SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

NVIDIA ~~CORPORATION~~CORPORATION

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. Yesx☒ 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). Yesx☒ No o☐

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 filerx	☒	Accelerated filero	☐	Non-accelerated filero	☐	Smaller reporting companyo	☐	Emerging growth companyo	☐

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. o☐

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

The number of shares of common stock, $0.001 par value, outstanding as of ~~November~~August 9, ~~2018,~~2019, was ~~610~~609 million.

NVIDIA CORPORATION

FORM 10-Q

FOR THE QUARTER ENDED ~~October~~July 28, ~~2018~~2019

TABLE OF CONTENTS



		Page
	PART I : FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)

	a) Condensed Consolidated Statements of Income for the three and ~~nine~~six months ended ~~October~~July 28, ~~2018~~2019 and ~~October~~July 29, ~~2017~~2018	3

	b) Condensed Consolidated Statements of Comprehensive Income for the three and ~~nine~~six months ended ~~October~~July 28, ~~2018~~2019 and ~~October~~July 29, ~~2017~~2018	4

	c) Condensed Consolidated Balance Sheets as of ~~October~~July 28, ~~2018~~2019 and January ~~28, 2018~~27, 2019	5

	d) Condensed Consolidated Statements of ~~Cash Flows~~Shareholders' Equity for the ~~nine~~three and six months ended ~~October~~July 28, ~~2018~~2019 and ~~October~~July 29, ~~2017~~2018	6
	e) Condensed Consolidated Statements of Cash Flows for the six months ended July 28, 2019 and July 29, 2018	8
	e)f) Notes to Condensed Consolidated Financial Statements	79

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2322

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3129

Item 4.	Controls and Procedures	3130

	PART II : OTHER INFORMATION

Item 1.	Legal Proceedings	3130

Item 1A.	Risk Factors	3130

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30

Item 6.	Exhibits	32

~~Item 6.~~	~~Exhibits~~	33

Signature		3433

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.

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.

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						Nine Months Ended						Three Months Ended						Six Months Ended
	October 28,			October 29,			October 28,			October 29,			July 28,			July 29,			July 28,			July 29,
	2018			2017			2018			2017			2019			2018			2019			2018

Revenue	$	3,181		$	2,636		$	9,511		$	6,803		$	2,579		$	3,123		$	4,799		$	6,330
Cost of revenue	1,260			1,067			3,547			2,782			1,038			1,148			1,962			2,287
Gross profit	1,921			1,569			5,964			4,021			1,541			1,975			2,837			4,043
Operating expenses
Research and development	605			462			1,729			1,290			704			581			1,379			1,124
Sales, general and administrative	258			212			725			594			266			237			529			467
Total operating expenses	863			674			2,454			1,884			970			818			1,908			1,591
Income from operations	1,058			895			3,510			2,137			571			1,157			929			2,452
Interest income	37			17			94			48			47			32			92			57
Interest expense	(15		)	(15		)	(44		)	(46		)	(13		)	(14		)	(27		)	(29		)
Other, net	1			(1		)	12			(22		)	1			5			1			11
Total other income (expense)	23			1			62			(20		)	35			23			66			39
Income before income tax	1,081			896			3,572			2,117			606			1,180			995			2,491
Income tax expense (benefit)	(149		)	58			(3		)	189
Income tax expense													54			79			48			146
Net income	$	1,230		$	838		$	3,575		$	1,928		$	552		$	1,101		$	947		$	2,345

Net income per share:
Basic	$	2.02		$	1.39		$	5.88		$	3.23		$	0.91		$	1.81		$	1.56		$	3.86
Diluted	$	1.97		$	1.33		$	5.71		$	3.05		$	0.90		$	1.76		$	1.54		$	3.74

Weighted average shares used in per share computation:
Basic	609			603			608			597			609			607			608			607
Diluted	625			628			626			633			616			626			616			627

Cash dividends declared and paid per common share	$	0.15		$	0.14		$	0.45		$	0.42

See accompanying Notes to Condensed Consolidated Financial Statements.

NVIDIA CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions)

(Unaudited)


	Three Months Ended						Nine Months Ended						Three Months Ended					Six Months Ended
	October 28,			October 29,			October 28,			October 29,			July 28,		July 29,			July 28,			July 29,
	2018			2017			2018			2017			2019		2018			2019			2018

Net income	$	1,230		$	838		$	3,575		$	1,928		$	552	$	1,101		$	947		$	2,345
Other comprehensive income (loss), net of tax
Available-for-sale securities:
Net unrealized gain (loss)	3			(3		)	6			2
Net change in unrealized gain													1		6			9			3
Reclassification adjustments for net realized gain included in net income	—			1			1			1			—		—			—			1
Net change in unrealized gain (loss)	3			(2		)	7			3
Net change in unrealized gain													1		6			9			4
Cash flow hedges:
Net unrealized gain (loss)	1			(1		)	(7		)	(3		)	—		(4		)	4			(8		)
Reclassification adjustments for net realized gain (loss) included in net income	(5		)	1			(6		)	3			—		(2		)	(2		)	(1		)
Net change in unrealized loss	(4		)	—			(13		)	—
Net change in unrealized gain (loss)													—		(6		)	2			(9		)
Other comprehensive income (loss), net of tax	(1		)	(2		)	(6		)	3			1		—			11			(5		)
Total comprehensive income	$	1,229		$	836		$	3,569		$	1,931		$	553	$	1,101		$	958		$	2,340

See accompanying Notes to Condensed Consolidated Financial Statements.

NVIDIA CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions)

(Unaudited)


	October 28,			January 28,			July 28,			January 27,
	2018			2018			2019			2019
ASSETS
Current assets:
Cash and cash equivalents	$	721		$	4,002		$	7,105		$	782
Marketable securities	6,870			3,106			1,370			6,640
Accounts receivable, net	2,219			1,265			1,561			1,424
Inventories	1,417			796			1,204			1,575
Prepaid expenses and other current assets	159			86			151			136
Total current assets	11,386			9,255			11,391			10,557
Property and equipment, net	1,292			997			1,484			1,404
Operating lease assets							535			—
Goodwill	618			618			618			618
Intangible assets, net	49			52			49			45
Deferred income tax assets							588			560
Other assets	312			319			110			108
Total assets	$	13,657		$	11,241		$	14,775		$	13,292

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	902		$	596		$	437		$	511
Accrued and other current liabilities	703			542			880			818
Convertible short-term debt	3			15
Total current liabilities	1,608			1,153			1,317			1,329
Long-term debt	1,987			1,985			1,989			1,988
Long-term operating lease liabilities							483			—
Other long-term liabilities	587			632			650			633
Total liabilities	4,182			3,770			4,439			3,950
Commitments and contingencies - see Note 13
Shareholders’ equity:
Preferred stock	—			—			—			—
Common stock	1			1			1			1
Additional paid-in capital	5,891			5,351			6,543			6,051
Treasury stock, at cost	(8,489		)	(6,650		)	(9,524		)	(9,263		)
Accumulated other comprehensive loss	(24		)	(18		)	(1		)	(12		)
Retained earnings	12,096			8,787			13,317			12,565
Total shareholders' equity	9,475			7,471			10,336			9,342
Total liabilities and shareholders' equity	$	13,657		$	11,241		$	14,775		$	13,292

See accompanying Notes to Condensed Consolidated Financial Statements.

NVIDIA CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED JULY 28, 2019 AND JULY 29, 2018

(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		Additional Paid-in Capital		Treasury Stock			Accumulated Other Comprehensive Income (Loss)			Retained Earnings			Total Shareholders' Equity
Balances, April 28, 2019	609	$	1	$	6,317	$	(9,474	)	$	(2	)	$	12,862		$	9,704
Other comprehensive income	—	—		—		—			1			—			1
Net income	—	—		—		—			—			552			552
Tax withholding related to vesting of restricted stock units	—	—		—		(50		)	—			—			(50		)
Cash dividends declared and paid ($0.16 per common share)	—	—		—		—			—			(97		)	(97		)
Stock-based compensation	—	—		226		—			—			—			226
Balances, July 28, 2019	609	$	1	$	6,543	$	(9,524	)	$	(1	)	$	13,317		$	10,336



	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		Additional Paid-in Capital		Treasury Stock			Accumulated Other Comprehensive Income (Loss)			Retained Earnings			Total Shareholders' Equity
Balances, April 29, 2018	607	$	1	$	5,546	$	(7,755	)	$	(23	)	$	9,948		$	7,717
Net income	—	—		—		—			—			1,101			1,101
Issuance of common stock from stock plans	1	—		3		—			—			—			3
Tax withholding related to vesting of restricted stock units	—	—		—		(65		)	—			—			(65		)
Exercise of convertible note hedges	—	—		1		(1		)	—			—			—
Cash dividends declared and paid ($0.15 per common share)	—	—		—		—			—			(92		)	(92		)
Stock-based compensation	—	—		131		—			—			—			131
Balances, July 29, 2018	608	$	1	$	5,681	$	(7,821	)	$	(23	)	$	10,957		$	8,795

See accompanying Notes to Condensed Consolidated Financial Statements.

NVIDIA CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

FOR THE SIX MONTHS ENDED JULY 28, 2019 AND JULY 29, 2018

(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		Additional Paid-in Capital		Treasury Stock			Accumulated Other Comprehensive Income (Loss)			Retained Earnings			Total Shareholders' Equity
Balances, January 27, 2019	606		$	1	$	6,051	$	(9,263	)	$	(12	)	$	12,565		$	9,342
Other comprehensive income	—		—		—		—			11			—			11
Net income	—		—		—		—			—			947			947
Issuance of common stock from stock plans	5		—		83		—			—			—			83
Tax withholding related to vesting of restricted stock units	(2	)	—		—		(261		)	—			—			(261		)
Cash dividends declared and paid ($0.32 per common share)	—		—		—		—			—			(195		)	(195		)
Stock-based compensation	—		—		409		—			—			—			409
Balances, July 28, 2019	609		$	1	$	6,543	$	(9,524	)	$	(1	)	$	13,317		$	10,336



	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		Additional Paid-in Capital		Treasury Stock			Accumulated Other Comprehensive Income (Loss)			Retained Earnings			Total Shareholders' Equity
Balances, January 28, 2018	606		$	1	$	5,351	$	(6,650	)	$	(18	)	$	8,787		$	7,471
Retained earnings adjustment due to adoption of new revenue accounting standard	—		—		—		—			—			8			8
Other comprehensive loss	—		—		—		—			(5		)	—			(5		)
Net income	—		—		—		—			—			2,345			2,345
Issuance of common stock from stock plans	7		—		69		—			—			—			69
Tax withholding related to vesting of restricted stock units	(2	)	—		—		(515		)	—			—			(515		)
Share repurchase	(3	)	—		—		(655		)	—			—			(655		)
Exercise of convertible note hedges	—		—		1		(1		)	—			—			—
Cash dividends declared and paid ($0.30 per common share)	—		—		—		—			—			(183		)	(183		)
Stock-based compensation	—		—		260		—			—			—			260
Balances, July 29, 2018	608		$	1	$	5,681	$	(7,821	)	$	(23	)	$	10,957		$	8,795

See accompanying Notes to Condensed Consolidated Financial Statements.

NVIDIA CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)


	Nine Months Ended						Six Months Ended
	October 28,			October 29,			July 28,			July 29,
	2018			2017			2019			2018
Cash flows from operating activities:
Net income	$	3,575		$	1,928		$	947		$	2,345
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation expense	400			265			401			262
Depreciation and amortization	184			145			183			116
Deferred income taxes	30			158			(27		)	113
Loss on early debt conversions	—			19
Other	(35		)	15			1			(22		)
Changes in operating assets and liabilities:
Accounts receivable	(943		)	(342		)	(137		)	(386		)
Inventories	(620		)	(61		)	378			(295		)
Prepaid expenses and other assets	(68		)	(26		)	36			(44		)
Accounts payable	224			27			(45		)	172
Accrued and other current liabilities	147			(15		)	(79		)	96
Other long-term liabilities	(49		)	31			(2		)	1
Net cash provided by operating activities	2,845			2,144			1,656			2,358
Cash flows from investing activities:
Proceeds from maturities of marketable securities	6,267			739			3,592			2,957
Proceeds from sales of marketable securities	114			802			3,152			77
Purchases of marketable securities	(10,112		)	(36		)	(1,461		)	(7,136		)
Purchases of property and equipment and intangible assets	(397		)	(177		)	(241		)	(247		)
Investment in non-affiliates	(9		)	(26		)	(2		)	(7		)
Net cash provided by (used in) investing activities	(4,137		)	1,302			5,040			(4,356		)
Cash flows from financing activities:
Proceeds related to employee stock plans							83			69
Payments related to tax on restricted stock units							(261		)	(515		)
Dividends paid							(195		)	(182		)
Payments related to repurchases of common stock	(855		)	(909		)	—			(655		)
Repayment of Convertible Notes	(12		)	(803		)	—			(2		)
Dividends paid	(273		)	(250		)
Proceeds related to employee stock plans	135			132
Payments related to tax on restricted stock units	(982		)	(577		)
Other	(2		)	(3		)	—			(1		)
Net cash used in financing activities	(1,989		)	(2,410		)	(373		)	(1,286		)
Change in cash and cash equivalents	(3,281		)	1,036			6,323			(3,284		)
Cash and cash equivalents at beginning of period	4,002			1,766			782			4,002
Cash and cash equivalents at end of period	$	721		$	2,802		$	7,105		$	718

Other non-cash investing activity:
Assets acquired by assuming related liabilities	$	98		$	20		$	80		$	52

See accompanying Notes to Condensed Consolidated Financial Statements.

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 ~~28, 2018~~27, 2019 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 ~~28, 2018,~~27, 2019, 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 ~~except as otherwise noted,~~ 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 ~~28, 2018.~~27, 2019.

Significant Accounting Policies

Except for the accounting policy for ~~revenue recognition,~~leases, which was updated as a result of adopting a new accounting standard related to ~~revenue recognition,~~leases, there have been no material changes to our significant accounting policies 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 ~~28, 2018.~~27, 2019.

~~Revenue Recognition~~Leases

We ~~derive~~determine if an arrangement is or contains a lease at inception. Operating leases with lease terms of more than 12 months are included in operating lease assets, accrued and other current liabilities, and long-term operating lease liabilities on our ~~revenue from product sales, including hardware~~consolidated balance sheet. Operating lease assets represent our right to use an underlying asset for the lease term and ~~systems, license~~lease liabilities represent our obligation to make lease payments over the lease term.

Operating lease assets and development arrangements, and software licensing. We determine revenue recognition through the following steps: (1) identification of the contract with a customer; (2) identification of the performance obligations in the contract; (3) determination of the transaction price; (4) allocation of the transaction price to the performance obligations in the contract; and (5) recognition of revenue when, or as, we satisfy a performance obligation.

~~Product Sales Revenue~~

~~Revenue from product sales is~~liabilities are recognized upon transfer of control of promised products to customers in an amount that reflects the consideration we expect to receive in exchange for those products. Revenue is recognized net of allowances for returns, customer programs and any taxes collected from customers.

For products sold with a right of return, we record a reduction to revenue by establishing a sales return allowance for estimated product returns at the time revenue is recognized, based primarily on historical return rates. However, if product returns for a fiscal period are anticipated to exceed historical return rates, we may determine that additional sales return allowances are required to properly reflect our estimated exposure for product returns.

Our customer programs involve rebates, which are designed to serve as sales incentives to resellers of our products in various target markets, and marketing development funds, or MDFs, which represent monies paid to our partners that are earmarked for market segment development and are designed to support our partners’ activities while also promoting NVIDIA products. We account for customer programs as a reduction to revenue and accrue for potential rebates and MDFs based on the ~~amount we expect to be claimed by customers.~~

~~License and Development Arrangements~~

Our license and development arrangements with customers typically require significant customization of our intellectual property components. As a result, we recognize the revenue from the license and the revenue from the development services as a single performance obligation over the period in which the development services are performed. We measure progress to completion based on actual cost incurred to date as a percentagepresent value of the ~~estimated total cost required~~remaining lease payments discounted using our incremental borrowing rate. Operating lease assets also include initial direct costs incurred and prepaid lease payments, minus any lease incentives. Our lease terms include options to ~~complete each project. If a loss on an arrangement becomes probable during a period, we record a provision for such loss in that period.~~

~~NVIDIA CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

~~Software Licensing~~

~~Our software licenses provide our customers with a right to use~~extend or terminate the ~~software~~lease when it is made available to the customer. Customers may purchase either perpetual licenses or subscriptions to licenses, which differ mainly in the duration over which the customer benefits from the software. Software licenses are frequently sold along with post-contract customer support, or PCS. For such arrangements,reasonably certain that we ~~allocate revenue to the software license and PCS~~will exercise that option. Lease expense is recognized on a ~~relative standalone selling price~~straight-line basis by maximizing the use of observable inputs to determine the standalone selling price for each performance obligation. Revenue from software licenses is recognized up front when the software is made available to the customer. PCS revenue is recognized ratably over the ~~service period, or as services are performed.~~lease term.

We combine the lease and non-lease components in determining the operating lease assets and liabilities.

Refer to Note 3 of these Notes to Condensed Consolidated Financial Statements for additional information.

We operate on a 52- or 53-week year, ending on the last Sunday in January. Fiscal years ~~2019~~2020 and ~~2018~~2019 are both 52-week years. The ~~third~~second quarters of fiscal years ~~2019~~2020 and ~~2018~~2019 were both 13-week quarters.

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.

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~~on-going 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

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

other contingencies. These estimates are based on historical facts and various other assumptions that we believe are reasonable.

Adoption of New and Recently Issued Accounting Pronouncements

Recently Adopted Accounting ~~Pronouncements~~Pronouncement

The Financial Accounting Standards Board, or FASB, issued an accounting standards update ~~that creates a single source of revenue guidance~~regarding the accounting for leases under ~~U.S. GAAP for all companies, in all industries.~~which lease assets and liabilities are recognized on the balance sheet. We adopted this guidance on January ~~29, 2018~~28, 2019 using the ~~modified retrospective approach.~~optional transition method by recognizing a cumulative-effect adjustment to the consolidated balance sheet. Refer to Note 23 of these Notes to Condensed Consolidated Financial Statements for additional information.

In January 2016, the FASB issued an accounting standards update to amend certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. We are now required to recognize changes in the fair value of our equity investments through net income rather than other comprehensive income. We adopted this guidance in the first quarter of fiscal year 2019 and applied it prospectively. The adoption of this guidance did not have a significant impact on our consolidated financial statements.

Recent Accounting Pronouncement Not Yet Adopted

In ~~February~~June 2016, ~~and July 2018,~~ the FASB issued a new accounting ~~standards updates regarding~~standard to replace the ~~accounting~~incurred loss impairment methodology under current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. We will be required to use a forward-looking expected credit loss model for ~~leases by which we will begin recognizing lease assets~~accounts receivable and ~~liabilities on the balance sheet for lease terms of more than 12 months.~~other financial instruments, including available-for-sale debt securities. The FASB also recently provided a practical expedient transition method to adopt the new lease accounting requirements. We are evaluating the impact of adopting the new lease accounting standards on our consolidated financial statements, systems and processes in conjunction with our review of lease agreements. The updatesstandard will be effective for us beginning in the first quarter of fiscal year ~~2020.~~2021, with early adoption permitted. We ~~expect~~are currently evaluating the impact of this standard on our Consolidated Financial Statements.

Note 2 - Merger Agreement with Mellanox Technologies, Ltd.

On March 10, 2019, we entered into an Agreement and Plan of Merger, or the Merger Agreement, with Mellanox Technologies Ltd., or Mellanox, pursuant to which we will acquire all of the issued and outstanding common shares of Mellanox for $125 per share in cash, representing a total enterprise value of approximately $6.9 billion as of the date of the Merger Agreement. The closing of the merger is subject to approval by regulatory agencies. If the Merger Agreement is terminated under certain circumstances involving the failure to obtain the required regulatory approvals, we could be obligated to pay Mellanox a termination fee of $350 million. We have received regulatory approval in the United States and Mexico and are engaged with regulators in Europe and China. In June 2019, Mellanox shareholders approved the merger.

Note 3 - New Lease Accounting Standard

Method and Impact of Adoption

On January 28, 2019, we adopted the new lease accounting standard using the optional transition method by recognizing a cumulative-effect adjustment to the consolidated balance sheet and not adjusting comparative information for prior periods. In addition, we elected the package of practical expedients permitted under the transition guidance, which allowed us not to reassess (1) whether any expired or existing contracts are or contain leases, (2) lease classification for any expired or existing leases, and (3) initial direct costs for any existing leases.

The cumulative-effect adjustment upon adoption of ~~this~~the new lease accounting ~~guidance to result~~standard resulted in ~~an increase in~~the recognition of $470 million of operating lease assets and ~~a corresponding increase in~~$500 million of operating lease liabilities on our Consolidated Balance ~~Sheets.~~Sheet. The difference of $30 million represents deferred rent for leases that existed as of the date of adoption, which was an offset to the opening balance of operating lease assets.

Our lease obligations consist of operating leases for our headquarters complex, domestic and international office facilities, and data center space, with lease periods expiring between fiscal years 2020 and 2035.

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Future minimum lease payments under our non-cancelable operating leases as of July 28, 2019, are as follows:

~~Note 2 - New Revenue Accounting Standard~~



	Operating Lease Obligations
	(In millions)
Fiscal Year:
2020 (excluding first half of fiscal year 2020)	$	55
2021	109
2022	100
2023	81
2024	57
2025 and thereafter	281
Total	683
Less imputed interest	116
Present value of net future minimum lease payments	567
Less short-term operating lease liabilities	84
Long-term operating lease liabilities	$	483

~~Method and Impact~~Future minimum lease payments under our non-cancelable operating leases as of ~~Adoption~~

On January ~~29, 2018, we adopted~~27, 2019, based on the ~~new revenue~~previous lease accounting standard, ~~using the modified retrospective method and applied it to contracts that were not completed~~are as of that date. Upon adoption, we recognized the cumulative effect of the new standard as a $7 million increase to opening retained earnings, net of tax. Comparative information for prior periods has not been adjusted. The impact of the new standard on our consolidated financial statementsfollows:



	Lease Obligations
	(In millions)
Fiscal Year:
2020	$	100
2021	97
2022	90
2023	77
2024	54
2025 and thereafter	265
Total	$	683

Operating lease expense for the ~~third~~second quarter and first ~~nine months~~half of fiscal year 2020 was $28 million and $55 million, respectively. Operating lease expense for the second quarter and first half of fiscal year 2019 was ~~not significant.~~

~~Deferred Revenue~~$20 million and ~~Performance Obligations~~

~~Deferred revenue is comprised mainly of customer advances~~$36 million, respectively. Short-term and ~~deferrals related to license~~variable lease expenses for the second quarter and ~~development arrangements and PCS related to software licensing. The following table shows the changes in deferred revenue during the~~ first ~~nine months~~half of fiscal year ~~2019:~~2020 were not significant.

October 28,
2018
(In millions)
Balance as of January 28, 2018 $ 68
Adjustment to retained earnings upon adoption of new revenue standard (5 )
Balance as of January 29, 2018 63
Deferred revenue added during the period 271
Revenue recognized during the period (214 )
Balance as of October 28, 2018 $ 120

~~Revenue~~Other information related to ~~remaining performance obligations represents the amount of contracted license and development arrangements and PCS that has not been recognized.~~ leases was as follows:



	Three Months Ended		Six Months Ended
	July 28, 2019		July 28, 2019
	(In millions)
Supplemental cash flows information
Operating cash flows used for operating leases	$	26	$	50
Operating lease assets obtained in exchange for lease obligations	$	21	$	108

As of ~~October~~July 28, ~~2018, the amount~~2019, our operating leases had a weighted average remaining lease term of ~~our remaining performance obligations that has not been recognized as revenue was $237 million,~~8.7 years and a weighted average discount rate of which we expect to recognize approximately 50% as revenue over the next twelve months and the remainder thereafter. This amount excludes the value of remaining performance obligations for contracts with an original expected length of one year or less.3.70%.

~~Refer to Note 15 of these Notes to Condensed Consolidated Financial Statements for additional information, including disaggregated revenue disclosures.~~

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 34 - 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
	July 28, 2019		July 29, 2018		July 28, 2019		July 29, 2018
	(In millions)
Cost of revenue	$	8	$	8	$	12	$	16
Research and development	145		76		259		150
Sales, general and administrative	71		48		130		96
Total	$	224	$	132	$	401	$	262

Three Months Ended Nine Months Ended
October 28,
2018 October 29,
2017 October 28,
2018 October 29,
2017
(In millions)
Cost of revenue $ 5
$ 6
$ 21
$ 14
Research and development 88
61
237
146
Sales, general and administrative 47
40
142
105
Total $ 140
$ 107
$ 400
$ 265

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 27, 2019	16		$	129.92
Granted (1) (2)	6		$	183.33
Vested restricted stock	(4	)	$	67.51
Canceled and forfeited	(1	)	$	189.95
Balances, July 28, 2019	17		$	161.37

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 28, 2018 22
$ 66.72
Granted (1) (2) 4
$ 262.44
Vested restricted stock (10 ) $ 47.61
Canceled and forfeited —
$ —
Balances, October 28, 2018 16
$ 127.89

~~Of the total fair value~~As of ~~equity awards granted during the third quarter and first nine months~~July 28, 2019, there was $2.06 billion of ~~fiscal year 2019, we estimated that the~~aggregate unearned stock-based compensation expense, ~~related to equity awards that are not~~net of forfeitures. This amount is expected to ~~vest was $73 million~~be recognized over a weighted average period of 2.5 years for RSUs, PSUs, and ~~$89 million, respectively. Of the total fair value of equity awards granted during the third quarter~~market-based PSUs, and ~~first nine months of fiscal year 2018, we estimated that the stock-based compensation expense related to equity awards that are not expected to vest was $105 million and $144 million, respectively.~~1.1 years for ESPP.

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

~~The following summarizes the aggregate unearned stock-based compensation expense and estimated weighted average amortization period as of October 28, 2018 and January 28, 2018:~~

October 28, January 28,
2018 2018
(In millions)
Aggregate unearned stock-based compensation expense $ 1,608
$ 1,091

Estimated weighted average remaining amortization period (In years)
RSUs, PSUs, and market-based PSUs 2.4
2.3
ESPP 0.9
0.7

Note 45 – 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
	July 28,		July 29,		July 28,		July 29,
	2019		2018		2019		2018
	(In millions, except per share data)
Numerator:
Net income	$	552	$	1,101	$	947	$	2,345
Denominator:
Basic weighted average shares	609		607		608		607
Dilutive impact of outstanding securities:
Equity awards	7		18		8		19
1.00% Convertible Senior Notes	—		1		—		1
Diluted weighted average shares	616		626		616		627
Net income per share:
Basic (1)	$	0.91	$	1.81	$	1.56	$	3.86
Diluted (2)	$	0.90	$	1.76	$	1.54	$	3.74
Equity awards excluded from diluted net income per share because their effect would have been anti-dilutive	11		—		12		1

Three Months Ended Nine Months Ended
October 28, October 29, October 28, October 29,
2018 2017 2018 2017
(In millions, except per share data)
Numerator:
Net income $ 1,230
$ 838
$ 3,575
$ 1,928
Denominator:
Basic weighted average shares 609
603
608
597
Dilutive impact of outstanding securities:
Equity awards 16
23
18
24
1.00% Convertible Senior Notes —
2
—
7
Warrants issued with the 1.00% Convertible
Senior Notes
—
—
—
5
Diluted weighted average shares 625
628
626
633
Net income per share:
Basic (1) $ 2.02
$ 1.39
$ 5.88
$ 3.23
Diluted (2) $ 1.97
$ 1.33
$ 5.71
$ 3.05
Equity awards excluded from diluted net income per share because their effect would have been anti-dilutive 3
3
4
4

The 1.00% Convertible Senior Notes Due 2018, or the Convertible Notes, were included in the calculation of diluted net income per share. The Convertible Notes had a dilutive impact on net income per share as our average stock price for the reporting period exceeded the adjusted conversion price of $20.02 per share. The warrants associated with our Convertible Notes, or the Warrants, outstanding were also included in the calculation of diluted net income per share. As of October 28, 2018, there were no warrants outstanding.

~~Refer to~~ Note 1~~2 of these Notes to Condensed Consolidated Financial Statements for additional discussion regarding the Convertible Notes.~~

~~NVIDIA CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

~~Note 5~~6 – Income Taxes

We recognized an income tax ~~benefit~~expense of ~~$149~~$54 million and $3$48 million for the ~~third~~second quarter and first ~~nine months~~half of fiscal year 2020, respectively, and $79 million and $146 million for the second quarter and first half of fiscal year 2019, ~~respectively, and income~~respectively. The effective tax ~~expense of $58 million and $189 million~~rate for the ~~third~~second quarter and first ~~nine months~~half of fiscal year ~~2018, respectively. Income tax benefit as a percentage of income before income tax~~2020 was ~~13.8%~~8.8% and ~~nominal~~4.9%, respectively, and 6.7% and 5.9% for the ~~third~~second quarter and first ~~nine months~~half of fiscal year 2019, ~~respectively, and income~~respectively.

The increase in our effective tax ~~expense as a percentage of income before tax was 6.5% and 8.9%~~rate for the ~~third~~second quarter ~~and first nine months~~ of fiscal year ~~2018, respectively.~~

2020 as compared to the second quarter of fiscal year 2019 was primarily due to an increase in the amount of earnings subject to United States tax, and a decrease of tax benefits from stock-based compensation, partially offset by an increase in the impact of tax benefits from the U.S. federal research tax credit. The decrease in our effective tax rate for the ~~third quarter and~~ first ~~nine months~~half of fiscal year 2020 as compared to the first half of fiscal year 2019 ~~as compared to the same periods in the prior fiscal year~~ was primarily due to a decrease in the U.S. statutory tax rate from 35% to 21% as a result of U.S. tax reform, and a $138 million reduction in our provisional U.S. tax reform transition tax amount in the third quarter of fiscal year 2019, partially offset by a decreasean increase in the impact of tax benefits from the U.S. federal research tax credit and stock-based compensation.

Our effective tax rates for the first ~~nine months~~half of fiscal years 2020 and 2019 were 4.9% and ~~2018 were nominal and 8.9%~~5.9%, respectively, and were lower than the U.S. federal statutory ~~rates~~rate of 21% ~~and 33.9%, for fiscal years 2019 and 2018, respectively,~~ due to income earned in jurisdictions that are 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, and for fiscal year 2019, the reduction in our provisional U.S. tax reform transition tax amount.~~

In December 2017, the SEC issued guidance that allows companies to record provisional amounts for the tax effects of the Tax Cuts and Job Acts, or TCJA, during a measurement period not to exceed one year. The TCJA was effective in the fourth quarter of fiscal year 2018 and we have recorded provisional amounts based on reasonable estimates for those tax effects. For the third quarter of fiscal year 2019, we reduced our provisional transition tax amount based on proposed regulations issued on August 1, 2018. We expect to complete our analysis of these provisional amounts in our fourth quarter of fiscal year 2019 based on further guidance on accounting interpretations from the FASB and application of the law from the U.S. Department of Treasury, which may further impact our provisional estimates.

The TCJA subjects a U.S. corporation to tax on its global intangible low-taxed income, or GILTI. Under U.S. GAAP, we can make an accounting policy election to either treat taxes due on the GILTI as a current period expense or factor such amounts into our measurement of deferred taxes. Given the complexity of the GILTI provisions, we are still evaluating its effects and have not yet determined our accounting policy. We expect to complete our analysis in the fourth quarter of fiscal year 2019. For the third quarter of fiscal year 2019, as we are still evaluating the effects of the GILTI provisions, we have included tax expense related to GILTI for current-year operations in our estimated annual effective tax rate and have not provided for GILTI on deferred items.credit.

For the first ~~nine months~~half of fiscal year ~~2019,~~2020, there have been no material changes to our tax years that remain subject to examination by major tax jurisdictions. Additionally, there have been no material changes to our unrecognized tax benefits and any related interest or penalties since the fiscal year ended January ~~28, 2018, other than the aforementioned reduction in our provisional U.S. tax reform transition tax amount.~~27, 2019.

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

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

resolved with the respective tax authorities. As of ~~October~~July 28, ~~2018,~~2019, we do not believe that our estimates, as otherwise provided for, on such tax positions will significantly increase or decrease within the next twelve months.

~~NVIDIA CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

Note 67 - Marketable Securities

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

The following is a summary of cash equivalents and marketable securities as of ~~October~~July 28, ~~2018~~2019 and January ~~28, 2018:~~27, 2019:


	October 28, 2018																		July 28, 2019
	Amortized Cost		Unrealized Gain			Unrealized Loss			Estimated Fair Value				Reported as						Amortized Cost				Unrealized Gain			Unrealized Loss				Estimated Fair Value				Reported as
	Amortized Cost				Cash Equivalents				Estimated Fair Value			Marketable Securities						Cash Equivalents					Unrealized Gain		Marketable Securities					Estimated Fair Value
	(In millions)																		Amortized Cost		(In millions)
Money market funds																			$	2,868			$	—		Unrealized Loss		$	—			$	2,868			$	2,868			$	—
Debt securities issued by the United States Treasury																			2,161				—			—				2,161				1,833				328
Corporate debt securities	$	2,732	Unrealized Gain		$	Unrealized Loss		1		$	(6	)		$	2,727		$	—			$	2,727		2,103			1				—				2,104				1,282			822
Debt securities of United States government agencies	2,140		—			(5		)	$	2,135			—			2,135			1,120				—			—				1,120				995				125
Debt securities issued by the United States Treasury	1,544		—			(2		)	1,542				—			1,542
Money market funds	602		—			—			602				602			—
Foreign government bonds	191		—			—			191				—			191
Foreign government debt securities																			45				—			—				45				—				45
Asset-backed securities	178		—			(2		)	176				—			176			44				—			—				44				—				44
Certificates of deposit																			24				—			—				24				24				—
Mortgage-backed securities issued by United States government-sponsored enterprises	98		1			—			99				—			99			6				—			—				6				—				6
Total	$	7,485	$	2		$	(15	)	$	7,472			$	602		$	6,870		$	8,371			$	1		$	—			$	8,372			$	7,002			$	1,370



	January 27, 2019
	Amortized Cost		Unrealized Gain		Unrealized Loss			Estimated Fair Value		Reported as
	Amortized Cost		Unrealized Gain		Unrealized Loss			Estimated Fair Value		Cash Equivalents		Marketable Securities
	(In millions)
Corporate debt securities	$	2,626	$	—	$	(6	)	$	2,620	$	25	$	2,595
Debt securities of United States government agencies	2,284		—		(4		)	2,280		—		2,280
Debt securities issued by the United States Treasury	1,493		—		(1		)	1,492		176		1,316
Money market funds	483		—		—			483		483		—
Foreign government debt securities	209		—		—			209		—		209
Asset-backed securities	152		—		(1		)	151		—		151
Mortgage-backed securities issued by United States government-sponsored enterprises	88		1		—			89		—		89
Total	$	7,335	$	1	$	(12	)	$	7,324	$	684	$	6,640

January 28, 2018
Amortized
Cost Unrealized
Gain Unrealized
Loss Estimated
Fair Value Reported as
Cash Equivalents Marketable Securities
(In millions)
Money market funds $ 3,789
$ —
$ —
$ 3,789
$ 3,789
$ —
Corporate debt securities 1,304
—
(9 ) 1,295
—
1,295
Debt securities of United States government agencies 822
—
(7 ) 815
—
815
Debt securities issued by the United States Treasury 577
—
(4 ) 573
—
573
Asset-backed securities 254
—
(2 ) 252
—
252
Mortgage-backed securities issued by United States government-sponsored enterprises 128
2
—
130
—
130
Foreign government bonds 42
—
(1 ) 41
—
41
Total $ 6,916
$ 2
$ (23 ) $ 6,895
$ 3,789
$ 3,106

The following table provides the breakdown of unrealized losses as of October 28, 2018, aggregated by investment category and length of time that individual securities have been in a continuous loss position:

Less than 12 Months 12 Months or Greater Total
Estimated Fair Value
Gross
Unrealized
Losses
Estimated Fair Value
Gross
Unrealized
Losses
Estimated Fair Value
Gross
Unrealized
Losses
(In millions)
Debt securities issued by United States government agencies $ 1,584
$ (1 ) $ 507
$ (4 ) $ 2,091
$ (5 )
Debt securities issued by the United States Treasury 1,253
—
289
(2 ) 1,542
(2 )
Corporate debt securities 167
—
794
(6 ) 961
(6 )
Asset-backed securities —
—
176
(2 ) 176
(2 )
Total $ 3,004
$ (1 ) $ 1,766
$ (14 ) $ 4,770
$ (15 )

The gross unrealized losses are related to fixed income securities, temporary in nature, and driven primarily by changes in interest rates. We have the intent and ability to hold our investments until maturity. For the ~~third~~second quarter and first ~~nine months~~half of fiscal years ~~2019~~2020 and ~~2018,~~2019, there were no other-than-temporary impairment losses and net realized gains were not significant.

The amortized cost and estimated fair value of cash equivalents and marketable securities as of ~~October~~July 28, ~~2018~~2019 and January ~~28, 2018~~27, 2019 are shown below by contractual maturity.



	July 28, 2019				January 27, 2019
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
	(In millions)
Less than 1 year	$	8,255	$	8,255	$	5,042	$	5,034
Due in 1 - 5 years	112		113		2,271		2,268
Mortgage-backed securities issued by United States government-sponsored enterprises not due at a single maturity date	4		4		22		22
Total	$	8,371	$	8,372	$	7,335	$	7,324

October 28, 2018 January 28, 2018

Amortized
Cost

Estimated
Fair Value

Amortized
Cost

Estimated
Fair Value
(In millions)
Less than 1 year $ 5,537
$ 5,524
$ 5,381
$ 5,375
Due in 1 - 5 years 1,923
1,923
1,500
1,485
Mortgage-backed securities issued by United States government-sponsored enterprises not due at a single maturity date 25
25
35
35
Total $ 7,485
$ 7,472
$ 6,916
$ 6,895

Note 78 – 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. There were no significant transfers between Levels 1 and 2 financial assets and liabilities for the third quarter of fiscal year 2019. Level 3 financial assets and liabilities are based on unobservable inputs to the valuation methodology and include our own data about assumptions market participants would use in pricing the asset or liability based on the best information available under the circumstances.

~~NVIDIA CORPORATION AND SUBSIDIARIES~~



		Fair Value at
	Pricing Category	July 28, 2019		January 27, 2019
		(In millions)
Assets
Cash equivalents and marketable securities:
Money market funds	Level 1	$	2,868	$	483
Debt securities issued by the United States Treasury	Level 2	$	2,161	$	1,492
Corporate debt securities	Level 2	$	2,104	$	2,620
Debt securities of United States government agencies	Level 2	$	1,120	$	2,280
Foreign government debt securities	Level 2	$	45	$	209
Asset-backed securities	Level 2	$	44	$	151
Certificates of deposit	Level 2	$	24	$	—
Mortgage-backed securities issued by United States government-sponsored enterprises	Level 2	$	6	$	89

Liabilities
Other noncurrent liabilities:
2.20% Notes Due 2021 (1)	Level 2	$	999	$	978
3.20% Notes Due 2026 (1)	Level 2	$	1,022	$	961

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

Fair Value at
Pricing Category October 28, 2018 January 28, 2018
(In millions)
Assets
Cash equivalents and marketable securities:
Corporate debt securities Level 2 $ 2,727
$ 1,295
Debt securities of United States government agencies Level 2 $ 2,135
$ 815
Debt securities issued by the United States Treasury Level 2 $ 1,542
$ 573
Money market funds Level 1 $ 602
$ 3,789
Foreign government bonds Level 2 $ 191
$ 41
Asset-backed securities Level 2 $ 176
$ 252
Mortgage-backed securities issued by United States government-sponsored enterprises Level 2 $ 99
$ 130

Liabilities
Current liability:
1.00% Convertible Senior Notes (1) Level 2 $ 43
$ 189
Other noncurrent liabilities:
2.20% Notes Due 2021 (1) Level 2 $ 971
$ 982
3.20% Notes Due 2026 (1) Level 2 $ 943
$ 986

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 89 - Amortizable Intangible Assets

The components of our amortizable intangible assets are as follows:



	July 28, 2019							January 27, 2019
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
	(In millions)							(In millions)
Acquisition-related intangible assets	$	195	$	(190	)	$	5	$	195	$	(188	)	$	7
Patents and licensed technology	508		(464		)	44		491		(453		)	38
Total intangible assets	$	703	$	(654	)	$	49	$	686	$	(641	)	$	45

October 28, 2018 January 28, 2018

Gross
Carrying
Amount

Accumulated
Amortization

Net Carrying
Amount

Gross
Carrying
Amount

Accumulated
Amortization

Net Carrying
Amount
(In millions) (In millions)
Acquisition-related intangible assets $ 195
$ (186 ) $ 9
$ 195
$ (180 ) $ 15
Patents and licensed technology 490
(450 ) 40
469
(432 ) 37
Total intangible assets $ 685
$ (636 ) $ 49
$ 664
$ (612 ) $ 52

The increase in gross carrying amount of intangible assets is due to purchases of licensed technology during the first ~~nine months~~half of fiscal year ~~2019.~~2020. Amortization expense associated with intangible assets was $7$6 million and ~~$24~~$13 million for the ~~third~~second quarter and first ~~nine months~~half of fiscal year ~~2019,~~2020, respectively, and ~~$13~~$6 million and ~~$42~~$17 million for the ~~third~~second quarter and first ~~nine months~~half of fiscal year ~~2018,~~2019, respectively. Future amortization expense related to the net carrying amount of intangible assets as of ~~October~~July 28, ~~2018~~2019 is estimated to be $6$12 million for the remainder of fiscal year ~~2019, $21 million in fiscal year~~ 2020, ~~$12~~$16 million in fiscal year 2021, $5$9 million in fiscal year 2022, $4$7 million in fiscal year 2023, and $1$5 million in fiscal year 2024.

~~NVIDIA CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

Note 910 - Balance Sheet Components

Certain balance sheet components are as follows:



	July 28,		January 27,
	2019		2019
Inventories:	(In millions)
Raw materials	$	362	$	613
Work in-process	203		238
Finished goods	639		724
Total inventories	$	1,204	$	1,575

October 28, January 28,
2018 2018
Inventories: (In millions)
Raw materials $ 634
$ 227
Work in-process 259
192
Finished goods 524
377
Total inventories $ 1,417
$ 796

~~As of October 28, 2018, we had outstanding inventory purchase obligations totaling $1.56 billion.~~


	October 28,		January 28,		July 28,		January 27,
	2018		2018		2019		2019
Accrued and Other Current Liabilities:	(In millions)				(In millions)
Customer program accruals	$	319	$	181	$	312	$	302
Accrued payroll and related expenses	151		172		183		186
Deferred revenue (1)	80		53		127		92
Operating lease liabilities					84		—
Taxes payable	40		33		37		91
Accrued royalties	19		17
Warranty accrual (2)	18		15
Professional service fees	15		15
Licenses payable					21		12
Coupon interest on debt obligations	7		20		20		20
Other	54		36		96		115
Total accrued and other current liabilities	$	703	$	542	$	880	$	818

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

October 28, January 28,
2018 2018
Other Long-Term Liabilities: (In millions)
Income tax payable (1) $ 469
$ 559
Deferred revenue (2) 40
15
Deferred income tax liability 23
18
Employee benefits liability 19
12
Deferred rent 17
9
Other 19
19
Total other long-term liabilities $ 587
$ 632



	July 28,		January 27,
	2019		2019
Other Long-Term Liabilities:	(In millions)
Income tax payable (1)	$	501	$	513
Deferred revenue (2)	54		46
Licenses payable	26		1
Deferred income tax liability	23		19
Employee benefits liability	22		20
Deferred rent	—		21
Other	24		13
Total other long-term liabilities	$	650	$	633

The following table shows the changes in deferred revenue during the first half of fiscal years 2020 and 2019.



	July 28,			July 29,
	2019			2018
	(In millions)
Balance at beginning of period	$	138		$	63
Deferred revenue added during the period	161			194
Revenue recognized during the period	(118		)	(153		)
Balance at end of period	$	181		$	104

~~NVIDIA CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

Note 1011 - Derivative Financial Instruments

We enter into foreign currency forward contracts to mitigate the impact of foreign currency exchange rate movements on our operating expenses. ~~We designate these~~These contracts are designated as cash flow hedges ~~and assess the effectiveness of the~~for hedge ~~relationships on a spot to spot basis.~~accounting treatment. Gains or losses on the contracts are recorded in accumulated other comprehensive income or loss and reclassified to operating expense when the related operating expenses are recognized in earnings or ineffectiveness should occur. The fair value of the contracts was not significant as of ~~October~~July 28, ~~2018~~2019 and January ~~28, 2018.~~27, 2019.

We also enter into foreign currency forward contracts to mitigate the impact of foreign currency movements on monetary assets and liabilities that are denominated in currencies other than U.S. dollar. These forward contracts were not designated for hedge accounting treatment. Therefore, the change in fair value of these contracts is recorded in other income or expense and offsets the change in fair value of the hedged foreign currency denominated monetary assets and liabilities, which is also recorded in other income or expense.

The table below presents the notional value of our foreign currency forward contracts outstanding as of ~~October~~July 28, ~~2018~~2019 and January ~~28, 2018:~~27, 2019:



	July 28, 2019		January 27, 2019
	(In millions)
Designated as cash flow hedges	$	420	$	408
Not designated for hedge accounting	$	269	$	241

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

October 28,
2018 January 28,
2018
(In millions)
Designated as cash flow hedges $ 403
$ 104
Not designated for hedge accounting $ 93
$ 94

As of ~~October~~July 28, ~~2018,~~2019, all designated foreign currency forward contracts mature within eighteen months. The expected realized gains and losses deferred into accumulated other comprehensive income (loss) related to foreign currency forward contracts within the next twelve months was not significant.

During the ~~third~~second quarter and first ~~nine months~~half of fiscal years ~~2019~~2020 and ~~2018,~~2019, the impact of derivative financial instruments designated for hedge accounting treatment on other comprehensive income or loss was not significant and all such instruments were determined to be highly effective. Therefore, there were no gains or losses associated with ineffectiveness.

~~Note 11 - Guarantees~~

~~U.S. GAAP requires that upon issuance of a guarantee, the guarantor must recognize a liability for the fair value of the obligation it assumes under that guarantee.~~

~~Accrual for Product Warranty Liabilities~~

We record a reduction to revenue for estimated product returns at the time revenue is recognized primarily based on historical return rates. Cost of revenue includes the estimated cost of product warranties. Under limited circumstances, we may offer an extended limited warranty to customers for certain products. Additionally, we accrue for known warranty and indemnification issues if a loss is probable and can be reasonably estimated. The estimated product returns and estimated product warranty liabilities was $18 million and $15 million as of October 28, 2018 and January 28, 2018, respectively.

In connection with certain agreements that we have entered in the past, we have provided indemnities to cover the indemnified party for matters such as tax, product, and employee liabilities. We have included intellectual property indemnification provisions in our technology related agreements with third parties. Maximum potential future payments cannot be estimated because many of these agreements do not have a maximum stated liability. We have not recorded any liability in our Condensed Consolidated Financial Statements for such indemnifications.

~~NVIDIA CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

Note 12 - Debt

Long-Term Debt

2.20% Notes Due 2021 and 3.20% Notes Due 2026

In fiscal year 2017, we issued $1.00 billion of the 2.20% Notes Due 2021, and $1.00 billion of the 3.20% Notes Due 2026, or collectively, the Notes. Interest on the Notes is payable on March 16 and September 16 of each ~~year, beginning on March 16, 2017.~~year. Upon 30 days' notice to holders of the Notes, we may redeem the Notes for cash prior to maturity, at redemption prices that include accrued and unpaid interest, if any, and a make-whole premium. However, no make-whole premium will be paid for redemptions of the Notes Due 2021 on or after August 16, 2021, or for redemptions of the Notes Due 2026 on or after June 16, 2026. The net proceeds from the Notes were $1.98 billion, after deducting debt discount and issuance costs.

The Notes are our unsecured senior obligations and rank equally in right of payment with all existing and future unsecured and unsubordinated indebtedness. The Notes are structurally subordinated to the liabilities of our subsidiaries and are effectively subordinated to any secured indebtedness to the extent of the value of the assets securing such indebtedness. All existing and future liabilities of our subsidiaries will be effectively senior to the Notes.

The carrying value of the Notes and the associated interest rates were as follows:



	Expected Remaining Term (years)	Effective Interest Rate	July 28, 2019			January 27, 2019
			(In millions)
2.20% Notes Due 2021	2.1	2.38%	$	1,000		$	1,000
3.20% Notes Due 2026	7.1	3.31%	1,000			1,000
Unamortized debt discount and issuance costs			(11		)	(12		)
Net carrying amount			$	1,989		$	1,988

Expected
Remaining Term (years)

Effective
Interest Rate
October 28, 2018 January 28, 2018
(In millions)
2.20% Notes Due 2021 2.9 2.38% $ 1,000
$ 1,000
3.20% Notes Due 2026 7.9 3.31% 1,000
1,000
Unamortized debt discount and issuance costs (13 ) (15 )
Net carrying amount $ 1,987
$ 1,985

~~Convertible Debt~~

~~1.00% Convertible Senior Notes Due 2018~~

In fiscal year 2014, we issued $1.50 billion of 1.00% Convertible Senior Notes due 2018. The Convertible Notes will mature on December 1, 2018 and we had $3 million in principal amount outstanding as of October 28, 2018. Effective August 1, 2018, holders may convert all or any portion of their Convertible Notes before the close of business on the second scheduled trading day immediately preceding the maturity date of December 1, 2018 regardless of conversion conditions.

During the third quarter of fiscal year 2019, we paid cash to settle an aggregate of $11 million in principal amount of the Convertible Notes and issued 485 thousand shares of our common stock for the excess conversion value. The related loss on early conversions was not significant. Based on the closing price of our common stock of $198.29 on the last trading day of the third quarter of fiscal year 2019, the if-converted value of the remaining outstanding Convertible Notes exceeded their principal amount by approximately $31 million. As of October 28, 2018, the conversion rate was 49.95 shares of common stock per $1,000 principal amount of the Convertible Notes.

~~Note Hedges~~

Concurrently with the issuance of the Convertible Notes, we entered into the Note Hedges. The Note Hedges have an adjusted strike price of $20.02 per share and allow us to receive shares of our common stock and/or cash related to the excess conversion value that we would deliver and/or pay, respectively, to the holders of the Convertible Notes upon conversion. Through October 28, 2018, we had received 56 million shares of our common stock from the exercise of a portion of the Note Hedges related to the settlement of $1.50 billion in principal amount of the Convertible Notes.

~~NVIDIA CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

Revolving Credit Facility

We have a Credit Agreement under which we may borrow up to $575 million for general corporate purposes and can obtain revolving loan commitments up to $425 million. As of ~~October~~July 28, ~~2018,~~2019, we had not borrowed any amounts under this agreement.

Commercial Paper

We have a $575 million commercial paper program to support general corporate purposes. As of ~~October~~July 28, ~~2018,~~2019, we had not issued any commercial paper.

Note 13 - Commitments and Contingencies

~~Litigation~~Inventory Purchase Obligations

~~Polaris Innovations Limited~~As of July 28, 2019, we had outstanding inventory purchase obligations totaling $757 million.

~~On May 16, 2016, Polaris Innovations Limited, or Polaris, a non-practicing entity and wholly-owned subsidiary~~Capital Purchase Obligations

As of Quarterhill Inc. (formerly WiLAN Inc.), filed a complaint against NVIDIA for patent infringement in the United States District Court for the Western District of Texas. Polaris alleges that NVIDIA has infringed and is continuing to infringe six U.S. patents relating to the control of dynamic random-access memory, or DRAM. The complaint seeks unspecified monetary damages, enhanced damages, interest, fees, expenses, and costs against NVIDIA. On September 14, 2016, NVIDIA answered the Polaris Complaint and asserted various defenses including non-infringement and invalidity of the six Polaris patents.

~~On December 5, 2016, the Texas Court granted NVIDIA’s motion to transfer and ordered the case transferred to the Northern District of California.~~

~~Between December 7, 2016 and~~ July 25, 2017, NVIDIA filed multiple petitions for inter partes review, or IPR, at the United States Patent and Trademark Office, or USPTO, challenging the validity of each of the patents asserted by Polaris in the U.S. litigation. The USPTO instituted IPRs for four U.S. patents and declined to institute IPRs on two U.S. patents. The USPTO issued a Final Written Decision on the IPR relating to one of the patents on June 19, 2018, finding claims 1-23 and 28, ~~unpatentable but that claims 24-27 were not proved unpatentable.~~

~~On June 15, 2017, the California Court granted NVIDIA’s motion to stay the district court litigation pending resolution of the petitions for IPR. The California Court has not set a trial date.~~

On December 30, 2016, Polaris filed a complaint against NVIDIA for patent infringement in the Regional Court of Düsseldorf, Germany. Polaris alleges that NVIDIA has infringed and is continuing to infringe three patents relating to control of DRAM. On July 14, 2017, NVIDIA filed defenses to the infringement allegations including non-infringement with respect to each of the three asserted patents. On September 3, 2018, NVIDIA filed a rejoinder with additional noninfringement arguments.

~~An oral hearing is scheduled for February 21, 2019.~~

~~Between March 31, 2017 and June 12, 2017, NVIDIA filed nullity actions with the German Patent Court challenging the validity of each of the patents asserted by Polaris in the German litigation.~~

~~ZiiLabs 1 Patents Lawsuit~~

On October 2, 2017, ZiiLabs Inc., Ltd., or ZiiLabs, a non-practicing entity, filed a complaint in the United States District Court for the District of Delaware alleging that NVIDIA has infringed and is continuing to infringe four U.S. patents relating to GPUs, or the ZiiLabs 1 Patents. ZiiLabs is a Bermuda corporation and a wholly-owned subsidiary of Creative Technology Asia Limited, a Hong Kong company which is itself is a wholly-owned subsidiary of Creative Technology Ltd., a publicly traded Singapore company. The complaint seeks unspecified monetary damages, enhanced damages, interest, costs, and fees against NVIDIA and an injunction against further direct or direct infringement of the ZiiLabs 1 Patents. On November 27, 2017, NVIDIA answered the ZiiLabs complaint and asserted various defenses including non-infringement and invalidity of the ZiiLabs 1 Patents.

~~On January 10, 2018, ZiiLabs filed a first amended complaint asserting infringement of a fifth U.S. patent.~~

~~On February 22, 2018, the Delaware Court stayed the ZiiLabs 1 case pending the resolution of the ITC investigation over the ZiiLabs 2 patents.~~2019, we had outstanding capital purchase obligations totaling $133 million.

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

~~ZiiLabs 2 Patents~~Performance Obligations

Revenue related to remaining performance obligations represents the amount of contracted license and development arrangements and PCS that has not been recognized. As of July 28, 2019, the amount of our remaining performance obligations that has not been recognized as revenue was $418 million, of which we expect to recognize approximately 48% as revenue over the next twelve months and the remainder thereafter. This amount excludes the value of remaining performance obligations for contracts with an original expected length of one year or less.

Accrual for Product Warranty Liabilities

The estimated amount of product returns and warranty liabilities was $17 million and $18 million as of July 28, 2019 and January 27, 2019, respectively.

In connection with certain agreements that we have entered in the past, we have provided indemnification to cover the indemnified party for matters such as tax, product, and employee liabilities. We have included intellectual property indemnification provisions in our technology related agreements with third parties. Maximum potential future payments cannot be estimated because many of these agreements do not have a maximum stated liability. We have not recorded any liability in our Condensed Consolidated Financial Statements for such indemnifications.

Litigation

Securities Class Action and Derivative Lawsuits

On December ~~27, 2017, ZiiLabs~~21, 2018, a purported securities class action lawsuit was filed ~~a second complaint~~ in the United States District Court for the Northern District of ~~Delaware alleging~~California, captioned Iron Workers Joint Funds v. Nvidia Corporation, et al. (Case No. 18-cv-7669), naming as defendants NVIDIA and certain of NVIDIA’s officers. On December 28, 2018, a substantially similar purported securities class action was commenced in the Northern District of California, captioned Oto v. Nvidia Corporation, et al. (Case No. 18-cv-07783), naming the same defendants, and seeking substantially similar relief. On February 19, 2019, a number of shareholders filed motions to consolidate the two cases and to be appointed lead plaintiff and for their respective counsel to be appointed lead counsel. On March 12, 2019, the two cases were consolidated under case number 4:18-cv-07669-HSG and titled In Re NVIDIA Corporation Securities Litigation. On May 2, 2019, the Court appointed lead plaintiffs and lead counsel. On June 21, 2019, the lead plaintiffs filed a consolidated class action complaint. The consolidated complaint asserts that the defendants violated Section 10(b) of the Securities Exchange Act of 1934, and SEC Rule 10b-5, by making materially false or misleading statements related to channel inventory and the impact of cryptocurrency mining on GPU demand between May 10, 2017 and November 14, 2018. The plaintiffs also allege that the NVIDIA executives who they named as defendants violated Section 20(a) of the Exchange Act. The plaintiffs seek class certification, an award of unspecified compensatory damages, an award of reasonable costs and expenses, including attorneys’ fees and expert fees, and further relief as the Court may deem just and proper. On August 2, 2019, NVIDIA moved to dismiss the consolidated class action complaint on the basis that plaintiffs failed to state any claims for violations of the securities laws by NVIDIA or the named defendants.

On January 18, 2019, a shareholder, purporting to act on the behalf of NVIDIA, filed a derivative lawsuit in the Northern District of California, captioned Han v. Huang, et al. (Case No. 19-cv-00341), seeking to assert claims on behalf of NVIDIA against the members of NVIDIA’s board of directors and certain officers. The lawsuit asserts claims for breach of fiduciary duty, unjust enrichment, waste of corporate assets, and violations of Sections 14(a), 10(b), and 20(a) of the Exchange Act based on the dissemination of allegedly false and misleading statements related to channel inventory and the impact of cryptocurrency mining on GPU demand. The plaintiff is seeking unspecified damages and other relief, including reforms and improvements to NVIDIA’s corporate governance and internal procedures. On February 12, 2019, a substantially similar derivative lawsuit was filed in the Northern District of California captioned Yang v. Huang, et. al. (Case No. 19-cv-00766), naming the same named defendants, and seeking the same relief. On February 19, 2019, a third substantially similar derivative lawsuit was filed in the Northern District of California captioned The Booth Family Trust v. Huang, et. al. (Case No. 3:19-cv-00876), naming the same named defendants, and seeking substantially the same relief. On March 12, 2019, the three derivative actions were consolidated under case number 4:19-cv-00341-HSG, and titled In re NVIDIA Corporation Consolidated Derivative Litigation. The parties stipulated to stay the In Re NVIDIA Corporation Consolidated Derivative Litigation pending resolution of any motion to dismiss that NVIDIA ~~has infringed four~~may file in the In Re NVIDIA Corporation Securities Litigation.

It is possible that additional ~~U.S. patents,~~suits will be filed, or ~~the ZiiLabs 2 Patents. The second complaint also seeks unspecified monetary damages, enhanced damages, interest, costs,~~allegations received from shareholders, with respect to these same or other matters, naming NVIDIA and/or its officers and ~~fees against~~ directors as defendants.

NVIDIA ~~and an injunction against further direct or direct infringement of the ZiiLabs 2 Patents.~~CORPORATION AND SUBSIDIARIES

~~On February 22, 2018, the Delaware Court stayed the district court action on the ZiiLabs 2 patents pending the resolution of the ITC Investigation over the ZiiLabs 2 patents.~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

~~On December 29, 2017, ZiiLabs filed a request with the U.S. International Trade Commission, or USITC,~~(Unaudited)

Litigation Related to commence an Investigation pursuant to Section 337 of the Tariff Act of 1930 relating to the unlawful importation of certain graphics processors and products containing the same. ZiiLabs alleges that the unlawful importation results from the infringement of the ZiiLabs 2 Patents by products from respondents NVIDIA, ASUSTeK Computer Inc., ASUS Computer International, EVGA Corporation, Gigabyte Technology Co., Ltd., G.B.T. Inc., Micro-Star International Co., Ltd., MSI Computer Corp., Nintendo Co., Ltd., Nintendo of America Inc., PNY Technologies Inc., Zotac International (MCO) Ltd., and Zotac USA Inc.

~~On February 28, 2018, NVIDIA and the other respondents answered the ITC complaint and asserted various defenses including non-infringement and invalidity of the four asserted ZiiLabs 2 patents.~~Mellanox Merger

On May ~~10, 2018,~~3, 2019, an alleged stockholder of Mellanox filed a putative class action lawsuit alleging that the ~~Administrative Law Judge presiding over~~proxy statement filed by Mellanox in connection with the ~~investigation issued an Initial Determination terminating the investigation with respect to one~~stockholder vote on NVIDIA’s pending acquisition of Mellanox violates Sections 14(a) and 20(a) of the ~~patents. On July 17, 2018, the USITC affirmed this decision on modified grounds.~~

~~On October 18, 2018, the Administrative Law Judge currently presiding over the investigation issued an order construing certain~~Securities Exchange Act of 1934 and asserting claims under those statutes against Mellanox and its board of ~~the three remaining patents~~directors as well as NVIDIA. The complaint, which is captioned Stein v. Mellanox Technologies, Ltd., et al., Case No. 19-2428 (United States District Court, Northern District of California), seeks declaratory and injunctive relief and unspecified damages. A number of other alleged Mellanox stockholders have filed substantially similar lawsuits against Mellanox and its directors in the ~~investigation.~~

~~The hearing~~United States District Court for the Northern District of California and in the ~~investigation is currently scheduled~~United States District Court for the Southern District of New York, but to ~~begin January 25, 2019. The target~~ date, ~~for completion~~NVIDIA has not been named as a defendant in any of ~~the investigation is September 9, 2019.~~these other lawsuits.

Accounting for Loss Contingencies

While there can be no assurance of favorable outcomes, we believe the claims made by the other parties in the above ongoing matters are without merit and we intend to vigorously defend the actions. As of October 28, 2018, we have not recorded any accrual for contingent liabilities associated with the legal proceedings described above based on our belief that liabilities, while possible, are not probable. Further, any possible loss or range of loss in these matters cannot be reasonably estimated at this time. We are engaged in ~~other~~ legal actions not described above arising in the ordinary course of ~~its~~ business and, while there can be no assurance of favorable outcomes, we believe that the ultimate outcome of these actions will not have a material adverse effect on our operating results, liquidity or financial position. As of July 28, 2019, we have not recorded any accrual for contingent liabilities associated with the legal proceedings described above based on our belief that liabilities, while possible, are not probable. Further, except as specifically described above, any possible loss or range of loss in these matters cannot be reasonably estimated at this time.

Note 14 - Shareholders’ Equity

Capital Return Program

Beginning August 2004, our Board of Directors authorized us to repurchase our stock.

During the ~~third~~second quarter and first ~~nine months~~half of fiscal year ~~2019,~~2020, we ~~repurchased a total of 1 million shares and 4 million shares, respectively, for $200~~paid $97 million and ~~$855 million, respectively. During the third quarter and first nine months of fiscal year 2019, we also paid $91 million and $273~~$195 million, respectively, in cash dividends to our shareholders.

In November 2018, we declared an increase in our quarterly cash dividend to $0.16 per share from $0.15 per share, to be paid with our next quarterly cash dividend on December 21, 2018, to all shareholders of record on November 30, 2018.

Through ~~October~~July 28, ~~2018,~~2019, we have repurchased an aggregate of ~~255~~260 million shares under our share repurchase program for a total cost of ~~$6.36~~$7.08 billion. All shares delivered from these repurchases have been placed into treasury stock. ~~In November 2018, our board of directors authorized an additional $7.00 billion under our share repurchase program.~~ As of ~~November 5, 2018,~~July 28, 2019, we were authorized, subject to certain specifications, to repurchase additional shares of our common stock up to ~~$7.94~~$7.24 billion through December 2022.

Preferred Stock

As of ~~October~~July 28, ~~2018~~2019 and January ~~28, 2018,~~27, 2019, there were no shares of preferred stock outstanding.

~~NVIDIA CORPORATION AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

Common Stock

We are authorized to issue up to 2.00 billion shares of our common stock at $0.001 per share par value.

Note 15 - Segment Information

Our Chief Executive Officer, who is considered to be our chief operating decision maker, or CODM, reviews financial information presented on an operating segment basis for purposes of making operating decisions and assessing financial performance. Our operating segments are equivalent to our reportable segments.

We report our business in two primary reportable segments - the GPU business and the Tegra Processor business - based on a single underlying architecture.

~~While our GPU and CUDA architecture is unified, our~~Our GPU product brands are aimed at specialized markets including GeForce for gamers; Quadro for designers; Tesla and DGX for artificial intelligence, ~~or AI,~~ data scientists and big data researchers; and GRID for cloud-based visual computing users. Our Tegra brand integrates an entire computer onto a single chip, and incorporates GPUs and multi-core CPUs to drive supercomputing for autonomous robots, drones, and cars, as well as for game consoles and mobile gaming and entertainment devices.

Under the single unifying architecture for our GPU and Tegra Processors, we leverage our visual computing expertise by charging the operating expenses of certain core engineering functions to the GPU business, while charging the Tegra Processor business for the incremental cost of the teams working directly for that business. In instances where the operating

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

expenses of certain functions benefit both reportable segments, our CODM assigns 100% of those expenses to the reportable segment that benefits the most.

The “All Other” category presented below represents the ~~revenue and~~ expenses that our CODM does not assign to either the GPU business or the Tegra Processor business for purposes of making operating decisions or assessing financial performance. The ~~revenue includes primarily patent licensing revenue and the~~ expenses include stock-based compensation expense, corporate infrastructure and support costs, acquisition-related costs, legal settlement costs, contributions, restructuring and other charges, product warranty charge, and other non-recurring charges and benefits that our CODM deems to be enterprise in nature.

Our CODM does not review any information regarding total assets on a reportable segment basis. Reportable segments do not record intersegment revenue, and, accordingly, there is none to be reported. The accounting policies for segment reporting are the same as for our consolidated financial statements. The table below presents details of our reportable segments and the “All Other” category.

~~NVIDIA CORPORATION AND SUBSIDIARIES~~



	GPU		Tegra Processor		All Other			Consolidated
	(In millions)
Three Months Ended July 28, 2019
Revenue	$	2,104	$	475	$	—		$	2,579
Depreciation and amortization expense	$	76	$	12	$	4		$	92
Operating income (loss)	$	746	$	122	$	(297	)	$	571

Three Months Ended July 29, 2018
Revenue	$	2,656	$	467	$	—		$	3,123
Depreciation and amortization expense	$	43	$	12	$	3		$	58
Operating income (loss)	$	1,259	$	97	$	(199	)	$	1,157

Six Months Ended July 28, 2019
Revenue	$	4,126	$	673	$	—		$	4,799
Depreciation and amortization expense	$	152	$	24	$	7		$	183
Operating income (loss)	$	1,415	$	78	$	(564	)	$	929

Six Months Ended July 29, 2018
Revenue	$	5,421	$	909	$	—		$	6,330
Depreciation and amortization expense	$	83	$	22	$	11		$	116
Operating income (loss)	$	2,653	$	194	$	(395	)	$	2,452

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~



	Three Months Ended						Six Months Ended
	July 28, 2019			July 29, 2018			July 28, 2019			July 29, 2018
	(In millions)
Reconciling items included in "All Other" category:
Stock-based compensation expense	$	(224	)	$	(132	)	$	(401	)	$	(262	)
Unallocated cost of revenue and operating expenses	(66		)	(65		)	(135		)	(129		)
Acquisition-related and other costs	(5		)	(2		)	(15		)	(4		)
Legal settlement costs	(2		)	—			(13		)	—
Total	$	(297	)	$	(199	)	$	(564	)	$	(395	)

GPU Tegra Processor All Other Consolidated
(In millions)
Three Months Ended October 28, 2018
Revenue $ 2,774
$ 407
$ —
$ 3,181
Depreciation and amortization expense $ 51
$ 13
$ 4
$ 68
Operating income (loss) $ 1,214
$ 72
$ (228 ) $ 1,058

Three Months Ended October 29, 2017

Revenue $ 2,217
$ 419
$ —
$ 2,636
Depreciation and amortization expense $ 32
$ 9
$ 9
$ 50
Operating income (loss) $ 978
$ 88
$ (171 ) $ 895

Nine Months Ended October 28, 2018
Revenue $ 8,195
$ 1,316
$ —
$ 9,511
Depreciation and amortization expense $ 134
$ 35
$ 15
$ 184
Operating income (loss) $ 3,867
$ 266
$ (623 ) $ 3,510

Nine Months Ended October 29, 2017
Revenue $ 5,676
$ 1,084
$ 43
$ 6,803
Depreciation and amortization expense $ 88
$ 27
$ 30
$ 145
Operating income (loss) $ 2,342
$ 206
$ (411 ) $ 2,137

Three Months Ended Nine Months Ended
October 28,
2018 October 29,
2017 October 28,
2018 October 29,
2017
(In millions)
Reconciling items included in "All Other" category:
Unallocated revenue $ —
$ —
$ —
$ 43
Stock-based compensation expense (140 ) (107 ) (400 ) (265 )
Unallocated cost of revenue and operating expenses (76 ) (61 ) (205 ) (176 )
Legal settlement costs (15 ) —
(17 ) —
Acquisition-related costs (1 ) (3 ) (5 ) (11 )
Restructuring and other 4
—
4
—
Contributions —
—
—
(2 )
Total $ (228 ) $ (171 ) $ (623 ) $ (411 )

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Revenue by geographic region is allocated to individual countries based on the location to which the products are initially billed even if our customers’ revenue is attributable to end customers that are located in a different location. The following table summarizes information pertaining to our revenue from customers based on the invoicing address by geographic regions:



	Three Months Ended				Six Months Ended
	July 28,		July 29,		July 28,		July 29,
	2019		2018		2019		2018
	(In millions)
Revenue:
Other Asia Pacific	$	756	$	676	$	1,178	$	1,259
Taiwan	635		843		1,333		1,810
China (including Hong Kong)	583		760		1,136		1,514
Europe	288		234		537		469
United States	188		413		353		847
Other countries	129		197		262		431
Total revenue	$	2,579	$	3,123	$	4,799	$	6,330

Three Months Ended Nine Months Ended
October 28, October 29, October 28, October 29,
2018 2017 2018 2017
(In millions)
Revenue:
Taiwan $ 929
$ 864
$ 2,739
$ 2,140
Other Asia Pacific 742
612
2,001
1,409
China (including Hong Kong) 704
515
2,218
1,325
United States 407
263
1,254
894
Europe 230
195
699
555
Other Americas 169
187
600
480
Total revenue $ 3,181
$ 2,636
$ 9,511
$ 6,803

The following table summarizes information pertaining to our revenue by each of the specialized markets we serve:



	Three Months Ended				Six Months Ended
	July 28,		July 29,		July 28,		July 29,
	2019		2018		2019		2018
	(In millions)
Revenue:
Gaming	$	1,313	$	1,805	$	2,368	$	3,528
Professional Visualization	291		281		557		532
Data Center	655		760		1,289		1,461
Automotive	209		161		375		306
OEM and Other	111		116		210		503
Total revenue	$	2,579	$	3,123	$	4,799	$	6,330

Three Months Ended Nine Months Ended
October 28, October 29, October 28, October 29,
2018 2017 2018 2017
(In millions)
Revenue:
Gaming $ 1,764
$ 1,561
$ 5,292
$ 3,774
Professional Visualization 305
239
837
679
Datacenter 792
501
2,253
1,326
Automotive 172
144
478
426
OEM & IP 148
191
651
598
Total revenue $ 3,181
$ 2,636
$ 9,511
$ 6,803

One customer represented approximately 11% of our total revenue for the second quarter and the first half of fiscal year 2020, and was attributable primarily to the GPU business. No customer represented 10% or more of total revenue for the ~~third~~second quarter and first ~~nine months~~half of fiscal ~~years 2019 and 2018.~~year 2019.

~~Accounts receivable from significant customers, those representing more than 10% of total accounts receivable, aggregated~~One customer represented approximately ~~14%~~20% of our accounts receivable balance ~~from~~as of July 28, 2019, and one customer ~~as of October 28, 2018, and~~represented approximately ~~28%~~19% of our accounts receivable balance ~~from two customers~~ as of January ~~28, 2018.~~27, 2019.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are subject to the “safe harbor” created by those sections. Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “goal,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “project,” “predict,” “potential” and similar expressions intended to identify forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors, which may cause our actual results, performance, time frames or achievements to be materially different from any future results, performance, time frames or achievements expressed or implied by the forward-looking statements. We discuss many of these risks, uncertainties and other factors in this Quarterly Report on Form 10-Q in greater detail under the heading “Risk Factors.” Given these risks, uncertainties and other factors, you should not place undue reliance on these forward-looking statements. Also, these forward-looking statements represent our estimates and assumptions only as of the date of this filing. You should read this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect. We hereby qualify our forward-looking statements by these cautionary statements. Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.

All ~~references~~references to “NVIDIA,” “we,” “us,” “our” or the “Company” mean NVIDIA Corporation and its ~~subsidiaries, except where it is made clear that the term means only the parent company.~~subsidiaries.

NVIDIA, the NVIDIA logo, CUDA, CUDA-X AI, GeForce, ~~Quadro, Tegra, Tesla, G-SYNC, Jetson,~~GeForce GTX, GeForce RTX, GeForce RTX SUPER, NVIDIA DGX, NVIDIA DGX SuperPOD, NVIDIA DRIVE, NVIDIA DRIVE ~~AGX Xavier, NVIDIA DRIVE~~ Constellation, ~~NVIDIA DRIVE Pegasus, NVIDIA DRIVE Sim,~~ NVIDIA GRID, NVIDIA Omniverse, NVIDIA RTX, NVIDIA Turing, ~~NVSwitch, Pascal, TensorRT~~Quadro, Quadro RTX, Tegra and ~~Xavier~~Tesla are trademarks and/or registered trademarks of NVIDIA Corporation in the United States ~~and~~and/or other countries. Other company and product names may be trademarks of the respective companies with which they are associated. Features, pricing, availability, and specifications are subject to change without notice.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with “Item 6. Selected Financial Data” of our Annual Report on Form 10-K for the fiscal year ended January ~~28, 2018~~27, 2019 and “Item 1A. Risk Factors” of this Quarterly Report on Form 10-Q and our Condensed Consolidated Financial Statements and related Notes thereto, as well as other cautionary statements and risks described elsewhere in this Quarterly Report on Form 10-Q, before deciding to purchase or sell shares of our common stock.

Overview

Our Company and Our Businesses

Starting with a focus on PC graphics, NVIDIA invented the GPU to solve some of the most complex problems in computer science. We have extended our focus in recent years to the revolutionary field of AI. Fueled by the sustained demand for better 3D graphics and the scale of the gaming market, NVIDIA has evolved the GPU into a computer brain at the intersection of virtual reality, high performance computing, or HPC, and artificial intelligence, or AI.

Our two reportable segments - GPU and Tegra Processor - are based on a single underlying architecture. From our proprietary processors, we have designed, created, and marketed platforms that address four large markets where our expertise is critical: Gaming, Professional Visualization, ~~Datacenter,~~Data Center, and Automotive.

~~While our GPU and CUDA architecture is unified, our~~Our GPU product brands are aimed at specialized markets including GeForce for gamers; Quadro for designers; Tesla and DGX for AI data scientists and big data researchers; and GRID for cloud-based visual computing users. Our Tegra brand integrates an entire computer onto a single chip, and incorporates GPUs and multi-core CPUs to drive supercomputing for autonomous robots, drones, and cars, as well as for consoles and mobile gaming and entertainment devices.

Headquartered in Santa Clara, California, NVIDIA was incorporated in California in April 1993 and reincorporated in Delaware in April 1998.

Recent Developments, Future Objectives and Challenges

~~Third~~Second Quarter of Fiscal Year ~~2019~~2020 Summary


	Three Months Ended													Three Months Ended
	October 28, 2018			July 29, 2018			October 29, 2017			Quarter-over-Quarter Change		Year-over-Year Change		July 28, 2019			April 28, 2019			July 29, 2018			Quarter-over-Quarter Change		Year-over-Year Change
	($ in millions, except per share data)													($ in millions, except per share data)
Revenue	$	3,181		$	3,123		$	2,636		2	%	21	%	$	2,579		$	2,220		$	3,123		16	%	(17	)%
Gross margin	60.4		%	63.3		%	59.5		%	(290) bps		90 bps		59.8		%	58.4		%	63.3		%	140 bps		(350) bps
Operating expenses	$	863		$	818		$	674		6	%	28	%	$	970		$	938		$	818		3	%	19	%
Income from operations	$	1,058		$	1,157		$	895		(9	)%	18	%	$	571		$	358		$	1,157		59	%	(51	)%
Net income	$	1,230		$	1,101		$	838		12	%	47	%	$	552		$	394		$	1,101		40	%	(50	)%
Net income per diluted share	$	1.97		$	1.76		$	1.33		12	%	48	%	$	0.90		$	0.64		$	1.76		41	%	(49	)%

Revenue for the ~~third~~second quarter of fiscal year ~~2019 increased 21%~~2020 decreased 17% year over year and increased 2%16% sequentially.

GPU business revenue was ~~$2.77~~$2.10 billion, ~~up 25%~~down 21% from a year earlier and up 4% ~~sequentially, reflecting growth in professional visualization, datacenter, and gaming GPUs.~~ sequentially.

Tegra Processor business revenue - which includes ~~automotive,~~Automotive, SOC modules for ~~the Nintendo Switch~~ gaming ~~console,~~platforms, and ~~other~~ embedded edge AI platforms - was ~~$407~~$475 million, ~~down 3%~~up 2% from a year ago and ~~down 13%~~up 140% sequentially.

From a market-platforms perspective, Gaming revenue was ~~$1.76~~$1.31 billion, ~~up 13%~~down 27% from a year ago ~~driven~~and up 24% sequentially. The year-on-year decrease reflects a decline in shipments of gaming desktop GPUs and SOC modules for gaming platforms, partially offset by growth in gaming ~~GPUs, and down 2% sequentially as gaming GPU~~notebook GPUs. The sequential increase reflects growth ~~was more than offset by a seasonal decline in~~from SOC modules for ~~Nintendo Switch. Gaming GPU growth was fueled by Turing-based~~gaming platforms, gaming notebook GPUs, ~~for desktops~~ and byGeForce RTX SUPER gaming ~~notebooks based on our Max-Q technology.~~GPUs.

Professional ~~visualization~~Visualization revenue was ~~$305~~$291 million, up ~~28%~~4% from a year earlier and up 9% ~~sequentially driven by~~sequentially. The year-on-year and sequential growth reflects strength across ~~both desktop and~~ mobile workstation products.

~~Datacenter~~Data Center revenue was ~~$792~~$655 million, ~~up 58%~~down 14% from a year ago and up ~~4% sequentially, led~~3% sequentially. The year-on-year decline reflects lower hyperscale revenue. The sequential increase was due to enterprise revenue growth driven by ~~strong sales of our Volta architecture-based products, including NVIDIA Tesla V100 and DGX systems, with contribution from the new Turing T4 Cloud GPU.~~expanding AI workloads.

Automotive revenue of ~~$172~~$209 million was up 30% from a year earlier and up 26% sequentially. The year-on-year and sequential growth was primarily driven by a development services agreement in the second quarter of fiscal year 2020. The growth in revenue also reflected AI cockpit solutions and other autonomous vehicle development agreements.

OEM and Other revenue was $111 million, down 4% from a year ago and up 12% sequentially. The sequential increase was primarily due to growth in shipments of embedded edge AI products.

Gross margin for the second quarter of fiscal year 2020 was 59.8%, down 350 basis points from a year earlier and up 140 basis points sequentially. The year-on-year decrease reflects lower Gaming and Data Center margins, driven primarily by product costs. The sequential increase reflects automotive development services, a favorable mix in Gaming, and lower component costs.

Operating expenses for the second quarter of fiscal year 2020 were $970 million, up 19% from a year earlier and up 7%3% sequentially, ~~incorporating infotainment modules, production DRIVE PX platforms,~~reflecting primarily employee additions and ~~development agreements with automotive companies.~~increases in employee compensation and other related costs, including infrastructure costs.

~~OEM and IP revenue was $148 million, down 23%~~Income from ~~a year ago, due to the absence of cryptocurrency mining.~~

~~Gross margin~~operations for the ~~third~~second quarter of fiscal year ~~2019~~2020 was ~~60.4%. Gross margins increased from a year ago - reflecting our continued shift toward higher-value platforms, which more than offset the current quarter impact of $57~~$571 million, ~~in charges related to prior architecture components and chips following the sharp fall-off in cryptocurrency mining demand.~~

~~Operating expenses for the third quarter of fiscal year 2019 were $863 million, up 28%~~down 51% from a year earlier and up ~~6% sequentially, reflecting increased headcount and related costs for our growth initiatives - including gaming, professional visualization, AI, and autonomous driving.~~

~~Income from operations for the third quarter of fiscal year 2019 was $1.06 billion, up 18% from a year earlier and down 9%~~59% sequentially. Net income and net income per diluted share for the ~~third~~second quarter of fiscal year ~~2019~~2020 were ~~$1.23 billion~~$552 million and ~~$1.97,~~$0.90, respectively, ~~up 47%~~down 50% and ~~48%~~49%, respectively, from a year earlier, ~~fueled by strong~~and up 40% and 41%, respectively, sequentially. The year-on-year decrease reflects lower revenue ~~growth~~ and ~~improved~~gross margin, and higher operating expenses. The sequential increase reflects higher revenue and gross margin.

We previously ~~announced~~communicated our ~~plan~~intent to return $1.25 billion to shareholders in fiscal year 2019. During the first nine months of fiscal year 2019, we returned $1.13 billion to shareholders through a combination of $855 million in share repurchases and $273 million in cash dividends. In November 2018, our board of directors authorized an additional $7.00 billion under our share repurchase program for a total of $7.94 billion available through the end of December 2022. We announced a 7% increase in our quarterly cash dividend to $0.16 per share from $0.15 per share, to be paid with our next quarterly cash dividend on December 21, 2018, to all shareholders of record on November 30, 2018. We intend to return an additional $3.00 billion to shareholders by the end of fiscal year 2020, ~~which may begin~~including $700 million in share repurchases made during the fourth quarter of fiscal year 2019. In the first half of fiscal year 2020, we returned $195 million in quarterly cash dividends. We intend to return the remaining $2.11 billion through a combination of share repurchases and cash dividends. We do not expect to repurchase shares prior to the close of the acquisition of Mellanox Technologies, Ltd., or Mellanox, and therefore the intended repurchases may extend into fiscal year 2021.

Cash, cash equivalents and marketable securities were ~~$7.59~~$8.47 billion as of ~~October~~July 28, ~~2018,~~2019, compared with ~~$7.94~~$7.42 billion ~~at the end~~as of ~~the prior quarter.~~January 27, 2019. The ~~decrease~~increase was primarily related to ~~third quarter stock repurchases, dividends~~growth in operating cash flow.

On March 10, 2019, we entered into an Agreement and ~~taxes paid related~~Plan of Merger, or the Merger Agreement, with Mellanox, pursuant to ~~restricted stock units, partially offset~~which we will acquire all of the issued and outstanding common shares of Mellanox for $125 per share in cash, representing a total enterprise value of approximately $6.9 billion as of the date of the Merger Agreement. The closing of the merger is subject to approval by ~~operating income~~regulatory agencies. If the Merger Agreement is terminated under certain circumstances involving the failure to obtain the required regulatory approvals, we could be obligated to pay Mellanox a termination fee of $350 million. We have received regulatory approval in the United States and ~~changes~~Mexico and are engaged with regulators in ~~working capital.~~Europe and China. In June 2019, Mellanox shareholders approved the merger.

GPU Business

During the third quarter of fiscal year 2019, we introduced RAPIDS, an open-source GPU-acceleration platform for data science and machine learning; launched the NVIDIA T4 cloud GPU and NVIDIA TensorRT Hyperscale Inference Platform to deliver advanced acceleration in hyperscale datacenters; launched the NVIDIA RTX Server; released the GeForce RTX series, the first gaming GPUs based on the Turing architecture; and unveiled the Quadro RTX series, which is designed to revolutionize the workflow of designers and artists on the desktop.

During the second quarter of fiscal year ~~2019,~~2020, in our Gaming platform, we ~~marked~~introduced GeForce RTX 2060 SUPER, GeForce RTX 2070 SUPER and GeForce RTX 2080 SUPER to our GeForce GPU lineup; accelerated the ~~launch~~momentum of ~~the Summit supercomputer at Oak Ridge National Laboratory,~~ray-tracing games by supporting newly announced blockbuster titles; introduced new RTX Studio laptops powered by ~~NVIDIA Volta Tensor Core GPUs; introduced NVIDIA HGX-2, a unified computing platform~~GeForce RTX and Quadro RTX GPUs for ~~both AI~~online and ~~high performance computing; announced that five of the world’s seven fastest supercomputers are powered by NVIDIA GPUs; introduced the NVIDIA HGX-2 platform for both AI~~studio-based creatives and HPC; and launched AIRI Mini with Pure Storage and ONTAP AI with NetApp for implementing and scaling deep learning. We also announced a number of Max-Q GeForce gaming notebook designs offered by major OEMs, enabling high-end performance for thin and light notebooks; disclosed that next-generation NVIDIA G-SYNC HDR displays are being shipped, enabling stutter-free gaming;prosumers; and announced ~~NVIDIA’s role~~OEMs will be launching additional gaming laptops incorporating NVIDIA GeForce Turing GPUs.

In our Professional Visualization platform, we rolled out a full range of Turing architecture-based Quadro GPUs for mobile workstations, also incorporating ray tracing for product design, architecture, effects and scientific visualization.

In our Data Center platform, we announced NVIDIA's DGX SuperPOD, which provides the AI infrastructure for our autonomous-vehicle development program; set eight records in ~~VirtualLink,~~AI training performance in the latest MLPerf benchmarking tests; and announced support for Arm CPUs, providing a ~~consortium establishing an industry standard~~new path to enable next-gen VR headsets to connect with PCs using a single, high-bandwidth USB Type-C connector. In August 2018, we unveiled our first Turing-based GPUs -- NVIDIA Quadro RTX 8000, RTX 6000 and RTX 5000 -- which we believe will revolutionize the work of millions of designers and artists; and introduced the NVIDIA RTX Server, a ray-tracing global illumination rendering server for render farms.build highly energy-efficient, AI-enabled exascale supercomputers.

During the first quarter of fiscal year ~~2019,~~2020, in our Gaming platform, we ~~announced NVIDIA RTX, a computer graphics technology that produces movie-quality images in real time. We also unveiled advances to our deep learning computing platform - including NVIDIA Tesla V100~~introduced the GeForce GTX 1660 Ti, GTX 1660 and GTX 1650 gaming GPUs with ~~32GB memory, NVIDIA NVSwitch GPU interconnect fabric, NVIDIA DGX-2,~~improved performance and ~~TensorRT 4, the latest version~~efficiency for today’s most popular games; announced a number of ~~the TensorRT AI inference accelerator software. In addition, we~~gaming laptop models based on Turing GPUs from top makers; and announced ~~GPU acceleration for Kubernetes to facilitate enterprise inference deployment on multi-cloud GPU clusters and the Quadro GV100 GPU with RTX technology, making~~that real-time ray tracing ~~possible on professional design~~is now integrated into Unreal Engine and Unity commercial game engines.

In our Professional Visualization platform, we announced expanded adoption of NVIDIA RTX ray-tracing technology by top 3D application providers and unveiled the NVIDIA Omniverse open-collaboration platform to simplify creative workflows for content ~~creation applications.~~creation.

In our Data Center platform, we introduced the NVIDIA CUDA-X AI platform for accelerating data science; announced availability of NVIDIA T4 Tensor Core GPUs from leading OEMs and Amazon Web Services; partnered with global system builders to create powerful data-science workstations integrating NVIDIA Quadro RTX GPUs and NVIDIA CUDA-X AI; and launched beta access to NVIDIA Quadro Virtual Workstation software in the Alibaba Cloud Marketplace.

Tegra Processor Business

During the third quarter of fiscal year 2019, we announced NVIDIA’s first level-2 autopilot design wins with Toyota, Volvo Cars and Isuzu Motors; announced the start of production of our Xavier single-chip autopilot SOC and started shipping the NVIDIA DRIVE AGX Xavier developer kit; and announced that Yamaha Motor Co. will use NVIDIA to power its upcoming lineup of autonomous machines.

During the second quarter of fiscal year ~~2019, we~~2020, in our Automotive platform, Volvo Group announced that ~~Daimler and Bosch have selected NVIDIA’s~~it is using the NVIDIA DRIVE end-to-end autonomous driving platform to ~~bring automated~~train networks in the data center, test them in simulation, and ~~driverless~~deploy them in self-driving vehicles, ~~to city streets, with pilot testing set to begin next year in Silicon Valley.~~targeting freight transport, refuse and recycling collection, public transport, construction, mining, forestry and more.

During the first quarter of fiscal year ~~2019,~~2020, in our Automotive platform, we announced that we are partnering with Toyota Research Institute-Advanced Development to develop, train and validate self-driving vehicles; unveiled the NVIDIA DRIVE AP2X automated driving solution, encompassing DRIVE AutoPilot software, DRIVE AGX and DRIVE validation tools; introduced NVIDIA DRIVE AV Safety Force Field to enable safe, comfortable driving experiences; and announced availability of the NVIDIA DRIVE Constellation ~~server with DRIVE Sim software, a complete system to safely test drive~~ autonomous ~~vehicles over billions of miles in virtual reality by leveraging NVIDIA GPUs and NVIDIA DRIVE Pegasus.~~vehicle simulation platform.

Financial Information by Business Segment and Geographic Data

Refer to Note 15 of the Notes to Condensed Consolidated Financial Statements for disclosure regarding segment information.

Results of Operations

The following table sets forth, for the periods indicated, certain items in our Condensed Consolidated Statements of Income expressed as a percentage of revenue.


	Three Months Ended				Nine Months Ended				Three Months Ended				Six Months Ended
	October 28, 2018		October 29, 2017		October 28, 2018		October 29, 2017		July 28, 2019		July 29, 2018		July 28, 2019		July 29, 2018
Revenue	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%
Cost of revenue	39.6		40.5		37.3		40.9		40.2		36.7		40.9		36.1
Gross profit	60.4		59.5		62.7		59.1		59.8		63.3		59.1		63.9
Operating expenses
Research and development	19.0		17.5		18.2		19.0		27.3		18.6		28.7		17.8
Sales, general and administrative	8.1		8.0		7.6		8.7		10.3		7.7		11.0		7.4
Total operating expenses	27.1		25.5		25.8		27.7		37.6		26.3		39.7		25.2
Income from operations	33.3		34.0		36.9		31.4		22.2		37.0		19.4		38.7
Interest income	1.2		0.6		1.0		0.7		1.8		1.0		1.9		0.9
Interest expense	(0.5	)	(0.6	)	(0.5	)	(0.7	)	(0.5	)	(0.4	)	(0.6	)	(0.5	)
Other, net	—		—		0.1		(0.3	)	—		0.2		—		0.2
Total other income (expense)	0.7		—		0.6		(0.3	)	1.3		0.8		1.3		0.6
Income before income tax	34.0		34.0		37.5		31.1		23.5		37.8		20.7		39.3
Income tax expense (benefit)	(4.7	)	2.2		—		2.8
Income tax expense									2.1		2.5		1.0		2.3
Net income	38.7	%	31.8	%	37.5	%	28.3	%	21.4	%	35.3	%	19.7	%	37.0	%

Revenue

Revenue by Reportable Segments


	Three Months Ended									Nine Months Ended									Three Months Ended									Six Months Ended
	October 28, 2018		October 29, 2017		$ Change			% Change		October 28, 2018		October 29, 2017		$ Change			% Change		July 28, 2019		July 29, 2018		$ Change			% Change		July 28, 2019		July 29, 2018		$ Change			% Change
	($ in millions)																		($ in millions)
GPU	$	2,774	$	2,217	$	557		25	%	$	8,195	$	5,676	$	2,519		44	%	$	2,104	$	2,656	$	(552	)	(21	)%	$	4,126	$	5,421	$	(1,295	)	(24	)%
Tegra Processor	407		419		(12		)	(3	)%	1,316		1,084		232			21	%	475		467		8			2	%	673		909		(236		)	(26	)%
All Other	—		—		—			—	%	—		43		(43		)	(100	)%
Total	$	3,181	$	2,636	$	545		21	%	$	9,511	$	6,803	$	2,708		40	%	$	2,579	$	3,123	$	(544	)	(17	)%	$	4,799	$	6,330	$	(1,531	)	(24	)%

GPU Business. GPU business revenue ~~increased~~decreased by ~~25% for~~21% in the ~~third~~second quarter of fiscal year 2020 compared to the second quarter of fiscal year 2019, ~~compared to the third quarter~~which reflects declines in gaming GPU and Data Center revenue. GeForce GPU product sales for gaming decreased 29%, reflecting a decline in shipments of ~~fiscal year 2018. This increase was due primarily to 20%~~gaming desktop GPUs partially offset by revenue growth in ~~sales of GeForce GPU products for~~ gaming ~~driven by initial sales of Turing-based GPUs for desktops and by high-performance notebooks based on our Max-Q technology. Datacenter~~notebook GPUs. Data Center revenue, including Tesla, GRID and DGX, ~~increased 58%~~decreased 14%, primarily reflecting ~~strong sales of our Volta architecture products, including NVIDIA Tesla V100 and DGX systems.~~a decline in hyperscale revenue partially offset by enterprise revenue growth, driven by expanding AI workloads. Revenue from Quadro GPUs for professional visualization increased ~~28% due~~4%, primarily ~~to higher sales~~reflecting strength across ~~desktop and~~ mobile workstation products. Our PC OEM revenue decreased by ~~almost 40%~~4%, primarily driven by ~~lower demand for GPU products targeted for use in~~the absence of cryptocurrency ~~mining.~~mining processor sales.

GPU business revenue ~~increased~~decreased by ~~44% for~~24% in the first ~~nine months~~half of fiscal year 2020 compared to the first half of fiscal year 2019, ~~compared to the first nine months~~which reflects declines in gaming GPU and Data Center revenue. GeForce GPU product sales for gaming decreased 29%, reflecting a decline in shipments of ~~fiscal year 2018. This increase was due primarily to over 40%~~gaming desktop GPUs partially offset by growth in ~~sales of GeForce GPU products for~~ gaming ~~driven by initial sales of Turing-based GPUs for desktops, Pascal-based GPUs for desktops and by high-performance notebooks based on our Max-Q technology. Datacenter~~notebook GPUs. Data Center revenue, including Tesla, GRID and DGX, ~~increased 70%~~decreased 12%, primarily reflecting ~~strong sales of our Volta architecture, including NVIDIA Tesla V100 and DGX systems.~~a decline in hyperscale revenue partially offset by enterprise revenue growth driven by expanding AI workloads. Revenue from Quadro GPUs for professional visualization increased ~~23%~~5% due primarily ~~to higher sales~~reflecting strength across ~~desktop and~~ mobile workstation products. Our PC OEM revenue decreased by 58% primarily driven by the absence of cryptocurrency mining processor sales.

Tegra Processor Business. Tegra Processor business revenue increased by ~~almost 20% due primarily to sales of GPU products targeted~~2% for ~~use in cryptocurrency mining in~~ the ~~first~~second quarter of fiscal year 2020 compared to the second quarter of fiscal year 2019. This was driven by an increase of 30% in Automotive revenue primarily

~~Tegra Processor Business.~~

driven by a development services agreement in the second quarter of fiscal year 2020. The growth in Automotive revenue also reflected AI cockpit solutions and other autonomous vehicle development agreements. The increase in Automotive revenue was partially offset by a decline in revenue from SOC modules for gaming platforms.

Tegra Processor business revenue decreased by 3%26% for the ~~third quarter~~first half of fiscal year ~~2019~~2020 compared to the ~~third quarter~~first half of fiscal year ~~2018.~~2019. This was driven by a ~~decrease of about 30%~~decline in revenue from SOC modules for gaming platforms, which was partially offset by an increase of ~~19%~~23% in ~~automotive~~Automotive revenue. Growth in Automotive revenue primarily ~~from DRIVE PX platforms and~~reflects a development ~~agreements with automotive companies, as well as from infotainment modules.~~

Tegra Processor business revenue increased by 21% for the first nine months of fiscal year 2019 compared to the first nine months of fiscal year 2018. This was driven by an increase of 30% in revenue from SOC modules for gaming platforms, and an increase of 12% in automotive revenue, primarily from DRIVE PX platforms and development agreements with automotive companies, as well as from infotainment modules.

~~All Other.Our patent license~~services agreement ~~with Intel concluded~~ in the ~~first~~second quarter of fiscal year ~~2018.~~2020, AI cockpit solutions, and other autonomous vehicle development agreements.

Concentration of Revenue

Revenue from sales to customers outside of the United States ~~and Other Americas~~ accounted for ~~82% and 81%~~93% of total revenue for the ~~third~~second quarter and first ~~nine months~~half of fiscal year ~~2019, respectively.~~2020. Revenue from sales to customers outside of the United States ~~and Other Americas~~ accounted for ~~83% and 80%~~87% of total revenue for the ~~third~~second quarter and first ~~nine months~~half of fiscal year ~~2018, respectively.~~2019. Revenue by geographic region is allocated to individual countries based on the location to which the products are initially billed even if the revenue is attributable to end customers in a different location.

Our overall gross margin ~~increased~~decreased to ~~60.4%~~59.8% for the ~~third~~second quarter of fiscal year ~~2019~~2020 from ~~59.5%~~63.3% for the ~~third~~second quarter of fiscal year ~~2018.~~2019. Our overall gross margin ~~increased~~decreased to ~~62.7% for the first nine months of fiscal year 2019 from~~ 59.1% for the first ~~nine months~~half of fiscal year ~~2018. These increases reflect our continued shift toward higher-value platforms, which more than offset a charge of $57 million we recorded during~~2020 from 63.9% for the ~~third quarter~~first half of fiscal year ~~2019 related to prior architecture components~~2019. These decreases reflect lower Gaming and ~~chips following the sharp fall-off in cryptocurrency mining demand.~~Data Center margins, driven primarily by product costs.

Inventory provisions totaled ~~$70~~$28 million and ~~$14~~$21 million for the ~~third~~second quarter of fiscal years ~~2019~~2020 and ~~2018,~~2019, respectively. Sales of inventory that was previously written-off or written-down totaled ~~$13~~$19 million and $6$12 million for the ~~third~~second quarter of fiscal years ~~2019~~2020 and ~~2018,~~2019, respectively. As a result, the overall net effect on our gross margin was an unfavorable impact of ~~1.8%~~0.4% and 0.3% for the ~~third~~second quarter of fiscal ~~year~~years 2020 and 2019, ~~and a nominal impact for the third quarter of fiscal year 2018.~~respectively.

Inventory provisions totaled ~~$124~~$72 million and ~~$30~~$54 million for the first ~~nine months~~half of fiscal years ~~2019~~2020 and ~~2018,~~2019, respectively. Sales of inventory that was previously written-off or written-down totaled ~~$29~~$31 million and $16 million for ~~each of~~ the first ~~nine months~~half of fiscal years 2020 and 2019, ~~and 2018.~~respectively. As a result, the overall net effect on our gross margin was an unfavorable impact of ~~1.0%~~0.9% and 0.6% for the first ~~nine months~~half of fiscal ~~year~~years 2020 and 2019, ~~and a nominal impact for the first nine months of fiscal year 2018.~~respectively.

A discussion of our gross margin results for each of our reportable segments is as follows:

GPU Business. The gross margin of our GPU business ~~was flat~~decreased during the ~~third~~second quarter and first half of fiscal year 2020 compared to the second quarter and first half of fiscal year 2019, ~~compared to the third quarter of fiscal year 2018. Gross margin of our~~primarily reflecting lower gaming GPU ~~business increased during the first nine months of~~and data center margins driven by product costs.

~~fiscal year 2019 compared to the first nine months of fiscal year 2018, primarily due to strong sales of high-end GeForce gaming GPUs and revenue growth in Datacenter.~~

Tegra Processor Business. The gross margin of our Tegra Processor business increased during the ~~third~~second quarter ~~and first nine months~~of fiscal year 2020 compared to the second quarter of fiscal year 2019, primarily driven by automotive development services. The gross margin of our Tegra Processor business decreased during the first half of fiscal year 2020 compared to the ~~third quarter and~~ first ~~nine months~~half of fiscal year ~~2018,~~2019, primarily due to ~~a favorable~~ mix ~~shift.~~shifts.

Research and Development

Research and development expenses increased by ~~31%~~21% and ~~34%~~23% during the ~~third~~second quarter and first ~~nine months~~half of fiscal year ~~2019,~~2020, compared to the ~~third~~second quarter and first ~~nine months~~half of fiscal year ~~2018,~~2019, respectively, driven primarily by employee additions, ~~and~~ increases in employee compensation and other related costs, including infrastructure costs and stock-based compensation expense.

Sales, General and Administrative

Sales, general and administrative expenses increased by ~~22%~~12% during ~~both~~ the ~~third~~second quarter ~~and first nine months~~of fiscal year 2020, compared to the second quarter of fiscal year 2019, driven primarily by employee additions, increases in employee compensation and other related costs, including stock-based compensation expense and infrastructure costs.

Sales, general and administrative expenses increased by 13% during the first half of fiscal year 2020, compared to the ~~third quarter and~~ first ~~nine months~~half of fiscal year ~~2018,~~2019, driven primarily by costs related to our plans to acquire Mellanox, costs related to employee additions, and increases in employee compensation and other related costs, including stock-based compensation ~~expense.~~expense and infrastructure costs.

Total Other Income (Expense)

Interest Income and Interest Expense

Interest income consists of interest earned on cash, cash equivalents and marketable securities. Interest income was ~~$37~~$47 million and ~~$17~~$32 million during the ~~third~~second quarter of fiscal years ~~2019~~2020 and ~~2018,~~2019, respectively, and ~~$94~~$92 million and ~~$48~~$57 million during the first ~~nine months~~half of fiscal years ~~2019~~2020 and ~~2018,~~2019, respectively. The increase in interest income was primarily due to higher average invested balances, higher rates from our floating rate securities, and the purchase of new securities.

Interest expense is primarily comprised of coupon interest and debt discount amortization related to the 2.20% Notes Due 2021 and 3.20% Notes Due 2026 issued in September ~~2016, and the 1.00% Convertible Notes Due 2018, or the Convertible Notes, issued in December 2013.~~2016. Interest expense was ~~$15~~$13 million and $14 million during ~~each of~~ the ~~third~~second quarters of fiscal years 2020 and 2019, respectively, and ~~2018, and $44~~$27 million and ~~$46~~$29 million during the first ~~nine months~~half of fiscal years ~~2019~~2020 and ~~2018,~~2019, respectively.

Other, net, consists primarily of realized or unrealized gains and losses from non-affiliated investments, ~~losses on early debt conversions of the Convertible Notes,~~ and the impact of changes in foreign currency rates. Other, net, was not significant during the ~~third~~second quarter or the first half of fiscal years 2020 and 2019.

We recognized an income tax expense of $54 million and $48 million for the second quarter and first ~~nine months~~half of fiscal year ~~2019. Other, net,~~2020, respectively, and $79 million and $146 million for the second quarter and first half of fiscal year 2019, respectively. The effective tax rate for the second quarter and first half of fiscal year 2020 was ~~not significant during~~8.8% and 4.9% respectively, and 6.7% and 5.9% for the ~~third~~second quarter and first half of fiscal year 2019, respectively.

The increase in our effective tax rate for the second quarter of fiscal year ~~2018 and $22 million of expense during~~2020 as compared to the ~~first nine months of fiscal year 2018, consisting primarily of $19 million of losses recognized from early conversions of the Convertible Notes during the first nine months of fiscal year 2018.~~

~~We recognized income tax benefit of $149 million and $3 million for the third~~second quarter ~~and first nine months~~ of fiscal year 2019 ~~respectively,~~was primarily due to an increase in the amount of earnings subject to United States tax, and ~~income~~a decrease of tax ~~expense~~benefits from stock-based compensation, partially offset by an increase in the impact of ~~$58 million and $189 million for~~tax benefits from the ~~third quarter and first nine months of fiscal year 2018, respectively. Income~~U.S. federal research tax benefit as a percentage of income before income tax was 13.8% and nominal for the third quarter and first nine months of fiscal year 2019, respectively, and income tax expense as a percentage of income before tax was 6.5% and 8.9% for the third quarter and first nine months of fiscal year 2018, respectively.

credit. The decrease in our effective tax rate for the ~~third quarter and~~ first ~~nine months~~half of fiscal year 2020 as compared to the first half of fiscal year 2019 ~~as compared to the same periods in the prior fiscal year~~ was primarily due to a decrease in the U.S. statutory tax rate from 35% to 21% as a result of U.S. tax reform, and a $138 million reduction in our provisional U.S. tax reform transition tax amount in the third quarter of fiscal year 2019, partially offset by a decreasean increase in the impact of tax benefits from the U.S. federal research tax credit and stock-based compensation.

Refer to Note 56 of the Notes to Condensed Consolidated Financial Statements for further information.

Liquidity and Capital Resources

As of ~~October~~July 28, ~~2018,~~2019, we had ~~$7.59~~$8.47 billion in cash, cash equivalents and marketable securities, an increase of ~~$483 million~~$1.05 billion from the end of fiscal year ~~2018. Our portfolio of cash equivalents and marketable securities is managed internally.~~2019. Our investment policy requires the purchase of ~~high-grade investment~~highly rated fixed income securities, the diversification of ~~asset~~investment types and credit exposures, and certain limits on our portfolio duration.

Cash provided by operating activities ~~increased~~decreased in the first ~~nine months~~half of fiscal year 2020 compared to the first half of fiscal year 2019, ~~compared to the first nine months of fiscal year 2018,~~ due to ~~higher~~lower net income, partially offset by changes in working capital.

Cash ~~used in~~provided by investing activities increased in the first ~~nine months~~half of fiscal year 2020 compared to the first half of fiscal year 2019, ~~compared to the first nine months of fiscal year 2018,~~ due to ~~higher~~lower purchases of marketable securities ~~partially offset by~~and higher maturities and sales of marketable securities.

Cash used in financing activities decreased in the first ~~nine months~~half of fiscal year 2020 compared to the first half of fiscal year 2019, ~~compared to the first nine months of fiscal year 2018,~~ due to lower ~~repayments of Convertible Notes, partially offset by higher~~share repurchases and lower tax payments related to employee stock plans.

Our primary sources of liquidity are our cash and cash equivalents, our marketable securities, and the cash generated by our operations. Our marketable securities consist of debt securities issued by the U.S. government and its agencies, highly rated corporations and financial institutions, asset-backed issuers, mortgage-backed securities by government-sponsored enterprises, and foreign government entities. These marketable securities are denominated in United States dollars. Refer to Note 67 of the Notes to Condensed Consolidated Financial Statements for additional information.

As a result of the Tax Cuts and ~~Job Acts that was signed into law in December 2017,~~Jobs Act, substantially all of our cash, cash equivalents and marketable securities held outside of the United States as of ~~October~~July 28, ~~2018~~2019 are available for use in the United States without incurring additional U.S. federal income taxes. ~~Refer to Note 5 of the Notes to Condensed Consolidated Financial Statements for additional information.~~

Capital Return to Shareholders

We previously ~~announced~~communicated our ~~plan~~intent to return $1.25 billion to shareholders in fiscal year 2019. During the first nine months of fiscal year 2019, we returned $1.13 billion to shareholders through a combination of $855 million in share repurchases and $273 million in cash dividends. In November 2018, our board of directors authorized an additional $7.00 billion under our share repurchase program for a total of $7.94 billion available through the end of December 2022. We announced a 7% increase in our quarterly cash dividend to $0.16 per share from $0.15 per share, to be paid with our next quarterly cash dividend on December 21, 2018, to all shareholders of record on November 30, 2018. We intend to return an additional $3.00 billion to shareholders by the end of fiscal year 2020, ~~which may begin~~including $700 million in share repurchases made during the fourth quarter of fiscal year 2019. In the first half of fiscal year 2020, we returned $195 million in quarterly cash dividends. We intend to return the remaining $2.11 billion through a combination of share repurchases and cash dividends. We do not expect to repurchase shares prior to the close of the acquisition of Mellanox, and therefore the intended repurchases may extend into fiscal year 2021. As of July 28, 2019, we were authorized, subject to certain specifications, to repurchase additional shares of our common stock up to $7.24 billion through December 2022.

Our cash dividend program and the payment of future cash dividends under that program are subject to our Board's continuing determination that the dividend program and the declaration of dividends thereunder are in the best interests of our shareholders. Refer to Note 14 of the Notes to Condensed Consolidated Financial Statements for additional information.

Notes Due 2021 and Notes Due 2026

In fiscal year 2017, we issued $1.00 billion of the 2.20% Notes Due 2021 and $1.00 billion of the 3.20% Notes Due 2026, collectively, the Notes. The net proceeds from the Notes were $1.98 billion, after deducting debt discounts and issuance costs.

~~Convertible Notes~~

We had $3 million in principal of Convertible Notes outstanding as of October 28, 2018, which will mature on December 1, 2018. Holders may convert all or any portion of their Convertible Notes before the close of business on the second scheduled trading day immediately preceding the maturity date, regardless of conversion conditions. Refer to Note 12 of the Notes to Condensed Consolidated Financial Statements for further discussion.

Revolving Credit Facility

We have a $575 million commercial paper program to support general corporate purposes. As of ~~October~~July 28, ~~2018,~~2019, we had not issued any commercial paper.

Operating Capital and Capital Expenditure Requirements

In ~~the second quarter of~~ fiscal year 2019, we began construction on a ~~750,000~~750 thousand square foot building on our Santa Clara campus, which is currently targeted for completion in fiscal year 2022. We believe that our existing cash ~~balances~~ and cash equivalents, marketable securities, anticipated cash flows from operations, and our available revolving credit facility or commercial paper program mentioned above will be sufficient to meet our operating requirements for at least the next twelve months.

Off-Balance Sheet Arrangements

As of ~~October~~July 28, ~~2018,~~2019, we had no material off-balance sheet arrangements as defined by applicable SEC regulations.

Contractual Obligations

There were no material changes in our contractual obligations from those disclosed in our Annual Report on Form 10-K for the fiscal year ended January ~~28, 2018.~~27, 2019 other than our proposed acquisition of Mellanox as described in Note 2 of the Notes to Condensed Consolidated Financial Statements.

Refer to Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources” in our Annual Report on Form 10-K for the fiscal year ended January ~~28, 2018~~27, 2019 for a description of our contractual obligations.

Adoption of New and Recently Issued Accounting Pronouncements

Refer to Note 1 of the Notes to Condensed Consolidated Financial Statements for a discussion of adoption of new and recently issued accounting pronouncements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Investment and Interest Rate Risk

Financial market risks related to investment and interest rate risk are described in our Annual Report on Form 10-K for the fiscal year ended January ~~28, 2018.~~27, 2019. As of ~~October~~July 28, ~~2018,~~2019, there have been no material changes to the financial market risks described as of January ~~28, 2018.~~27, 2019.

Foreign Exchange Rate Risk

The impact of foreign currency transactions related to foreign exchange rate risk is described in our Annual Report on Form 10-K for the fiscal year ended January ~~28, 2018.~~27, 2019. As of ~~October~~July 28, ~~2018,~~2019, there have been no material changes to the foreign exchange rate risks described as of January ~~28, 2018.~~27, 2019.

Refer to Note 1011 of the Notes to Condensed Consolidated Financial Statements for additional information.

ITEM 4. CONTROLS AND PROCEDURES

Controls and Procedures

Disclosure Controls and Procedures

Based on their evaluation as of ~~October~~July 28, ~~2018~~2019, our management, including our Chief Executive Officer and Chief Financial Officer, has concluded that our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as ~~amended)~~amended, or the Exchange Act) were effective to provide reasonable assurance.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the ~~third~~second quarter of fiscal year ~~2019~~2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls, will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within NVIDIA have been detected.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Refer to Part I, Item 1, Note 13 of the Notes to Condensed Consolidated Financial Statements for a discussion of significant developments in our legal proceedings since January ~~28, 2018.~~27, 2019. Also refer to Item 3, “Legal Proceedings” in our Annual Report on Form 10-K for the fiscal year ended January ~~28, 2018~~27, 2019 for a prior discussion of our legal proceedings.

ITEM 1A. RISK FACTORS

Refer to the description of the risk factors associated with our business previously disclosed in Item 1A of our Annual Report on Form 10-K for the fiscal year ended January ~~28, 2018.~~27, 2019. There have been no material changes from the risk factors previously described under Item 1A of our Annual Report on Form 10-K for the fiscal year ended January 27, 2019 and Item 1A of our Quarterly Report on Form 10-Q for the quarter ended April 28, ~~2018.~~2019.

Before you buy our common stock, you should know that making such an investment involves some risks including, but not limited to, the risks described in Item 1A of our Annual Report on Form 10-K for the fiscal year ended January 27, 2019 and Item 1A of our Quarterly Report on Form 10-Q for the quarter ended April 28, ~~2018.~~2019. Additionally, any one of those risks could harm our business, financial condition and results of operations, which could

cause our stock price to decline. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

Beginning August 2004, our Board of Directors authorized us to repurchase our stock.

Since the inception of our share repurchase program, we have repurchased an aggregate of ~~255~~260 million shares under our share repurchase program for a total cost of ~~$6.36~~$7.08 billion through ~~October~~July 28, ~~2018.~~2019. All shares delivered from these repurchases have been placed into treasury stock.

~~In November 2018, the Board authorized an additional $7.00 billion under our share repurchase program and extended it through the end of December 2022.~~ As of ~~November 5, 2018,~~July 28, 2019, we were authorized to repurchase additional shares of our common stock up to ~~$7.94~~$7.24 billion through December 2022.

For fiscal year 2019, we previously announced our plan to return $1.25 billion to shareholders. We now intend to return an additional $3.00 billion to shareholders by the end of fiscal year 2020, which may begin in the fourth quarter of fiscal year 2019.

The repurchases can be made in the open market, in privately negotiated transactions, or in structured share repurchase programs, and can be made in one or more larger repurchases. The program does not obligate NVIDIA to acquire any particular amount of common stock and the program may be suspended at any time at our discretion.

~~The following table presents details~~

We previously communicated our intent to return $3.00 billion to shareholders by the end of ~~our~~fiscal year 2020, including $700 million in share ~~repurchase transactions~~repurchases made during the ~~third~~fourth quarter of fiscal year ~~2019:~~

Period Total Number of Shares Purchased (In thousands) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Program (In thousands) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (In millions)
July 30, 2018 - August 26, 2018 116 $ 240.87
116 $ 1,133
August 27, 2018 - September 23, 2018 567 $ 266.07
567 $ 983
September 24, 2018 - October 28, 2018 82 $ 255.41
82 $ 962
Total 765 765

~~Transactions Related to our Convertible Notes and Note Hedges~~

~~During~~2019. In the ~~third quarter~~first half of fiscal year ~~2019,~~2020, we ~~issued 485 thousand shares of our common stock upon settlement of $11~~returned $195 million in ~~principal~~quarterly cash dividends. We had no share repurchases during the first half of ~~Convertible Notes submitted for conversion. In connection with these conversions, we exercised~~fiscal year 2020. We intend to return the remaining $2.11 billion through a ~~portion~~combination of ~~our Note Hedges~~share repurchases and cash dividends. We do not expect to ~~acquire an equal number of~~repurchase shares ~~of our common stock. The counterparty~~prior to the ~~Note Hedges may be deemed an “affiliated purchaser” and may have purchased the shares of our common stock deliverable to us upon this exercise of our option. Refer to Note 12~~close of the ~~Notes to Condensed Consolidated Financial Statements for further discussion regarding~~acquisition of Mellanox, and therefore the ~~Convertible Notes and the Note Hedges.~~intended repurchases may extend into fiscal year 2021.

Restricted Stock Unit Share Withholding

We also withhold common stock shares associated with net share settlements to cover tax withholding obligations upon the vesting of restricted stock unit awards under our employee equity incentive program. During the ~~third~~second quarter of fiscal year ~~2019,~~2020, we withheld approximately ~~1.7~~0.3 million shares at a total cost of ~~$467~~$50 million through net share settlements. During the first ~~nine months~~half of fiscal year ~~2019,~~2020, we withheld approximately ~~3.8~~1.5 million shares at a total cost of ~~$982~~$261 million through net share settlements. Refer to Note 34 of the Notes to Condensed Consolidated Financial Statements for further discussion regarding our equity incentive plans.

ITEM 6. EXHIBITS



Exhibit No.	Exhibit Description	Schedule /Form	File Number	Exhibit	Filing Date
10.1+	Offer Letter, dated May 21, 2019, between NVIDIA Corporation and Donald Robertson	8-K	000-23985	10.1	6/17/2019
31.1*	Certification of Chief Executive Officer as required by Rule 13a-14(a) of the Securities Exchange Act of 1934
31.2*	Certification of Chief Financial Officer as required by Rule 13a-14(a) of the Securities Exchange Act of 1934
32.1#*	Certification of Chief Executive Officer as required by Rule 13a-14(b) of the Securities Exchange Act of 1934
32.2#*	Certification of Chief Financial Officer as required by Rule 13a-14(b) of the Securities Exchange Act of 1934
101.INS*	Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH*	Inline XBRL Taxonomy Extension Schema Document
101.CAL*	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*	Inline XBRL Taxonomy Extension Labels Linkbase Document
101.PRE*	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data File - the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

* Filed herewith

+ Management contract or compensatory plan or arrangement

# In accordance with Item 601(b)(32)(ii) of Regulation S-K and SEC Release Nos. 33-8238 and 34-47986, Final Rule: Management's Reports on Internal Control Over Financial Reporting and Certification of Disclosure in Exchange Act Periodic Reports, the certifications furnished in Exhibits 32.1 and 32.2 hereto are deemed to accompany this Quarterly Report on Form 10-Q and will not be deemed “filed” for purpose of Section 18 of the Exchange Act. Such certifications will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.

Copies of above exhibits not contained herein are available to any shareholder upon written request to:

Investor Relations: NVIDIA Corporation, 2788 San Tomas Expressway, Santa Clara, CA 95051.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: ~~November~~August 15, ~~2018~~2019



	NVIDIA Corporation
By:	/s/ Colette M. Kress

	Colette M. Kress
	Executive Vice President and Chief Financial Officer (Duly Authorized Officer and Principal Financial Officer)

3433



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



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



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



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


(1)	Includes the number of PSUs granted that will be issued and eligible to vest if the maximum corporate financial performance goal for fiscal year ~~2019~~2020 is achieved. Depending on the actual level of the corporate performance achievement at the end of fiscal year ~~2019,~~2020, the PSUs issued could be up to ~~0.3~~0.4 million shares.


(2)	Includes the number of market-based PSUs granted that will be issued and eligible to vest if the maximum goal for total shareholder return, or TSR, over the 3-year measurement period is achieved. Depending on the ranking of our TSR compared to those of the companies comprising the Standard & Poor’s 500 Index during that period, the market-based PSUs issued could be up to 4560 thousand shares.


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


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



	January 28, 2018
	Amortized Cost		Unrealized Gain		Unrealized Loss			Estimated Fair Value		Reported as
	Amortized Cost		Unrealized Gain		Unrealized Loss			Estimated Fair Value		Cash Equivalents		Marketable Securities
	(In millions)
Money market funds	$	3,789	$	—	$	—		$	3,789	$	3,789	$	—
Corporate debt securities	1,304		—		(9		)	1,295		—		1,295
Debt securities of United States government agencies	822		—		(7		)	815		—		815
Debt securities issued by the United States Treasury	577		—		(4		)	573		—		573
Asset-backed securities	254		—		(2		)	252		—		252
Mortgage-backed securities issued by United States government-sponsored enterprises	128		2		—			130		—		130
Foreign government bonds	42		—		(1		)	41		—		41
Total	$	6,916	$	2	$	(23	)	$	6,895	$	3,789	$	3,106



	Less than 12 Months					12 Months or Greater					Total
	Estimated Fair Value		Gross Unrealized Losses			Estimated Fair Value		Gross Unrealized Losses			Estimated Fair Value		Gross Unrealized Losses
	(In millions)
Debt securities issued by United States government agencies	$	1,584	$	(1	)	$	507	$	(4	)	$	2,091	$	(5	)
Debt securities issued by the United States Treasury	1,253		—			289		(2		)	1,542		(2		)
Corporate debt securities	167		—			794		(6		)	961		(6		)
Asset-backed securities	—		—			176		(2		)	176		(2		)
Total	$	3,004	$	(1	)	$	1,766	$	(14	)	$	4,770	$	(15	)


(1)	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 these Notes to Condensed Consolidated Financial Statements for additional information.


(1)	Deferred revenue primarily includes customer advances and deferrals related to license and development arrangements and post contract customer support, or PCS.


~~(2)~~	~~Refer to Note 11 of these Notes to Condensed Consolidated Financial Statements for a discussion regarding warranties.~~


(2)	Deferred revenue primarily includes deferrals related to ~~license and development arrangements and~~ PCS.



	October 28, 2018		January 28, 2018
	(In millions)
Designated as cash flow hedges	$	403	$	104
Not designated for hedge accounting	$	93	$	94



Period	Total Number of Shares Purchased (In thousands)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Program (In thousands)	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (In millions)
July 30, 2018 - August 26, 2018	116	$	240.87	116	$	1,133
August 27, 2018 - September 23, 2018	567	$	266.07	567	$	983
September 24, 2018 - October 28, 2018	82	$	255.41	82	$	962
Total	765			765