Factors Driving Higher Margins For Nvidia

Nvidia’s (NASDAQ:NVDA) operating margin steadily increased from 13% in the October quarter of 2013 to 32% in the corresponding period of 2016. The primary factor underlying the strong improvement in Nvidia’s operating margin is the fact that its revenues have surged strongly over the last couple of years, while its operating costs hardly increased. In the table below, we show how the company’s revenues in the third quarter in the last four years increased, while its R&D expenditure as a percentage of revenue during the same period steadily declined. Source: Sec-filings Even in absolute terms, Nvidia’s R&D in Q3’17 as compared to its R&D in Q3’14 increased only 8%, while its revenue more than doubled during the same period. The reason behind low R&D expense and high revenue growth for Nvidia…

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