UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended August 1, 2021

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 0-23985

NVIDIA CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	94-3177549
(State or Other Jurisdiction of	(I.R.S. Employer
Incorporation or Organization)	Identification No.)

2788 San Tomas Expressway

Santa Clara, California 95051

(408) 486-2000

(Address, including zip code, and telephone number,

including area code, of principal executive offices)

N/A

(Former name, former address and former fiscal year if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.001 par value per share	NVDA	The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares of common stock, $0.001 par value, outstanding as of August 13, 2021, was 2.50 billion.

NVIDIA CORPORATION

FORM 10-Q

FOR THE QUARTER ENDED August 1, 2021

TABLE OF CONTENTS

		Page
	PART I : FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	a) Condensed Consolidated Statements of Income for the three and six months ended August 1, 2021 and July 26, 2020	3
	b) Condensed Consolidated Statements of Comprehensive Income for the three and six months ended August 1, 2021 and July 26, 2020	4
	c) Condensed Consolidated Balance Sheets as of August 1, 2021 and January 31, 2021	5
	d) Condensed Consolidated Statements of Shareholders' Equity for the three and six months ended August 1, 2021 and July 26, 2020	6
	e) Condensed Consolidated Statements of Cash Flows for the six months ended August 1, 2021 and July 26, 2020	8
	f) Notes to Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32
Item 4.	Controls and Procedures	32
	PART II : OTHER INFORMATION
Item 1.	Legal Proceedings	33
Item 1A.	Risk Factors	33
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37
Item 6.	Exhibits	38
Signature		40

WHERE YOU CAN FIND MORE INFORMATION

Investors and others should note that we announce material financial information to our investors using our investor relations website, press releases, SEC filings and public conference calls and webcasts. We also use the following social media channels as a means of disclosing information about the company, our products, our planned financial and other announcements and attendance at upcoming investor and industry conferences, and other matters, and for complying with our disclosure obligations under Regulation FD: 

NVIDIA Twitter Account (https://twitter.com/nvidia)

NVIDIA Company Blog (http://blogs.nvidia.com)

NVIDIA Facebook Page (https://www.facebook.com/nvidia)

NVIDIA LinkedIn Page (http://www.linkedin.com/company/nvidia)

NVIDIA Instagram Page (https://www.instagram.com/nvidia)

In addition, investors and others can view NVIDIA videos on YouTube (https://www.YouTube.com/nvidia).

The information we post through these social media channels may be deemed material. Accordingly, investors should monitor these accounts and the blog, in addition to following our press releases, SEC filings and public conference calls and webcasts. This list may be updated from time to time. The information we post through these channels is not a part of this Quarterly Report on Form 10-Q. These channels may be updated from time to time on NVIDIA's investor relations website.

2

PART I. FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS (UNAUDITED)

NVIDIA CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In millions, except per share data)

(Unaudited)

	Three Months Ended				Six Months Ended
	August 1,		July 26,		August 1,		July 26,
	2021		2020		2021		2020
Revenue	$	6,507	$	3,866	$	12,168	$	6,946
Cost of revenue	2,292		1,591		4,324		2,667
Gross profit	4,215		2,275		7,844		4,279
Operating expenses
Research and development	1,245		997		2,398		1,732
Sales, general and administrative	526		627		1,046		920
Total operating expenses	1,771		1,624		3,444		2,652
Income from operations	2,444		651		4,400		1,627
Interest income	6		13		13		44
Interest expense	(60)		(54)		(113)		(78)
Other, net	4		(1)		138		(2)
Other income (expense), net	(50)		(42)		38		(36)
Income before income tax	2,394		609		4,438		1,591
Income tax expense (benefit)	20		(13)		153		52
Net income	$	2,374	$	622	$	4,285	$	1,539
Net income per share:
Basic	$	0.95	$	0.25	$	1.72	$	0.63
Diluted	$	0.94	$	0.25	$	1.69	$	0.62
Weighted average shares used in per share computation:
Basic	2,493		2,464		2,489		2,460
Diluted	2,532		2,504		2,529		2,496

See accompanying Notes to Condensed Consolidated Financial Statements.

3

NVIDIA CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions)

(Unaudited)

	Three Months Ended				Six Months Ended
	August 1,		July 26,		August 1,		July 26,
	2021		2020		2021		2020
Net income	$	2,374	$	622	$	4,285	$	1,539
Other comprehensive income (loss), net of tax
Available-for-sale securities:
Net change in unrealized gain (loss)	—		3		(1)		3
Reclassification adjustments for net realized gain (loss) included in net income	—		(2)		—		(2)
Net change in unrealized gain (loss)	—		1		(1)		1
Cash flow hedges:
Net unrealized gain (loss)	(14)		16		(27)		6
Reclassification adjustments for net realized gain (loss) included in net income	8		(3)		17		(4)
Net change in unrealized gain (loss)	(6)		13		(10)		2
Other comprehensive income (loss), net of tax	(6)		14		(11)		3
Total comprehensive income	$	2,368	$	636	$	4,274	$	1,542

See accompanying Notes to Condensed Consolidated Financial Statements.

4

NVIDIA CORPORATION AND SUBSIDIARIES 

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions)

(Unaudited)

	August 1,		January 31,
	2021		2021
ASSETS
Current assets:
Cash and cash equivalents	$	5,628	$	847
Marketable securities	14,026		10,714
Accounts receivable, net	3,586		2,429
Inventories	2,114		1,826
Prepaid expenses and other current assets	452		239
Total current assets	25,806		16,055
Property and equipment, net	2,364		2,149
Operating lease assets	801		707
Goodwill	4,193		4,193
Intangible assets, net	2,478		2,737
Deferred income tax assets	958		806
Other assets	2,050		2,144
Total assets	$	38,650	$	28,791
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1,474	$	1,201
Accrued and other current liabilities	1,974		1,725
Short-term debt	1,000		999
Total current liabilities	4,448		3,925
Long-term debt	10,943		5,964
Long-term operating lease liabilities	716		634
Other long-term liabilities	1,396		1,375
Total liabilities	17,503		11,898
Commitments and contingencies - see Note 13
Shareholders’ equity:
Preferred stock	—		—
Common stock	3		3
Additional paid-in capital	9,745		8,719
Treasury stock, at cost	(11,604)		(10,756)
Accumulated other comprehensive income	8		19
Retained earnings	22,995		18,908
Total shareholders' equity	21,147		16,893
Total liabilities and shareholders' equity	$	38,650	$	28,791

See accompanying Notes to Condensed Consolidated Financial Statements.

5

NVIDIA CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED AUGUST 1, 2021 AND JULY 26, 2020

(Unaudited)

	Common Stock Outstanding			Additional Paid-in Capital		Treasury Stock		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Total Shareholders' Equity
(In millions, except per share data)	Shares	Amount
Balances, May 2, 2021	2,491	$	3	$	9,278	$	(11,242)	$	14	$	20,721	$	18,774
Net income	—	—		—		—		—		2,374		2,374
Other comprehensive loss	—	—		—		—		(6)		—		(6)
Issuance of common stock from stock plans	7	—		2		—		—		—		2
Tax withholding related to vesting of restricted stock units	(2)	—		—		(362)		—		—		(362)
Cash dividends declared and paid ($0.04 per common share)	—	—		—		—		—		(100)		(100)
Stock-based compensation	—	—		465		—		—		—		465
Balances, August 1, 2021	2,496	$	3	$	9,745	$	(11,604)	$	8	$	22,995	$	21,147
Balances, April 26, 2020	2,461	$	3	$	7,352	$	(10,036)	$	(10)	$	15,790	$	13,099
Net income	—	—		—		—		—		622		622
Other comprehensive income	—	—		—		—		14		—		14
Issuance of common stock from stock plans	8	—		6		—		—		—		6
Tax withholding related to vesting of restricted stock units	(2)	—		—		(196)		—		—		(196)
Cash dividends declared and paid ($0.04 per common share)	—	—		—		—		—		(99)		(99)
Fair value of partially vested equity awards assumed in connection with acquisitions	—	—		86		—		—		—		86
Stock-based compensation	—	—		382		—		—		—		382
Balances, July 26, 2020	2,467	$	3	$	7,826	$	(10,232)	$	4	$	16,313	$	13,914

See accompanying Notes to Condensed Consolidated Financial Statements.

6

NVIDIA CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

FOR THE SIX MONTHS ENDED AUGUST 1, 2021 AND JULY 26, 2020

(Unaudited)

	Common Stock Outstanding			Additional Paid-in Capital		Treasury Stock		Accumulated Other Comprehensive Income		Retained Earnings		Total Shareholders' Equity
(In millions, except per share data)	Shares	Amount
Balances, January 31, 2021	2,479	$	3	$	8,719	$	(10,756)	$	19	$	18,908	$	16,893
Net income	—	—		—		—		—		4,285		4,285
Other comprehensive loss	—	—		—		—		(11)		—		(11)
Issuance of common stock from stock plans	22	—		128		—		—		—		128
Tax withholding related to vesting of restricted stock units	(5)	—		—		(848)		—		—		(848)
Cash dividends declared and paid ($0.08 per common share)	—	—		—		—		—		(198)		(198)
Stock-based compensation	—	—		898		—		—		—		898
Balances, August 1, 2021	2,496	$	3	$	9,745	$	(11,604)	$	8	$	22,995	$	21,147
Balances, January 26, 2020	2,450	$	3	$	7,043	$	(9,814)	$	1	$	14,971	$	12,204
Net income	—	—		—		—		—		1,539		1,539
Other comprehensive income	—	—		—		—		3		—		3
Issuance of common stock from stock plans	24	—		94		—		—		—		94
Tax withholding related to vesting of restricted stock units	(7)	—		—		(418)		—		—		(418)
Cash dividends declared and paid ($0.08 per common share)	—	—		—		—		—		(197)		(197)
Fair value of partially vested equity awards assumed in connection with acquisitions	—	—		86		—		—		—		86
Stock-based compensation	—	—		603		—		—		—		603
Balances, July 26, 2020	2,467	$	3	$	7,826	$	(10,232)	$	4	$	16,313	$	13,914

See accompanying Notes to Condensed Consolidated Financial Statements.

7

NVIDIA CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

	Six Months Ended
	August 1,		July 26,
	2021		2020
Cash flows from operating activities:
Net income	$	4,285	$	1,539
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation expense	894		598
Depreciation and amortization	567		511
Deferred income taxes	(161)		(64)
(Gains) losses on investments in non-affiliates, net	(133)		5
Other	16		(10)
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable	(1,157)		(205)
Inventories	(282)		(97)
Prepaid expenses and other assets	18		34
Accounts payable	279		63
Accrued and other current liabilities	132		81
Other long-term liabilities	98		21
Net cash provided by operating activities	4,556		2,476
Cash flows from investing activities:
Proceeds from maturities of marketable securities	5,236		1,032
Proceeds from sales of marketable securities	705		259
Purchases of marketable securities	(9,268)		(8,286)
Purchases related to property and equipment and intangible assets	(481)		(372)
Investments and other, net	3		(7)
Acquisitions, net of cash acquired	—		(7,171)
Net cash used in investing activities	(3,805)		(14,545)
Cash flows from financing activities:
Issuance of debt, net of issuance costs	4,985		4,971
Proceeds related to employee stock plans	128		94
Payments related to tax on restricted stock units	(843)		(418)
Dividends paid	(198)		(197)
Principal payments on property and equipment	(40)		—
Other	(2)		(3)
Net cash provided by financing activities	4,030		4,447
Change in cash and cash equivalents	4,781		(7,622)
Cash and cash equivalents at beginning of period	847		10,896
Cash and cash equivalents at end of period	$	5,628	$	3,274

See accompanying Notes to Condensed Consolidated Financial Statements.

8

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1 - Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America, or U.S. GAAP, for interim financial information and with the instructions to Form 10-Q and Article 10 of Securities and Exchange Commission, or SEC, Regulation S-X. The January 31, 2021 consolidated balance sheet was derived from our audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended January 31, 2021, as filed with the SEC, but does not include all disclosures required by U.S. GAAP. In the opinion of management, all adjustments, consisting only of normal recurring adjustments considered necessary for a fair statement of results of operations and financial position, have been included. The results for the interim periods presented are not necessarily indicative of the results expected for any future period. The following information should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended January 31, 2021. 

On May 21, 2021, our Board of Directors declared a four-for-one split of our common stock in the form of a stock dividend, or the Stock Split, which was conditioned upon obtaining stockholder approval to increase the number of our authorized shares of common stock from 2 billion to 4 billion. On June 3, 2021, at the 2021 Annual Meeting of Stockholders, our stockholders approved the amendment to our Amended and Restated Certificate of Incorporation to increase the number of authorized shares of common stock to 4 billion. As a result, each stockholder of record at the close of business on June 21, 2021 received a dividend of three additional shares of common stock for every share held on the record date, distributed after the close of trading on July 19, 2021. All share, equity award, and per share amounts and related shareholders' equity balances presented herein have been retroactively adjusted to reflect the Stock Split.

Significant Accounting Policies

There have been no material changes to our significant accounting policies disclosed in Note 1 - Organization and Summary of Significant Accounting Policies, of the Notes to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended January 31, 2021.

Fiscal Year

We operate on a 52- or 53-week year, ending on the last Sunday in January. Fiscal year 2022 is a 52-week year and fiscal year 2021 was a 53-week year. The second quarters of fiscal years 2022 and 2021 were both 13-week quarters.

Reclassifications

Certain prior fiscal year balances have been reclassified to conform to the current fiscal year presentation.

Principles of Consolidation

Our condensed consolidated financial statements include the accounts of NVIDIA Corporation and our wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ materially from our estimates. On an ongoing basis, we evaluate our estimates, including those related to revenue recognition, cash equivalents and marketable securities, accounts receivable, inventories, income taxes, goodwill, stock-based compensation, litigation, investigation and settlement costs, restructuring and other charges, and other contingencies. The inputs into our judgments and estimates consider the economic implications of COVID-19. These estimates are based on historical facts and various other assumptions that we believe are reasonable.

9

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 2 - Business Combination

Pending Acquisition of Arm Limited

On September 13, 2020, we entered into a Share Purchase Agreement, or the Purchase Agreement, with Arm Limited, or Arm, and SoftBank Group Capital Limited and SVF Holdco (UK) Limited, or together, SoftBank, for us to acquire, from SoftBank, all allotted and issued ordinary shares of Arm in a transaction valued at $40 billion. We paid $2 billion in cash at signing, or the Signing Consideration, and will pay upon closing of the acquisition $10 billion in cash and issue to SoftBank 177.5 million shares of our common stock, which had an aggregate value of $21.5 billion as of the date of the Purchase Agreement. The transaction includes a potential earn out, which is contingent on the achievement of certain financial performance targets by Arm during the fiscal year ending March 31, 2022. If the financial targets are achieved, SoftBank can elect to receive either up to an additional $5 billion in cash or up to an additional 41.3 million shares of our common stock. We will issue up to $1.5 billion in restricted stock units to Arm employees after closing. The $2 billion paid upon signing was allocated between advanced consideration for the acquisition of $1.36 billion and the prepayment of intellectual property licenses from Arm of $0.17 billion and royalties of $0.47 billion, both with a 20-year term. The closing of the acquisition is subject to customary closing conditions, including receipt of specified governmental and regulatory consents and approvals and the expiration of any related mandatory waiting period, and Arm's implementation of the reorganization and distribution of Arm’s IoT Services Group and certain other assets and liabilities. We are working through the regulatory process in the United States, the United Kingdom, the European Union, China and other jurisdictions. Although some Arm licensees have expressed concerns or objected to the transaction, and discussions with regulators are taking longer than initially thought, we are confident in the deal rationale and that regulators should recognize the benefits of the acquisition to Arm, its licensees, and the industry. If the Purchase Agreement is terminated under certain circumstances, we will be refunded $1.25 billion of the Signing Consideration. The Signing Consideration was allocated on a fair value basis and any refund of the Signing Consideration will use stated values in the Purchase Agreement.

Acquisition of Mellanox Technologies, Ltd.

On April 27, 2020, we completed the acquisition of all outstanding shares of Mellanox for a total purchase consideration of $7.13 billion. Mellanox is a supplier of high-performance interconnect products for computing, storage and communications applications. We acquired Mellanox to optimize data center workloads to scale across the entire computing, networking, and storage stack.

Supplemental Unaudited Pro Forma Information

The following unaudited pro forma financial information summarizes the combined results of operations for NVIDIA and Mellanox as if the companies were combined as of the beginning of fiscal year 2020:

	Pro Forma
	Three Months Ended		Six Months Ended
	July 26, 2020		July 26, 2020
	(In millions)
Revenue	$	3,866	$	7,375
Net income	$	964	$	1,883

The unaudited pro forma information includes adjustments related to amortization of acquired intangible assets, adjustments to stock-based compensation expense, fair value of acquired inventory, and transaction costs. The unaudited pro forma information presented above is for informational purposes only and is not necessarily indicative of our consolidated results of operations of the combined business had the acquisition occurred at the beginning of fiscal year 2020 or of the results of our future operations of the combined businesses.

The pro forma results reflect the inventory step-up expense of $161 million in the first half of fiscal year 2020 and was excluded from the pro forma results for the second quarter and first half of fiscal year 2021. There were no other material nonrecurring adjustments.

10

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 3 - Leases

Our lease obligations primarily consist of operating leases for our headquarters complex, domestic and international office facilities, and data center space, with lease periods expiring between fiscal years 2022 and 2035.

Future minimum lease payments under our non-cancelable operating leases as of August 1, 2021, are as follows:

	Operating Lease Obligations
	(In millions)
Fiscal Year:
2022 (excluding first half of fiscal year 2022)	$	81
2023	156
2024	139
2025	119
2026	111
2027 and thereafter	355
Total	961
Less imputed interest	113
Present value of net future minimum lease payments	848
Less short-term operating lease liabilities	132
Long-term operating lease liabilities	$	716

Operating lease expenses were $42 million and $35 million for the second quarter of fiscal years 2022 and 2021, respectively, and $81 million and $67 million for the first half of fiscal years 2022 and 2021, respectively. Short-term and variable lease expenses for the second quarter and first half of fiscal years 2022 and 2021 were not significant.

Other information related to leases was as follows:

	Six Months Ended
	August 1, 2021		July 26, 2020
	(In millions)
Supplemental cash flows information
Operating cash flows used for operating leases	$	75	$	66
Operating lease assets obtained in exchange for lease obligations	$	164	$	138

As of August 1, 2021, our operating leases had a weighted average remaining lease term of 7.6 years and a weighted average discount rate of 2.84%. As of January 31, 2021, our operating leases had a weighted average remaining lease term of 7.6 years and a weighted average discount rate of 2.87%.

11

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 4 - Stock-Based Compensation

Our stock-based compensation expense is associated with restricted stock units, or RSUs, performance stock units that are based on our corporate financial performance targets, or PSUs, performance stock units that are based on market conditions, or market-based PSUs, and our employee stock purchase plan, or ESPP.

Our Condensed Consolidated Statements of Income include stock-based compensation expense, net of amounts allocated to inventory, as follows:

	Three Months Ended				Six Months Ended
	August 1, 2021		July 26, 2020		August 1, 2021		July 26, 2020
	(In millions)
Cost of revenue	$	32	$	14	$	57	$	35
Research and development	297		228		573		362
Sales, general and administrative	136		132		264		201
Total	$	465	$	374	$	894	$	598

Equity Award Activity

The following is a summary of equity award transactions under our equity incentive plans:

	RSUs, PSUs, and Market-based PSUs Outstanding
	Number of Shares	Weighted Average Grant-Date Fair Value Per Share
	(In millions, except per share data)
Balances, January 31, 2021	59	$	66.17
Granted	15	$	181.65
Vested restricted stock	(17)	$	62.20
Canceled and forfeited	(1)	$	70.78
Balances, August 1, 2021	56	$	100.01

As of August 1, 2021, there was $5.35 billion of aggregate unearned stock-based compensation expense, net of forfeitures. This amount is expected to be recognized over a weighted average period of 2.7 years for RSUs, PSUs, and market-based PSUs, and 1 year for ESPP.

12

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 5 – Net Income Per Share

The following is a reconciliation of the denominator of the basic and diluted net income per share computations for the periods presented:

	Three Months Ended				Six Months Ended
	August 1,		July 26,		August 1,		July 26,
	2021		2020		2021		2020
	(In millions, except per share data)
Numerator:
Net income	$	2,374	$	622	$	4,285	$	1,539
Denominator:
Basic weighted average shares	2,493		2,464		2,489		2,460
Dilutive impact of outstanding equity awards	39		40		40		36
Diluted weighted average shares	2,532		2,504		2,529		2,496
Net income per share:
Basic (1)	$	0.95	$	0.25	$	1.72	$	0.63
Diluted (2)	$	0.94	$	0.25	$	1.69	$	0.62
Equity awards excluded from diluted net income per share because their effect would have been anti-dilutive	13		—		15		24

(1)    Calculated as net income divided by basic weighted average shares.

(2)    Calculated as net income divided by diluted weighted average shares.

Note 6 – Income Taxes

We recognized an income tax expense of $20 million and $153 million for the second quarter and first half of fiscal year 2022, respectively, and an income tax benefit of $13 million and an income tax expense of $52 million for the second quarter and first half of fiscal year 2021, respectively. The income tax expense as a percentage of income before income tax was 0.9% and 3.4% for the second quarter and first half of fiscal year 2022, respectively, and 3.3% for the first half of fiscal year 2021. The income tax benefit as a percentage of income before income tax was 2.0% for the second quarter of fiscal year 2021.

On June 28, 2021, we simplified our corporate structure by repatriating the economic rights of certain non-U.S. intellectual property to the United States via domestication of a foreign subsidiary, or the Domestication. The Domestication more closely aligns our corporate structure to our operating structure in accordance with the Organization for Economic Cooperation and Development’s Base Erosion and Profit Shifting conclusions and changes to U.S. and European tax laws. The impact of the Domestication, which is regarded as a change in tax status, resulted in a discrete benefit primarily from re-valuing certain deferred tax assets, net of deferred tax liabilities, of $252 million in the second quarter of fiscal year 2022.

The increase in our effective tax rate for the second quarter and first half of fiscal year 2022 as compared to the same periods of fiscal year 2021 was primarily due to a decreased impact of tax benefits from stock-based compensation and the U.S. federal research tax credit, and an increase in the amount of earnings subject to U.S. tax, partially offset by the discrete benefit of the Domestication.

Our effective tax rate for the first half of fiscal year 2021 was lower than the U.S. federal statutory rate of 21% due to income earned in jurisdictions that is subject to taxes lower than the U.S. federal statutory tax rate, tax benefits related to stock-based compensation, and the benefit of the U.S. federal research tax credit.

Our effective tax rate for the first half of fiscal year 2022 was lower than the U.S. federal statutory rate of 21% due to the discrete benefit of the Domestication, tax benefits related to the foreign-derived intangible income deduction, income

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

earned in jurisdictions that is subject to taxes lower than the U.S. federal statutory tax rate, and tax benefits related to the U.S. federal research tax credit and stock-based compensation.

As of August 1, 2021, we intend to indefinitely reinvest approximately $1.6 billion and $231 million of cumulative undistributed earnings held by certain subsidiaries in Israel and the United Kingdom, respectively. We have not provided the amount of unrecognized deferred tax liabilities for temporary differences related to these investments as the determination of such amount is not practicable.

For the first half of fiscal year 2022, there have been no material changes to our tax years that remain subject to examination by major tax jurisdictions. We are currently under examination by the Internal Revenue Service for our fiscal years 2018 and 2019. Additionally, there have been no material changes to our unrecognized tax benefits and any related interest or penalties since the fiscal year ended January 31, 2021.

While we believe that we have adequately provided for all uncertain tax positions, or tax positions where we believe it is not more-likely-than-not that the position will be sustained upon review, amounts asserted by tax authorities could be greater or less than our accrued position. Accordingly, our provisions on federal, state and foreign tax related matters to be recorded in the future may change as revised estimates are made or the underlying matters are settled or otherwise resolved with the respective tax authorities. As of August 1, 2021, we do not believe that our estimates, as otherwise provided for, on such tax positions will significantly increase or decrease within the next 12 months.

Note 7 - Cash Equivalents and Marketable Securities 

Our cash equivalents and marketable securities related to debt securities are classified as “available-for-sale” debt securities.

The following is a summary of cash equivalents and marketable securities as of August 1, 2021 and January 31, 2021:

	August 1, 2021
	Amortized Cost		Unrealized Gain		Unrealized Loss		Estimated Fair Value		Reported as
									Cash Equivalents		Marketable Securities
	(In millions)
Corporate debt securities	$	8,610	$	2	$	(1)	$	8,611	$	1,825	$	6,786
Debt securities issued by the United States Treasury	5,079		1		—		5,080		1,311		3,769
Debt securities issued by United States government agencies	2,371		1		—		2,372		60		2,312
Money market funds	2,097		—		—		2,097		2,097		—
Certificates of deposit	962		—		—		962		44		918
Foreign government bonds	241		—		—		241		—		241
Total	$	19,360	$	4	$	(1)	$	19,363	$	5,337	$	14,026

	January 31, 2021
	Amortized Cost		Unrealized Gain		Unrealized Loss		Estimated Fair Value		Reported as
									Cash Equivalents		Marketable Securities
	(In millions)
Corporate debt securities	$	4,442	$	2	$	—	$	4,444	$	234	$	4,210
Debt securities issued by United States government agencies	2,975		1		—		2,976		28		2,948
Debt securities issued by the United States Treasury	2,846		—		—		2,846		25		2,821
Certificates of deposit	705		—		—		705		37		668
Money market funds	313		—		—		313		313		—
Foreign government bonds	67		—		—		67		—		67
Total	$	11,348	$	3	$	—	$	11,351	$	637	$	10,714

Net realized gains and unrealized gains and losses were not significant for all periods presented.

The amortized cost and estimated fair value of cash equivalents and marketable securities as of August 1, 2021 and January 31, 2021 are shown below by contractual maturity.

	August 1, 2021				January 31, 2021
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
	(In millions)
Less than one year	$	17,390	$	17,391	$	10,782	$	10,783
Due in 1 - 5 years	1,970		1,972		566		568
Total	$	19,360	$	19,363	$	11,348	$	11,351

Note 8 – Fair Value of Financial Assets and Liabilities

The fair values of our financial assets and liabilities are determined using quoted market prices of identical assets or quoted market prices of similar assets from active markets. We review fair value hierarchy classification on a quarterly basis.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

		Fair Value at
	Pricing Category	August 1, 2021		January 31, 2021
		(In millions)
Assets
Cash equivalents and marketable securities:
Money market funds	Level 1	$	2,097	$	313
Corporate debt securities	Level 2	$	8,611	$	4,444
Debt securities issued by the United States Treasury	Level 2	$	5,080	$	2,846
Debt securities issued by United States government agencies	Level 2	$	2,372	$	2,976
Certificates of deposit	Level 2	$	962	$	705
Foreign government bonds	Level 2	$	241	$	67
Prepaid expenses and other current assets:
Publicly-held equity security (1)	Level 1	$	128	$	—
Other assets:
Investment in non-affiliated entities (2)	Level 3	$	147	$	144
Liabilities (3)
2.20% Notes Due 2021	Level 2	$	1,001	$	1,011
0.309% Notes Due 2023	Level 2	$	1,251	$	—
0.584% Notes Due 2024	Level 2	$	1,254	$	—
3.20% Notes Due 2026	Level 2	$	1,106	$	1,124
1.55% Notes Due 2028	Level 2	$	1,261	$	—
2.85% Notes Due 2030	Level 2	$	1,640	$	1,654
2.00% Notes Due 2031	Level 2	$	1,271	$	—
3.50% Notes Due 2040	Level 2	$	1,152	$	1,152
3.50% Notes Due 2050	Level 2	$	2,320	$	2,308
3.70% Notes Due 2060	Level 2	$	603	$	602

(1)    Investment in a publicly-traded equity security subject to short-term selling restrictions. An unrealized loss on the investment of $6 million was recorded in other income (expense), net in the second quarter of fiscal year 2022 and an unrealized gain of $118 million was recorded in other income (expense), net in the first half of fiscal year 2022.

(2)    Investment in private non-affiliated entities is recorded at fair value on a non-recurring basis only if an impairment or observable price adjustment occurs in the period with changes in fair value recorded through net income. The amount recorded as of August 1, 2021 has not been significant.

(3)    These liabilities are carried on our Consolidated Balance Sheets at their original issuance value, net of unamortized debt discount and issuance costs, and are not marked to fair value each period. Refer to Note 12 of the Notes to Condensed Consolidated Financial Statements for additional information.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 9 - Amortizable Intangible Assets and Goodwill

The components of our amortizable intangible assets are as follows:

	August 1, 2021			January 31, 2021
	Gross Carrying Amount	Accumulated Amortization	Net Carrying Amount	Gross Carrying Amount	Accumulated Amortization	Net Carrying Amount
	(In millions)
Acquisition-related intangible assets (1)