NVDIA Corp. (NVDA) reported third-quarter 2010 EPS of 19 cents, exceeding the Zacks Consensus Estimate of 6 cents per share.

Revenue

NVDA reported revenue of $903.2 million, up 16.0% from the previous quarter and up 0.6% from the year-ago quarter. Revenue increased as a result of improvement in the company’s PC, professional solutions and consumer businesses. NVDA is shipping orders of Tegra mobile-computing solution, and witnessing increased enthusiasm for its Tesla platform for parallel computing in the server and cloud-computing markets.

The core GPU business showed strength in this quarter, up almost 25.0% sequentially. In this segment, desktop and notebook GPU segments were up 19% and over 41%, respectively, quarter over quarter. Demand was strong, although the company’s supply process was inhibited to a certain extent. The Professional business segment saw another quarter of growth, up 11% on a sequential basis. While revenues in this business are still well below their levels a year ago, quotation activity continues to gain momentum and is encouraging.

Operating Results

Gross margin, on a GAAP basis, was 43.4%, up from 20.2% in the previous quarter and 41.0% a year earlier. Gross margin on a non-GAAP basis was 41.0%, up 4.7 points from 36.3% in the previous quarter, but was almost flat compared to 41.9% a year ago. Gross margin improved sequentially as a result of significantly higher unit sales of GPUs, improved yields from 55-nanometer products, some cost reduction measures adopted by the company, and also as a result of a favorable product mix across businesses. GAAP operating expense for the quarter was around $284.0 million, marginally above the company’s guidance.

The company reported net income of $107.6 million, or $0.19 per diluted share On a GAAP basis, compared with net income of $61.7 million, or $0.11 per diluted share a year ago quarter. Third-quarter GAAP results included a benefit to operating income of $25.1 million, related to insurance reimbursements received during the quarter. Excluding special items such as insurance reimbursements and stock-based compensation, as well as their associated tax impact, net income on a non-GAAP basis was $110.3 million, or $0.19 per diluted share, compared with $111.4 million, or $0.20 per diluted share, a year earlier.

Guidance

For the fourth quarter of fiscal 2010, the company expects revenue to be up approximately 2.0% compared to the third quarter. GAAP gross margin is expected to be in the range of 40.0% to 42.0%. GAAP operating expenses are expected to be $305.0 million.

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