Jensen Huang, NVIDIA Chief Executive and President, has reportedly taken a major pay cut after his company missed financial sales targets in its Q2 earnings report.
According to media reports, he received compensation packages valued at $21.4 million USD, down 10 per cent from the year before.
The company reported Huang’s earnings in its 2023 Annual Review. However, it added that NVIDIA did not offer Huang his full payout due to the shortcoming.
Huang bagged a financial package that included a $996,216 base salary and $19.666 million USD in stocks. He also received an additional $693,710 in compensation for life insurance, travel, security, and others.
Although ongoing losses have hit NVIDIA’s profits, the company has been projected to become the largest chipmaker, Reuters reported in February. This comes as Intel reportedly continues to struggle in the chipmaking market, leading to widespread layoffs and resource cuts.
NVIDIA Q2 Earnings Report Figurees
As of 22 February, NVIDIA reported quarterly revenues of $6.05 billion USD, down a massive 21 percent from the previous period last year. Fiscal year revenues also remained flat from last year at $27 billion USD.
Additionally, its quarterly and annual returns to company shareholders peaked at a respective $1.15 billion and $10.44 billion USD.
Generally Accepted Accounting Principles (GAAP) earnings per diluted share also plummeted 52 percent compared to the previous year, totalling $0.57. Non-GAAP earnings per diluted share also fell 33 percent to $0.88.
In a statement, Huang praised his company’s adoption of artificial intelligence (AI). He said it was at an “inflection point,” leading to its “broad adoption” across every industry.
“We are set to help customers take advantage of breakthroughs in generative AI and large language models. Our new AI supercomputer, with H100 and its Transformer Engine and Quantum-2 networking fabric, is in full production”
However, Huang cited the “post-pandemic downturn” as the reason for slumping sales figures. Despite these, gamers had “enthusiastically” adopted the firm’s Ada architecture graphic processing units (GPUs).
The new devices leverage NVIDIA’s artificial intelligence neural rendering technologies, leading to markedly quicker processing times.
“Fiscal 2023 was a challenging year, with macroeconomic headwinds, channel inventory corrections, COVID-19 and product architecture transitions affecting several of our businesses. As a result, our Fiscal 2023 revenue and non-GAAP Operating Income performance fell short of the CC’s (compensation committee’s) pre-established goals for executive compensation.”
However, the company called on shareholders to vote for its 2023 executive compensation plans, adding,
“As we move into fiscal 2024, we expect new product architectures to ramp, alongside new opportunities from areas such as generative AI and language models, Nvidia cloud services and digitalization”
Reflections on NVIDIA’s Q2 2022 Earnings
The news comes after NVIDIA’s Q2 2022 results sparked fears over mass layoffs.
The report echoed market sentiments amid waves of redundancies at Meta Platforms, Microsoft, Amazon, and other tech giants from August to November last year.
Further competition from rival firm Advanced Micro Systems (AMD) also reflected concerns in NVIDIA’s Q2 2022 earnings reports and current 2023 Annual Review.
Huang also stressed the company did not plan to lay off any customers and would step up efforts to retain talent.
In a memo sent to Business Insider, he said at the time: “So what does this mean for us? Do we have a layoff? No. Instead, we have given raises to take care of your families as all of you are facing sky-high inflation.”
Brief Analysis of NVIDIA Challenges
Demond Cureton, Senior Journalist for XR Today, analysing events surrounding NVIDIA’s latest earnings reports.
NVIDIA has created clear distinctions in its promoted technologies, namely the adoption of generative AI technologies and its industrial metaverse solutions. After their NVIDIA GTC event, the company unveiled its CloudXR 4.0 technologies and announced several strategic partnerships.
In July last year, NVIDIA also partnered with Siemens to realise use cases for smart factories, digital twins, and blockchain-based verification systems. Many of these solutions leverage the former’s Omniverse solution, which coordinates and hosts metaverse technologies for client firms.
According to a recent Q2 report, Siemens received “impressive margin increases and all-time highs for Digital Industries and Smart Infrastructure.” Orders received by the company topped around €23.6 billion and revenues jumped 15 percent to €19.4 billion, an increase from €17 billion in Q2 last year.
Roland Busch, President and CEO, Siemens AG, said in a statement that the company had received “all-time highs” for its digital industries and smart infrastructure technologies.
He added: “Our very strong results show that we have the right strategy, the right technology, and the right team to support our customers in becoming more competitive, resilient and sustainable.”
Siemens recently partnered with NVIDIA at a FREYR Battery factory in Norway to showcase their industrial metaverse technologies. Using digital twins, the two firms debuted a cutting-edge platform for monitoring and automating factory activities. Both revealed the partnership at the Hannover Messe trade show last month.
NVIDIA Struggles in the GPU Market
However, on the NVIDIA side, Huang told investors in his report that the company had faced a “tough 2022.”
He explained further,
“Our business was affected by economic headwinds, geopolitical tension, and a product supply chain that swung from severe shortage to excess. NVIDIANs rose to tackle each challenge while inventing new technologies and capabilities that position us at the center of the most exciting opportunities in the history of computing.”
Runaway inflation across many developed countries, namely in the United States, United Kingdom, and European Union, has triggered many businesses’ economic headwinds. Additionally, energy crises from the ongoing Russo-Ukrainian war have exacerbated difficulties for many companies.
However, NVIDIA also faces a secondary set of problems: plummeting demand in the cryptocurrency market. The company’s RTX graphical processing units (GPUs) have fallen due to greater instability among cryptocurrencies.
Further crackdowns from the US Securities and Exchange Commission (SEC) and other global agencies and risks associated with bitcoin mining and use have driven down demand even more.
Potentially, with reduced demand for cryptocurrency mining — a major cause of shortages for GPUs — NVIDIA could seek new sources of income.
This is likely to target the rising industrial metaverse, as indicated by successes at Siemens and ongoing generative AI technologies; the primary focus of its GTC event in April.
CloudXR to the Rescue?
NVIDIA explained that it would focus on developing its latest CloudXR iteration for enterprises. CloudXR 4.0 aims to facilitate XR streaming anywhere in the world, leading to low-latency, instantaneous connectivity to remotely stored content. This would also improve resolutions, frame rates, and field of view (FoV).
Greg Jones, Director of Global Business Development and Product Management, NVIDIA, told XR Today in April his company saw a “fundamental trend” in streaming services for XR headsets.
He explained at the time,
“For graphics processing, these lightweight devices may be underpowered and under-resourced relative to memory for the graphics workloads that support experiences users desire. This is especially true in enterprise use cases where the digital models tend to be very large and is likely true for consumer use cases where photorealism is an important driver”
Streamlining solutions could lead the company to potential gains in global markets as enterprises adopt industrial metaverse systems to improve operations. Doing so would also improve interoperability and leverage 5G edge networks by moving more processing resources to the cloud.
For companies using architectural, engineering, and construction (AEC) tools, these solutions are vital for remote collaboration and prototyping models in real-time. Scaling application programme interfaces (APIs) would “support scalability over the next few years,” he concluded.
This indicates that CloudXR would remain a more long-term source of revenue, leading to steady subscription streams from clients. Mobile devices and headsets would eventually benefit as metaverse firms expanded and leveraged NVIDIA and rival solutions.
Despite NVIDIA’s current pay cut, I believe that the company can weather ongoing difficulties with a solid long-term strategy. This will diversify its revenue streams and, ultimately, build the industrial metaverse.