UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

OR

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.

The number of shares of common stock, $0.001 par value, outstanding as of August 9,November 8, 2019, was 609612 million.

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)

See accompanying Notes to Condensed Consolidated Financial Statements.

See accompanying Notes to Condensed Consolidated Financial Statements.

See accompanying Notes to Condensed Consolidated Financial Statements.

(Unaudited)

See accompanying Notes to Condensed Consolidated Financial Statements.

(Unaudited)

See accompanying Notes to Condensed Consolidated Financial Statements.

See accompanying Notes to Condensed Consolidated Financial Statements.

Except for the accounting policy for leases, which was updated as a result of adopting a new accounting standard related to 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 27, 2019.

We 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 consolidated balance sheet. Operating lease assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments over the lease term.

Operating lease assets and liabilities are recognized based on the present value of the 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 extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense is recognized on a straight-line basis over the 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 2020 and 2019 are both 52-week years. The secondthird quarters of fiscal years 2020 and 2019 were both 13-week quarters.

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

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 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

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

The Financial Accounting Standards Board, or FASB, issued an accounting standards update regarding the accounting for leases under which lease assets and liabilities are recognized on the balance sheet. We adopted this guidance on January 28, 2019 using the optional transition method by recognizing a cumulative-effect adjustment to the consolidated balance sheet. Refer to Note 3 of these Notes to Condensed Consolidated Financial Statements for additional information.

In June 2016, the FASB issued a new accounting standard to replace the 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 accounts receivable and other financial instruments, including available-for-sale debt securities. TheWe expect to adopt the standard will be effective for ususing the modified retrospective transition method beginning in the first quarter of fiscal year 2021, with early adoption permitted. We2021. While we are currentlystill evaluating the impact of this standard on our Consolidated Financial Statements.Statements, we do not currently believe it will have a material impact upon adoption.

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. In June 2019, Mellanox shareholders approved the acquisition. The closing of the mergeracquisition 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 approvedAlthough discussions with the merger.European Union and China regulatory bodies are progressing and closing the acquisition is possible by the end of this calendar year, we believe the closing will likely occur in the early part of calendar 2020.

Note 3 - New Lease Accounting Standard

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 the new lease accounting standard resulted in the recognition of $470 million of operating lease assets and $500 million of operating lease liabilities on our Consolidated Balance 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.

Future minimum lease payments under our non-cancelable operating leases as of July 28,October 27, 2019, are as follows:   

Note 4 - Stock-Based Compensation

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

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

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

As of July 28,October 27, 2019, there was $2.06$1.95 billion of aggregate unearned stock-based compensation expense, net of forfeitures. This amount is expected to be recognized over a weighted average period of 2.52.6 years for RSUs, PSUs, and market-based PSUs, and 1.1 years1.0 year for ESPP.

Note 5 – Net Income Per Share

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

We recognized an income tax expense of $54$60 million and $48$109 million for the secondthird quarter and first halfnine months of fiscal year 2020, respectively, and $79an income tax benefit of $149 million and $146$3 million for the secondthird quarter and first halfnine months of fiscal year 2019, respectively. The effectiveincome tax rateexpense as a percentage of income before income tax was 6.3% and 5.6% for the secondthird quarter and first halfnine months of fiscal year 2020, was 8.8% and 4.9%, respectively, and 6.7%income tax benefit as a percentage of income before income tax was 13.8% and 5.9%nominal for the secondthird quarter and first halfnine months of fiscal year 2019, respectively.

The increase in our effective tax rate for the secondthird quarter and first nine months of fiscal year 2020 as compared to the secondthird quarter and first nine months 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 byand an increase inabsence of the impact of tax benefits frombenefit related to the U.S. federal research tax credit. The decreasereduction in our effectiveprovisional U.S. tax rate for the first half of fiscal year 2020 as compared to the first half of fiscal year 2019 was primarily due to an increase in the impact ofreform transition tax benefits from the U.S. federal research tax credit and stock-based compensation.amount.

Our effective tax rates for the first halfnine months of fiscal years 2020 and 2019 were 4.9%5.6% and 5.9%,nominal, respectively, and were lower than the U.S. federal statutory rate of 21% 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.credit, and for fiscal year 2019, the reduction in our provisional U.S. tax reform transition tax amount.

For the first halfnine months of fiscal year 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 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

resolved with the respective tax authorities. As of July 28,October 27, 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.

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 July 28,October 27, 2019 and January 27, 2019:

For the secondthird quarter and first halfnine months of fiscal years 2020 and 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 July 28,October 27, 2019 and January 27, 2019 are shown below by contractual maturity.  

Note 8 – Fair Value of Financial Assets and Liabilities

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

Note 9 - Amortizable Intangible Assets

The components of our amortizable intangible assets are as follows:

The increase in gross carrying amount of intangible assets is due to purchases of licensed technology during the first halfnine months of fiscal year 2020. Amortization expense associated with intangible assets was $6 million and $13$19 million for the secondthird quarter and first halfnine months of fiscal year 2020, respectively, and $6$7 million and $17$24 million for the secondthird quarter and first halfnine months of fiscal year 2019, respectively. Future amortization expense related to the net carrying amount of intangible assets as of July 28,October 27, 2019 is estimated to be $12$6 million for the remainder of fiscal year 2020, $16 million in fiscal year 2021, $9 million in fiscal year 2022, $7 million in fiscal year 2023, and $5 million in fiscal year 2024.