little lighter than analysts had projected.

Alphabet Class A and C shares have gained 16.3% and 17.4%, respectively, in 2019 through Friday, Oct. 11. The S&P 500 has returned 20.4% over this period. Alphabet stock, however, remains an outperformer for periods of one year and longer.

Here’s what to watch when Alphabet reports.

Key quarterly numbers

Here are Alphabet’s year-ago results and Wall Street’s estimates to use as benchmarks. The company doesn’t provide guidance.

Data sources: Alphabet and Yahoo! Finance.

CFO Ruth Porat said on last quarter’s earnings call that the company expected continued foreign exchange headwinds in the third quarter. Such headwinds negatively impact both revenue and operating income (and, thus, earnings).

Investors can expect that Alphabet will continue to invest to support long-term growth. While this is a positive for investors focused on the long haul, it does negatively impact current operating income and earnings.

Segment results

For context, here are last quarter’s results by segment:

Data sources: Alphabet and Yahoo! Finance. YOY = year over year. *Includes the impact of a 4.34 billion euros (about $5.1 billion) European Commission fine in Q2 2018. Excluding this fine, operating income grew 13.1% in Q2 2019.

In constant currency, revenue grew 22% — an acceleration from the first quarter’s 19%, though slightly lower than the fourth quarter of 2018’s 23%. Within Google, revenue breakdown was as follows:

• Google properties (“sites”): an 18% increase to $27.3 billion
• Google network members’ properties: a 9.1% rise to $5.3 billion
• Total Google advertising (above two categories): a 16% increase to $32.6 billion, driven by mobile search and YouTube.
• Google “other revenue”: a 40% jump to $6.2 billion, driven by strong growth in Cloud and Play

As has been the trend for some time, Alphabet’s costs increased faster than its revenue in the second quarter. This resulted in the adjusted operating margin edging down to 24%, from 25% in the year-ago period.

Google: Ad revenue growth

As always, investors should primarily focus on revenue growth in the company’s main business: advertising. Last quarter’s ad sales growth of 16.1% year over year represented an acceleration from the first quarter’s growth of 15.3%, but in general, this metric has been decelerating on a sequential basis. In the two preceding quarters, it was 19.9% (Q4 2018) and 20.3% (Q3).

Other bets: Waymo update

Investors can expect management to provide an update on the earnings call about Waymo’s progress and plans. Since late last year, Alphabet’s self-driving vehicle subsidiary has been operating a ride-hailing service in Phoenix, Waymo One. On last quarter’s earnings call, CFO Porat said the service has over 1,000 active riders. Just last week, Waymo announced that it has entered Los Angeles with several vehicles for 3D mapping purposes.

The post Google Parent Alphabet’s Earnings: Will They Soar Past Expectations Again? appeared first on The Motley Fool Canada.

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Shares of Appian (NASDAQ: APPN), a low-code software development platform provider, declined 20.1% in September, according to data from S&P Global Market Intelligence. Nonetheless, in 2019, the software-as-a-service (SaaS) company’s stock is still up a whopping 83.2% through Oct. 4.

For context, the S&P 500 returned 1.9% last month and 19.6% so far this year.

So what

There doesn’t seem to be any company-specific news behind Appian stock’s September drop. It was one of many highly valued growth stocks — particularly of companies that aren’t profitable — in the tech sector that took sizable hits last month. We can probably attribute this dynamic to some investors rotating out of these types of stocks and into what they consider safer due to concerns about an impending recession or at least a slowdown in economic growth.

It’s also likely that profit-taking was at play. After all, Appian stock ran up 51.4% in August, so some short-term traders surely took their fast profits.

Why the huge run-up in August? On Aug. 8, Appian released second-quarter results that easily beat Wall Street’s top- and bottom-line estimates and delighted investors. Revenue grew 12% year over year to $66.9 million, driven by a 41% jump in the higher-margin subscription revenue category. Adjusted net loss narrowed to $6.6 million, or $0.10 per share, from $8.8 million, or $0.14 per share, in the year-ago period.

Now what

As I wrote last month regarding guidance:

For the third quarter, Appian guided for total revenue of $65 million to $65.5 million, representing growth of 18% to 19% year over year. Furthermore, it expects subscription revenue to come in between $38.8 million and $39 million, or grow about 32% to 33%. The company forecasts an adjusted net loss per share of $0.16 to $0.15.

Management also raised its full-year 2019 revenue projection and slightly lowered its bottom-line outlook. It now expects:

• Revenue of $260.5 million to $262.5 million, or growth of 15% to 16% year over year. Its previous guidance was for revenue between $255 million and $258 million.
• An adjusted loss per share between $0.55 and $0.51, which compares with an adjusted loss per share of $0.54 in 2018. Its previous outlook was for an adjusted loss per share of $0.55 to $0.50.

Appian hasn’t yet announced a date for the release of its Q3 results, but investors can probably expect it to be in early November.

The post Why Appian Stock Dropped 20% in September appeared first on The Motley Fool Canada.

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Last month, CrowdStrike Holdings (NASDAQ: CRWD) stock plummeted 28.3%, according to data from S&P Global Market Intelligence. For context, the S&P 500 returned 1.9% in September.

Despite the drop, however, through Oct. 4, shares are still up 88% since the cloud-based cybersecurity provider’s June initial public offering (IPO) at $34 per share.

So what

We can attribute CrowdStrike stock’s drop last month largely to two catalysts: the company’s release of its fiscal second-quarter 2020 results and a downturn among highly valued growth stocks in the tech space.

On Sept. 6, shares declined 12.5% following CrowdStrike’s announcement of its quarterly results the prior afternoon. Results were strong and beat Wall Street’s estimates and the same can be said of guidance. However, investors apparently weren’t entirely satisfied. CrowdStrike stock is very richly valued, so investors want to see quarterly results and an outlook that they feel justifies the stock’s lofty valuation.

In Q2, revenue soared 94% year over year to $108.1 million, with subscription revenue rocketing 98% to $97.6 million, while adjusted net loss narrowed 74% to $0.18 per share. Wall Street was looking for an adjusted loss of $0.23 per share on revenue of $103.8 million. So, CrowdStrike comfortably beat both estimates. We’ll get to guidance in the next section.

On Sept. 9, CrowdStrike stock fell 11.7% for no apparent reason. It wasn’t alone, however, as many highly valued growth stocks in the tech sector, particularly those in the cloud computing space, took sizable hits on this day. At that time, my colleague Rich Smith opined that the likely reason was that some investors were “backing away” from these types of stocks due to concerns that a recession could be on its way. I agree with that take.

Now what

CrowdStrike issued Q3 guidance and raised its full-year outlook as follows:

• Fiscal Q3: Revenue of $117.1 million to $119.5 million and an adjusted loss of $0.12 to $0.11 per share.
• Full-year fiscal 2020: Revenue of $445.4 million to $451.8 million, up from prior projection of $430.2 million to $436.4 million. Adjusted loss of $0.65 to $0.62 per share, up from prior guidance of an adjusted loss of $0.72 to $0.70 per share.

Going into the release, Wall Street had been modeling for a loss of $0.13 per share on revenue of $111.2 million in the third quarter and a loss of $0.73 per share on revenue of $434.9 million for the year. So, CrowdStrike’s guidance exceeded analysts’ expectations across the board. That said, I’d venture to guess that the Q3 bottom-line outlook probably disappointed some investors, as it’s just a bit over the Street’s consensus estimate.

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What happened

Shares of newly public social-media company Pinterest (NYSE: PINS) jumped 18.7% in August, according to data from S&P Global Market Intelligence. For context, the S&P 500, including dividends, fell 1.6% last month.

While shares pulled back 11.8% during the holiday-shortened first week of September, they’re still up more than 59% since the San Francisco-based company’s April initial public offering at $19 per share.

Pinterest’s platform allows users to visually share — by “pinning” images and videos to their boards — and discover products and projects by browsing what others have pinned. As with social-media titan Facebook, the company makes it money from advertising.

So what

We can attribute Pinterest stock’s strong performance last month to the company’s Aug. 1 release of second-quarter results that crushed Wall Street’s expectations and to management increasing full-year 2019 guidance. Shares surged 18.6% on the day following the release.

In Q2, Pinterest’s revenue soared 62% year over year to $261.2 million, easily beating the consensus estimate of $235.5 million. Revenue growth was driven by a 30% increase in monthly active users (MAUs) to 300 million and a 29% rise in average revenue per user to $0.88.

As is typical for a newly public company, Pinterest isn’t profitable. It posted an adjusted net loss of $24.5 million, or $0.06 per share, a 28% improvement from the year-ago period’s $34.2 million net loss.  Nonetheless, the adjusted bottom line beat the $0.08 loss-per-share that the Street was expecting. On the basis of GAAP (generally accepted accounting principles), Pinterest turned in a net loss of $1.16 billion, though much of that loss was due to expenses associated with the company’s IPO.

Now what

For full-year 2019, Pinterest now expects revenue to be $1.095 billion to $1.115 billion, up from its previous outlook of $1.055 billion to $1.08 billion. It also guided for adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) of negative $50 million to negative $25 million, up from its prior expectation of negative $70 million to negative $45 million.

The post Why Pinterest Stock Soared 19% in August appeared first on The Motley Fool Canada.

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