UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



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

For the quarterly period ended ~~October~~July 29, ~~2017~~2018



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

Commission file number: 0-23985

NVIDIA CORPORATION

(Exact name of registrant as specified in its charter)



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

2788 San Tomas Expressway

Santa Clara, California 95051

(408) 486-2000

(Address, including zip code, and telephone number,

including area code, of principal executive offices)

~~2701 San Tomas Expressway, Santa Clara, CA, 95050~~N/A

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

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes x 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 filer x	Accelerated filer o	Non-accelerated filer o	Smaller reporting company o	Emerging growth company o
		(Do not check if a smaller reporting company)

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 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 17, 2017,~~August 10, 2018, was ~~606~~608 million.

NVIDIA CORPORATION

FORM 10-Q

FOR THE QUARTER ENDED ~~October~~July 29, ~~2017~~2018

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 29, ~~2017~~2018 and ~~October~~July 30, ~~2016~~2017	3

	b) Condensed Consolidated Statements of Comprehensive Income for the three and ~~nine~~six months ended ~~October~~July 29, ~~2017~~2018 and ~~October~~July 30, ~~2016~~2017	4

	c) Condensed Consolidated Balance Sheets as of ~~October~~July 29, ~~2017~~2018 and January ~~29, 2017~~28, 2018	5

	d) Condensed Consolidated Statements of Cash Flows for the ~~nine~~six months ended ~~October~~July 29, ~~2017~~2018 and ~~October~~July 30, ~~2016~~2017	6

	e) Notes to Condensed Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3129

Item 4.	Controls and Procedures	3129

	PART II : OTHER INFORMATION

Item 1.	Legal Proceedings	3229

Item 1A.	Risk Factors	3229

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3230

Item 6.	Exhibits	3431

Signature		3532

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/)~~ 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 ~~use the Pulse news reader to subscribe to the NVIDIA Daily News feed and 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 29,			October 30,			October 29,			October 30,			July 29,			July 30,			July 29,			July 30,
	2017			2016			2017			2016			2018			2017			2018			2017

Revenue	$	2,636		$	2,004		$	6,803		$	4,737		$	3,123		$	2,230		$	6,330		$	4,167
Cost of revenue	1,067			821			2,782			1,977			1,148			928			2,287			1,715
Gross profit	1,569			1,183			4,021			2,760			1,975			1,302			4,043			2,452
Operating expenses
Research and development	462			373			1,290			1,069			581			416			1,124			827
Sales, general and administrative	212			171			594			487			237			198			467			383
Restructuring and other charges	—			—			—			3
Total operating expenses	674			544			1,884			1,559			818			614			1,591			1,210
Income from operations	895			639			2,137			1,201			1,157			688			2,452			1,242
Interest income	17			14			48			37			32			15			57			31
Interest expense	(15		)	(16		)	(46		)	(39		)	(14		)	(15		)	(29		)	(31		)
Other, net	(1		)	(16		)	(22		)	(19		)	5			(4		)	11			(21		)
Total other income (expense)	1			(18		)	(20		)	(21		)	23			(4		)	39			(21		)
Income before income tax expense	896			621			2,117			1,180
Income before income tax													1,180			684			2,491			1,221
Income tax expense	58			79			189			168			79			101			146			130
Net income	$	838		$	542		$	1,928		$	1,012		$	1,101		$	583		$	2,345		$	1,091

Net income per share:
Basic	$	1.39		$	1.01		$	3.23		$	1.89		$	1.81		$	0.98		$	3.86		$	1.83
Diluted	$	1.33		$	0.83		$	3.05		$	1.59		$	1.76		$	0.92		$	3.74		$	1.71

Weighted average shares used in per share computation:
Basic	603			538			597			536			607			597			607			595
Diluted	628			653			633			636			626			633			627			637

Cash dividends declared and paid per common share	$	0.140		$	0.115		$	0.420		$	0.345		$	0.150		$	0.140		$	0.300		$	0.280

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 29,			October 30,			October 29,			October 30,			July 29,			July 30,			July 29,			July 30,
	2017			2016			2017			2016			2018			2017			2018			2017

Net income	$	838		$	542		$	1,928		$	1,012		$	1,101		$	583		$	2,345		$	1,091
Other comprehensive income (loss), net of tax
Available-for-sale securities:
Net unrealized gain (loss)	(3		)	(10		)	2			1
Net unrealized gain													6			3			3			5
Reclassification adjustments for net realized gain included in net income													—			—			1			—
Net change in unrealized gain													6			3			4			5
Cash flow hedges:
Net unrealized loss													(4		)	(1		)	(8		)	(2		)
Reclassification adjustments for net realized gain (loss) included in net income	1			—			1			1			(2		)	1			(1		)	1
Net change in unrealized gain (loss)	(2		)	(10		)	3			2
Cash flow hedges:
Net unrealized gain (loss)	(1		)	2			(3		)	(3		)
Reclassification adjustments for net realized gain (loss) included in net income	1			—			3			—
Net change in unrealized gain (loss)	—			2			—			(3		)
Net change in unrealized loss													(6		)	—			(9		)	(1		)
Other comprehensive income (loss), net of tax	(2		)	(8		)	3			(1		)	—			3			(5		)	4
Total comprehensive income	$	836		$	534		$	1,931		$	1,011		$	1,101		$	586		$	2,340		$	1,095

See accompanying Notes to Condensed Consolidated Financial Statements.

NVIDIA CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions)

(Unaudited)


	October 29,			January 29,			July 29,			January 28,
	2017			2017			2018			2018
ASSETS
Current assets:
Cash and cash equivalents	$	2,802		$	1,766		$	718		$	4,002
Marketable securities	3,518			5,032			7,225			3,106
Accounts receivable, net	1,167			826			1,662			1,265
Inventories	857			794			1,090			796
Prepaid expenses and other current assets	135			118			136			86
Total current assets	8,479			8,536			10,831			9,255
Property and equipment, net	600			521			1,162			997
Goodwill	618			618			618			618
Intangible assets, net	63			104			51			52
Other assets	70			62			220			319
Total assets	$	9,830		$	9,841		$	12,882		$	11,241

LIABILITIES, CONVERTIBLE DEBT CONVERSION OBLIGATION AND SHAREHOLDERS’ EQUITY
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	511		$	485		$	800		$	596
Accrued and other current liabilities	493			507			648			542
Convertible short-term debt	23			796			14			15
Total current liabilities	1,027			1,788			1,462			1,153
Long-term debt	1,985			1,983			1,987			1,985
Other long-term liabilities	464			271			638			632
Capital lease obligations, long-term	1			6
Total liabilities	3,477			4,048			4,087			3,770
Commitments and contingencies - see Note 12
Convertible debt conversion obligation	1			31
Commitments and contingencies - see Note 13
Shareholders’ equity:
Preferred stock	—			—			—			—
Common stock	1			1			1			1
Additional paid-in capital	5,219			4,708			5,681			5,351
Treasury stock, at cost	(6,614		)	(5,039		)	(7,821		)	(6,650		)
Accumulated other comprehensive loss	(14		)	(16		)	(23		)	(18		)
Retained earnings	7,760			6,108			10,957			8,787
Total shareholders' equity	6,352			5,762			8,795			7,471
Total liabilities, convertible debt conversion obligation and shareholders' equity	$	9,830		$	9,841
Total liabilities and shareholders' equity							$	12,882		$	11,241

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 29,			October 30,			July 29,			July 30,
	2017			2016			2018			2017
Cash flows from operating activities:
Net income	$	1,928		$	1,012		$	2,345		$	1,091
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation expense							262			158
Depreciation and amortization	145			140			116			96
Stock-based compensation expense	265			176
Deferred income taxes	158			146			113			115
Amortization of debt discount	3			20
Loss on early debt conversions	19			15			—			17
Net loss (gain) on sale and disposal of long-lived assets and investments	1			(2		)
Other	11			8			(22		)	11
Changes in operating assets and liabilities:
Accounts receivable	(342		)	(328		)	(386		)	(387		)
Inventories	(61		)	(261		)	(295		)	(61		)
Prepaid expenses and other assets	(26		)	(28		)	(44		)	(15		)
Accounts payable	27			218			172			(63		)
Accrued and other current liabilities	(15		)	(136		)	96			9
Other long-term liabilities	31			(29		)	1			16
Net cash provided by operating activities	2,144			951			2,358			987
Cash flows from investing activities:
Proceeds from maturities of marketable securities							2,957			450
Proceeds from sales of marketable securities	802			1,239			77			726
Proceeds from maturities of marketable securities	739			712
Proceeds from sale of long-lived assets and investments	—			6
Purchases of marketable securities	(36		)	(2,249		)	(7,136		)	(36		)
Purchases of property and equipment and intangible assets	(177		)	(125		)	(247		)	(108		)
Investment in non-affiliates	(26		)	(3		)	(7		)	(16		)
Net cash provided by (used in) investing activities	1,302			(420		)	(4,356		)	1,016
Cash flows from financing activities:
Proceeds from issuance of debt	—			1,988
Payments related to repurchases of common stock	(909		)	(509		)	(655		)	(758		)
Repayment of Convertible Notes	(803		)	(444		)	(2		)	(741		)
Dividends paid	(250		)	(185		)	(182		)	(166		)
Proceeds related to employee stock plans	132			148			69			76
Payments related to tax on restricted stock units	(577		)	(177		)	(515		)	(190		)
Other	(3		)	(8		)	(1		)	(2		)
Net cash provided by (used in) financing activities	(2,410		)	813
Net cash used in financing activities							(1,286		)	(1,781		)
Change in cash and cash equivalents	1,036			1,344			(3,284		)	222
Cash and cash equivalents at beginning of period	1,766			596			4,002			1,766
Cash and cash equivalents at end of period	$	2,802		$	1,940		$	718		$	1,988

Other non-cash investing activity:
Assets acquired by assuming related liabilities	$	20		$	25		$	52		$	32

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 ~~29, 2017~~28, 2018 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 ~~29, 2017,~~28, 2018, 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 ~~29, 2017.~~28, 2018.

Significant Accounting Policies

~~For~~Except for the accounting policy for revenue recognition, which was updated as a ~~description~~result of adopting a new accounting standard related to revenue recognition, there have been no material changes to our significant accounting policies ~~see~~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 ~~29, 2017. There have been no material changes~~28, 2018.

Revenue Recognition

We derive our revenue from product sales, including hardware and systems, license 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 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 ~~accounting policies since~~customization of our intellectual property components. As a result, we recognize the ~~filing~~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 percentage of the ~~Annual Report~~estimated total cost required to complete each project. If a loss on ~~Form 10-K.~~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 the software 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, we allocate revenue to the software license and PCS on a relative standalone selling price 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.

Fiscal Year

We operate on a 52- or 53-week year, ending on the last Sunday in January. Fiscal years ~~2018~~2019 and ~~2017~~2018 are both 52-week years. The ~~third quarter~~second quarters of fiscal years ~~2018~~2019 and ~~2017~~2018 were both 13-week quarters.

Reclassifications

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

Principles of Consolidation

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

Use of Estimates

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

~~NVIDIA CORPORATION AND SUBSIDIARIES~~

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

~~(Unaudited)~~

Adoption of New and Recently Issued Accounting Pronouncements

Recently Adopted Accounting ~~Pronouncement~~Pronouncements

~~In October 2016, the~~The Financial Accounting Standards Board, or FASB, issued an accounting standards update ~~which requires the recognition~~that creates a single source of ~~income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs.~~revenue guidance under U.S. GAAP for all companies, in all industries. We ~~elected to early adopt this new guidance in the first quarter of fiscal year 2018, which required us to reflect any adjustments as of January 30, 2017. Upon adoption of~~adopted this guidance ~~we recorded a cumulative-effect adjustment as~~on January 29, 2018 using the modified retrospective approach. Refer to Note 2 of ~~the first day of fiscal year 2018~~these Notes to ~~decrease retained earnings by $28 million, with a corresponding decrease to prepaid taxes that had not been previously recognized in income tax expense.~~

~~Recent Accounting Pronouncements Not Yet Adopted~~

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. ~~Most prominent among the amendments is the requirement for~~We are now required to recognize changes in the fair value of our equity investments ~~with certain exceptions, to be recognized~~ through net income rather than other comprehensive income. ~~The update will be effective for us beginning~~We adopted this guidance in ~~our~~the first quarter of fiscal year ~~2019. While we are still finalizing our analysis to quantify the~~2019 and applied it prospectively. The adoption ~~impact~~ of ~~the provisions of the new standard, we do~~this guidance did not ~~expect it to~~ have a ~~material~~significant impact on our consolidated financial statements.

Recent Accounting Pronouncement Not Yet Adopted

In February 2016 and July 2018, the FASB issued an accounting standards ~~update~~updates regarding the accounting for leases by which we will begin recognizing lease assets and liabilities on the balance sheet for ~~leases with a~~ lease ~~term~~terms of more than 12 months. The ~~update will require additional disclosures regarding key information about leasing arrangements. Under existing guidance, operating leases~~FASB also recently provided a practical expedient transition method to adopt the new lease accounting requirements. We are ~~not recorded as~~evaluating the impact of adopting the new lease ~~assets~~accounting standards on our consolidated financial statements, systems and processes in conjunction with our review of lease ~~liabilities on the balance sheet.~~agreements. The ~~update~~updates will be effective for us beginning in ~~our~~the first quarter of fiscal year ~~2020, with early adoption permitted.~~2020. We ~~are currently evaluating the impact of the adoption of this accounting guidance on our consolidated financial statements. However, we~~ expect the adoption of this accounting guidance to result in an increase in lease assets and a corresponding increase in lease liabilities on our Consolidated Balance Sheets.

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 2 - New Revenue Accounting Standard

Method and Impact of Adoption

On January 29, 2018, we adopted the new revenue accounting standard using the modified retrospective method and applied it to contracts that were not completed 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 ~~FASB issued an accounting standards update that creates a single source~~impact of ~~revenue guidance under U.S. GAAP~~the new standard on our consolidated financial statements for ~~all companies, in all industries. We expect to adopt this guidance beginning in our~~the second quarter and first ~~quarter~~half of fiscal year 2019 ~~using~~was not significant.

Deferred Revenue and Performance Obligations

Deferred revenue is comprised mainly of customer advances and deferrals related to license and development arrangements and PCS related to software licensing. The following table shows the ~~modified retrospective approach. Given the scope of work required to implement the recognition and disclosure requirements under the new guidance, we have made progress in and continue to assess~~ changes in ~~policies, processes, systems and controls necessary to meet~~deferred revenue during the ~~additional requirements~~first half of the guidance. While we are still finalizing our analysis to quantify the adoption impact of the provisions of the new standard, we do not expect it to have a material impact on our consolidated financial statements.fiscal year 2019:



	July 29,
	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	194
Revenue recognized during the period	(153		)
Balance as of July 29, 2018	$	104

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 29, 2018, the amount of our remaining performance obligations that have not been recognized as revenue was $235 million, 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.

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

Note 23 - Stock-Based Compensation

Our stock-based compensation expense is associated with ~~stock options,~~ 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 ~~capitalized as~~allocated to inventory, as follows:


	Three Months Ended				Nine Months Ended				Three Months Ended				Six Months Ended
	October 29, 2017		October 30, 2016		October 29, 2017		October 30, 2016		July 29, 2018		July 30, 2017		July 29, 2018		July 30, 2017
	(In millions)								(In millions)
Cost of revenue	$	6	$	2	$	14	$	10	$	8	$	4	$	16	$	8
Research and development	61		36		146		95		76		44		150		85
Sales, general and administrative	40		27		105		71		48		33		96		65
Total	$	107	$	65	$	265	$	176	$	132	$	81	$	262	$	158

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Equity Award Activity

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

RSUs, PSUs, and Market-based PSUs Outstanding Options Outstanding
Number of Shares Weighted Average Grant-Date Fair Value Per Share Number of Shares Weighted Average Exercise Price Per Share
(In millions, except per share data)
Balances, January 29, 2017 27
$ 32.84
7
$ 14.47
Granted (1) (2) 6
$ 142.34
—
$ —
Exercised —
$ —
(2 ) $ 14.46
Vested (10 ) $ 26.88
—
$ —
Balances, October 29, 2017 23
$ 64.42
5
$ 14.47



	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)	1		$	240.22
Vested restricted stock	(5	)	$	39.64
Canceled and forfeited	—		$	—
Balances, July 29, 2018	18		$	84.56


(1)	Includes the number of PSUs that will be issued and eligible to vest if the corporate financial performance maximum target level for fiscal year 2018 is achieved. Depending on the actual level of achievement of the corporate performance target at the end of fiscal year 2018, the PSUs issued could be up to 0.6 million shares.


~~(2)~~	~~Includes market-based PSUs~~granted that will be issued and eligible to vest if the maximum ~~target~~corporate financial performance goal for fiscal year 2019 is achieved. Depending on the actual level of the corporate performance achievement at the end of fiscal year 2019, the PSUs issued could be up to 0.3 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 ~~the respective TSRs~~those of the companies comprising the Standard & Poor’s 500 Index during that period, the market-based PSUs issued could be up to ~~0.1 million~~45 thousand shares.

Of the total fair value of equity awards granted during the ~~third~~second quarter and first ~~nine months~~half of fiscal year 2019, we estimated that the stock-based compensation expense related to equity awards that are not expected to vest was $12 million and $31 million, respectively. Of the total fair value of equity awards granted during the second quarter and first half of fiscal year 2018, we estimated that the stock-based compensation expense related to equity awards that are not expected to vest was ~~$105~~$10 million and ~~$144~~$39 million, respectively. Of the total fair value of equity awards granted during the third quarter and first nine months of fiscal year 2017, we estimated that the stock-based compensation expense related to equity awards that are not expected to vest was $72 million and $89 million, respectively.

The following summarizes the aggregate unearned stock-based compensation expense and estimated weighted average amortization period as of ~~October~~July 29, ~~2017~~2018 and January ~~29, 2017:~~28, 2018:


	October 29,		January 29,		July 29,		January 28,
	2017		2017		2018		2018
	(In millions)				(In millions)
Aggregate unearned stock-based compensation expense	$	1,153	$	627	$	1,048	$	1,091

Estimated weighted average remaining amortization period	(In years)				(In years)
Stock options	—		0.5
RSUs, PSUs, and market-based PSUs	2.5		2.6		2.1		2.3
ESPP	0.7		0.6		0.9		0.7

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 34 – 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				Nine Months Ended				Three Months Ended				Six Months Ended
	October 29,		October 30,		October 29,		October 30,		July 29,		July 30,		July 29,		July 30,
	2017		2016		2017		2016		2018		2017		2018		2017
	(In millions, except per share data)								(In millions, except per share data)
Numerator:
Net income	$	838	$	542	$	1,928	$	1,012	$	1,101	$	583	$	2,345	$	1,091
Denominator:
Basic weighted average shares	603		538		597		536		607		597		607		595
Dilutive impact of outstanding securities:
Equity awards	23		27		24		25		18		26		19		26
1.00% Convertible Senior Notes	2		45		7		42		1		4		1		9
Warrants issued with the 1.00% Convertible Senior Notes	—		43		5		33		—		6		—		7
Diluted weighted average shares	628		653		633		636		626		633		627		637
Net income per share:
Basic (1)	$	1.39	$	1.01	$	3.23	$	1.89	$	1.81	$	0.98	$	3.86	$	1.83
Diluted (2)	$	1.33	$	0.83	$	3.05	$	1.59	$	1.76	$	0.92	$	3.74	$	1.71
Equity awards excluded from diluted net income per share because their effect would have been anti-dilutive	3		7		4		9		—		—		1		1


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


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

The 1.00% Convertible Senior Notes Due 2018, or the Convertible Notes, are included in the calculation of diluted net income per share. The Convertible Notes have a dilutive impact on net income per share if our average stock price for the reporting period exceeds the adjusted conversion price of ~~$20.0410~~$20.02 per share. The warrants associated with our Convertible Notes, or the Warrants, outstanding are also included in the calculation of diluted net income per share.

~~For the third quarter and first nine months~~ As of ~~fiscal year~~July 29, 2018, our average stock price was $176.20 and $142.18, respectively, which exceeded the adjusted conversion price, causing the Convertible Notes to have a dilutive impact for these periods. Our average stock price for the first nine months of fiscal year 2018 also exceeded the adjusted strike price, causing the Warrants to have a dilutive impact. All outstanding Warrantsthere were ~~terminated by the second quarter of fiscal year 2018.~~

The denominator for diluted net income per share does not include any effect from the convertible note hedge transactions, or the Note Hedges, that we entered into concurrently with the issuance of the Convertible Notes, as this effect would be anti-dilutive. In the event of conversion of the Convertible Notes, the shares delivered to us under the Note Hedges will offset the dilutive effect of the shares that we would issue under the Convertible Notes.

no warrants outstanding.

~~Please refer~~Refer to Note 1112 of these Notes to Condensed Consolidated Financial Statements for additional discussion regarding the Convertible Notes and Note ~~Hedges, and Warrants.~~Hedges.

Note 45 – Income Taxes

We recognized income tax expense of ~~$58~~$79 million and ~~$189~~$146 million for the ~~third~~second quarter and first ~~nine months~~half of fiscal year 2019, respectively, and $101 million and $130 million for the second quarter and first half of fiscal year 2018, ~~respectively, and $79 million and $168 million for the third quarter and first nine months of fiscal year 2017,~~ respectively.

~~NVIDIA CORPORATION AND SUBSIDIARIES~~

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

~~(Unaudited)~~

Income tax expense as a percentage of income before income tax for the ~~third~~second quarter and first ~~nine months~~half of fiscal year 2019 was 6.7% and 5.9%, respectively, and 14.8% and 10.7% for the second quarter and first half of fiscal year 2018, ~~was 6.5% and 8.9%, respectively, and 12.8% and 14.2% for the third quarter and first nine months of fiscal year 2017,~~ respectively.

The decrease in our effective tax rate for the ~~third~~second quarter and first ~~nine months~~half of fiscal year ~~2018~~2019 as compared to the same periods in the prior fiscal year was primarily ~~reflects the recognition of greater tax benefits related~~due to ~~stock-based compensation and~~ a ~~proportional~~ decrease in the ~~amount~~U.S. statutory tax rate from 35% to 21% as a result of ~~earnings subject to United States tax.~~

U.S. tax reform, partially offset by a decrease in the impact of tax benefits from stock-based compensation.

Our effective tax rates for the first ~~nine months~~half of fiscal years 2019 and 2018 of 5.9% and ~~2017 of 8.9% and 14.2%~~10.7%, respectively, were lower than the U.S. federal statutory ~~rate~~rates of ~~35%~~21% and 33.9%, for fiscal years 2019 and 2018, respectively, due ~~primarily~~ to higher income earned in jurisdictions ~~where the tax rate is~~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.

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

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 second quarter of fiscal year 2019, we have not recorded any adjustments to our provisional amounts. We will continue our analysis of these provisional amounts, which are still subject to change during the measurement period based on further guidance on accounting interpretations from the FASB and application of the law from the U.S. Department of Treasury, including proposed regulations relating to the one-time transition tax issued on August 1, 2018.

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 within the measurement period. For the second quarter of fiscal year 2019, because 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.

For the first ~~nine months~~half of fiscal year ~~2018,~~2019, 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 ~~29, 2017.~~

28, 2018.

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 ~~October~~July 29, ~~2017,~~2018, 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.

On August 1, 2018, the Internal Revenue Service and the Department of the Treasury issued proposed regulations relating to the one-time transition tax provision of the TCJA. Any required adjustment must be recorded during the measurement period as determined in accordance with the SEC guidance. While we are currently evaluating the potential impact of the regulations, we expect to record a discrete tax benefit in the third quarter of fiscal year 2019 related to our provisional U.S. tax reform transition tax amount.

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 56 - Marketable Securities

~~All of our~~Our cash equivalents and marketable securities are classified as “available-for-sale” debt securities. These securities are reported at fair value with the related unrealized gains and losses included in accumulated other comprehensive income (loss), a component of shareholders’ equity, net of tax, and net realized gains and losses recorded in total other income (expense) on the Condensed Consolidated Statements of Income.

We performed an impairment review of our investment portfolio as of October 29, 2017. Based on our quarterly impairment review, we concluded that our investments were appropriately valued and that no other-than-temporary impairment charges were necessary on our portfolio of available-for-sale investments as of October 29, 2017.

The following is a summary of cash equivalents and marketable securities as of ~~October~~July 29, ~~2017~~2018 and January ~~29, 2017:~~

28, 2018:

October 29, 2017

Amortized
Cost

Unrealized
Gain

Unrealized
Loss

Estimated
Fair Value
Reported as
Cash Equivalents Marketable Securities
(In millions)
Corporate debt securities $ 1,515
$ —
$ (5 ) $ 1,510
$ —
$ 1,510
Debt securities of United States government agencies 907
—
(5 ) 902
—
902
Debt securities issued by the United States Treasury 638
—
(3 ) 635
—
635
Asset-backed securities 289
—
(1 ) 288
—
288
Mortgage-backed securities issued by United States government-sponsored enterprises 140
2
(1 ) 141
—
141
Foreign government bonds 42
—
—
42
—
42
Money market funds 2,609
—
—
2,609
2,609
—
Total $ 6,140
$ 2
$ (15 ) $ 6,127
$ 2,609
$ 3,518

January 29, 2017
Amortized
Cost Unrealized
Gain Unrealized
Loss Estimated
Fair Value Reported as
Cash Equivalents Marketable Securities
(In millions)
Corporate debt securities $ 2,397
$ 1
$ (10 ) $ 2,388
$ 33
$ 2,355
Debt securities of United States government agencies 1,193
—
(5 ) 1,188
27
1,161
Debt securities issued by the United States Treasury 852
—
(2 ) 850
55
795
Asset-backed securities 490
—
(1 ) 489
—
489
Mortgage-backed securities issued by United States government-sponsored enterprises 161
2
(1 ) 162
—
162
Foreign government bonds 70
—
—
70
—
70
Money market funds 321
—
—
321
321
—
Total $ 5,484
$ 3
$ (19 ) $ 5,468
$ 436
$ 5,032



	July 29, 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)
Corporate debt securities	$	2,491	$	1	$	(8	)	$	2,484	$	—	$	2,484
Debt securities issued by the United States Treasury	2,412		—		(2		)	2,410		—		2,410
Debt securities of United States government agencies	1,993		—		(6		)	1,987		—		1,987
Money market funds	483		—		—			483		483		—
Asset-backed securities	206		—		(2		)	204		—		204
Mortgage-backed securities issued by United States government-sponsored enterprises	107		2		(1		)	108		—		108
Foreign government bonds	32		—		—			32		—		32
Total	$	7,724	$	3	$	(19	)	$	7,708	$	483	$	7,225



	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

The following table provides the breakdown of unrealized losses as of ~~October~~July 29, ~~2017,~~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					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			Estimated Fair Value		Gross Unrealized Losses			Estimated Fair Value		Gross Unrealized Losses			Estimated Fair Value		Gross Unrealized Losses
	(In millions)															(In millions)
Corporate debt securities	$	867	$	(3	)	$	407	$	(2	)	$	1,274	$	(5	)
Debt securities issued by United States government agencies	666		(3		)	236		(2		)	902		(5		)	$	925	$	(1	)	$	559	$	(5	)	$	1,484	$	(6	)
Debt securities issued by the United States Treasury	509		(2		)	126		(1		)	635		(3		)	754		—			410		(2		)	1,164		(2		)
Corporate debt securities																310		(1		)	742		(7		)	1,052		(8		)
Asset-backed securities	233		(1		)	44		—			277		(1		)	49		(1		)	155		(1		)	204		(2		)
Mortgage-backed securities issued by United States government-sponsored enterprises	26		—			36		(1		)	62		(1		)	15		—			31		(1		)	46		(1		)
Foreign government bonds																—		—			31		—			31		—
	$	2,301	$	(9	)	$	849	$	(6	)	$	3,150	$	(15	)	$	2,053	$	(3	)	$	1,928	$	(16	)	$	3,981	$	(19	)

The gross unrealized losses related to fixed income securities were primarily due to changes in interest ~~rates. We have determined that the gross unrealized losses on investment securities as of October 29, 2017~~rates, which we believe are temporary in nature. ~~Currently, we~~We have the intent and ability to hold our investments ~~with impairment indicators~~ until maturity. ~~Net realized gains and losses were not significant for~~For the ~~third~~second quarter and first ~~nine months~~half of fiscal years 2019 and 2018, there were no other-than-temporary impairment losses and ~~2017.~~

net realized gains were not significant.

The amortized cost and estimated fair value of cash equivalents and marketable securities ~~which are primarily debt instruments, are classified as available-for-sale~~ as of ~~October~~July 29, ~~2017~~2018 and January ~~29, 2017 and~~28, 2018 are shown below by contractual ~~maturity:~~

maturity.


	October 29, 2017				January 29, 2017				July 29, 2018				January 28, 2018
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
	(In millions)								(In millions)
Less than 1 year	$	4,074	$	4,072	$	2,209	$	2,209	$	5,991	$	5,981	$	5,381	$	5,375
Due in 1 - 5 years	2,024		2,013		3,210		3,194		1,705		1,699		1,500		1,485
Mortgage-backed securities issued by United States government-sponsored enterprises not due at a single maturity date	42		42		65		65		28		28		35		35
Total	$	6,140	$	6,127	$	5,484	$	5,468	$	7,724	$	7,708	$	6,916	$	6,895

Note 67 – 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 ~~the~~ 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~~second quarter of fiscal year ~~2018. We did not have any investments classified as~~2019. Level 3 ~~as of October 29, 2017.~~

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)


		Fair Value at					Fair Value at
	Pricing Category	October 29, 2017		January 29, 2017		Pricing Category	July 29, 2018		January 28, 2018
		(In millions)					(In millions)
Assets
Cash equivalents and marketable securities:	Cash equivalents and marketable securities:					Cash equivalents and marketable securities:
Corporate debt securities	Level 2	$	1,510	$	2,388	Level 2	$	2,484	$	1,295
Debt securities issued by the United States Treasury						Level 2	$	2,410	$	573
Debt securities of United States government agencies	Level 2	$	902	$	1,188	Level 2	$	1,987	$	815
Debt securities issued by the United States Treasury	Level 2	$	635	$	850
Money market funds						Level 1	$	483	$	3,789
Asset-backed securities	Level 2	$	288	$	489	Level 2	$	204	$	252
Mortgage-backed securities issued by United States government-sponsored enterprises	Level 2	$	141	$	162	Level 2	$	108	$	130
Foreign government bonds	Level 2	$	42	$	70	Level 2	$	32	$	41
Money market funds	Level 1	$	2,609	$	321

Liabilities
Current liability:
1.00% Convertible Senior Notes (1)	Level 2	$	245	$	4,474	Level 2	$	175	$	189
Other noncurrent liabilities:
2.20% Notes Due 2021 (1)	Level 2	$	996	$	975	Level 2	$	970	$	982
3.20% Notes Due 2026 (1)	Level 2	$	1,007	$	961	Level 2	$	970	$	986
Interest rate swap (2)	Level 2	$	3	$	2

(1)

~~The remaining 1.00% Convertible Senior Notes, 2.20% Notes Due 2021, and 3.20% Notes Due 2026~~These liabilities are carried on our ~~Condensed~~ 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. ~~See~~Refer to Note 1112 of these Notes to Condensed Consolidated Financial Statements for additional information.


~~(2)~~	~~Please refer to~~ ~~Note 9~~ ~~of these Notes to Condensed Consolidated Financial Statements for a discussion regarding our interest rate swap.~~

Note 78 - Amortizable Intangible Assets

The components of our amortizable intangible assets are as follows:


	October 29, 2017							January 29, 2017							July 29, 2018							January 28, 2018
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
	(In millions)														(In millions)							(In millions)
Acquisition-related intangible assets	$	193	$	(178	)	$	15	$	193	$	(167	)	$	26	$	195	$	(184	)	$	11	$	195	$	(180	)	$	15
Patents and licensed technology	469		(421		)	48		468		(390		)	78		485		(445		)	40		469		(432		)	37
Total intangible assets	$	662	$	(599	)	$	63	$	661	$	(557	)	$	104	$	680	$	(629	)	$	51	$	664	$	(612	)	$	52

The increase in gross carrying amount of intangible assets is due to purchases of licensed technology during the first half of fiscal year 2019. Amortization expense associated with intangible assets was ~~$13~~$6 million and ~~$42~~$17 million for the ~~third~~second quarter and first ~~nine months~~half of fiscal year ~~2018,~~2019, respectively, and ~~$18~~$14 million and ~~$53~~$29 million for the ~~third~~second quarter and first ~~nine months~~half of fiscal year ~~2017,~~2018, respectively. Future amortization expense related to the net carrying amount of intangible assets as of ~~October~~July 29, ~~2017~~2018 is estimated to be $12 million for the remainder of fiscal year ~~2018, $26 million in fiscal year~~ 2019, ~~$16~~$20 million in fiscal year 2020, $8$11 million in fiscal year 2021, $4 million in fiscal year 2022, $3 million in fiscal year 2023, and $1 million in fiscal ~~year 2022 and beyond.~~2024.

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 89 - Balance Sheet Components

Certain balance sheet components are as follows:


	October 29,		January 29,		July 29,		January 28,
	2017		2017		2018		2018
Inventories:	(In millions)				(In millions)
Raw materials	$	219	$	252	$	421	$	227
Work in-process	235		176		266		192
Finished goods	403		366		403		377
Total inventories	$	857	$	794	$	1,090	$	796

As of ~~October~~July 29, ~~2017,~~2018, we had outstanding inventory purchase obligations totaling ~~$1.16~~$1.91 billion.


	October 29,		January 29,		July 29,		January 28,
	2017		2017		2018		2018
Accrued and Other Current Liabilities:	(In millions)				(In millions)
Customer related liabilities (1)	$	177	$	197
Customer program accruals					$	248	$	181
Accrued payroll and related expenses	153		137		170		172
Deferred revenue ~~(2)~~(1)	65		85		77		53
Warranty accrual (3)	18		8
Taxes payable					39		33
Coupon interest on debt obligations					20		20
Accrued royalties	16		7		19		17
Warranty accrual (2)					16		15
Professional service fees	13		13		15		15
Taxes payable	11		4
Accrued restructuring and other charges (4)	8		13
Coupon interest on debt obligations	7		21
Leases payable	5		4
Contributions payable	4		4
Other	16		14		44		36
Total accrued and other current liabilities	$	493	$	507	$	648	$	542


(1)	~~Customer related liabilities include accrued customer programs, such as rebates and marketing development funds.~~


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


~~(3)~~(2)	~~Please refer~~Refer to Note 1011 of these Notes to Condensed Consolidated Financial Statements for a discussion regarding warranties.



	July 29,		January 28,
	2018		2018
Other Long-Term Liabilities:	(In millions)
Income tax payable (1)	$	544	$	559
Deferred revenue (2)	27		15
Deferred income tax liability	21		18
Employee benefits liability	18		12
Deferred rent	14		9
Other	14		19
Total other long-term liabilities	$	638	$	632


(1)	As of July 29, 2018, represents the long-term portion of the one-time transition tax payable of $337 million, as well as unrecognized tax benefits of $191 million and related interest and penalties of $16 million.


~~(4)~~(2)	~~Please refer~~Deferred revenue primarily includes deferrals related to ~~Note 15~~ ~~of these Notes to Condensed Consolidated Financial Statements for a discussion regarding restructuring~~license and ~~other charges.~~ development arrangements and PCS.

~~NVIDIA CORPORATION AND SUBSIDIARIES~~

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

~~(Unaudited)~~

October 29, January 29,
2017 2017
Other Long-Term Liabilities: (In millions)
Deferred income tax liability $ 295
$ 141
Income tax payable 116
96
Contributions payable 12
9
Employee benefits liability 11
10
Deferred revenue 10
4
Deferred rent 8
6
Licenses payable 7
1
Other 5
4
Total other long-term liabilities $ 464
$ 271

Note 910 - Derivative Financial Instruments

In fiscal year 2016, we entered into an interest rate swap for a portion of the operating lease financing arrangement for our new Santa Clara campus building. In November 2017, subsequent to the end of the third quarter of fiscal year 2018, we exercised the option to terminate the operating lease financing arrangement and purchase the property, which we expect to occur during the fourth quarter of fiscal year 2018. As a result, the interest rate swap would also terminate, which we expect to result in an immaterial loss upon termination.

We enter into foreign currency forward contracts to mitigate the impact of foreign currency exchange rate movements on our operating expenses. We designate these contracts as cash flow hedges and assess the effectiveness of the hedge relationships on a spot to spot basis. Gains or losses on the contracts are recorded in accumulated other comprehensive

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

income ~~(loss)~~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 29, ~~2017~~2018 and January ~~29, 2017.~~

28, 2018.

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 ~~our reporting currency.~~U.S. dollar. These ~~foreign currency~~ forward contracts were not designated for hedge accounting treatment. Therefore, the change in fair value of these contracts is recorded ~~as a component of total~~in other income ~~(expense)~~or expense and offsets the change in fair value of the hedged foreign currency denominated monetary assets and liabilities, which is also recorded in ~~total~~ other income ~~(expense).~~

or expense.

The table below presents the notional value of our foreign currency forward contracts outstanding as of ~~October~~July 29, ~~2017~~2018 and January ~~29, 2017:~~28, 2018:

October 29,
2017 January 29,
2017
(In millions)
Designated as cash flow hedges $ 93
$ 67
Not designated for hedge accounting $ 74
$ 32

Under the master netting agreements with the respective counterparties to our foreign currency forward contracts, we are allowed to net settle transactions with the same counterparty, subject to applicable requirements. However, we present our derivative assets and liabilities at their gross fair values on our Condensed Consolidated Balance Sheets. We are not required to pledge, and are not entitled to receive, cash collateral related to these derivative instruments.



	July 29, 2018		January 28, 2018
	(In millions)
Designated as cash flow hedges	$	396	$	104
Not designated for hedge accounting	$	92	$	94

As of ~~October~~July 29, ~~2017, the maturities of the~~2018, all designated foreign currency forward contracts ~~were three months or less. We expect to realize all~~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.~~months was not significant.

~~NVIDIA CORPORATION AND SUBSIDIARIES~~

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

~~(Unaudited)~~

~~We formally assess, both at inception~~During the second quarter and ~~on an ongoing basis, whether~~first half of fiscal years 2019 and 2018, the impact of derivative financial instruments designated for hedge accounting treatment ~~are highly effective. For the third quarter~~on other comprehensive income or loss was not significant and ~~first nine months of fiscal years 2018 and 2017,~~ all ~~derivative financial~~such instruments ~~designated for hedge accounting treatment~~ were determined to be highly ~~effective and~~effective. Therefore, there were no gains or losses associated with ineffectiveness.

The net change in unrealized gains (losses) on derivative financial instruments designated for hedge accounting treatment was not significant for the third quarter and first nine months of fiscal years 2018 and 2017.

Note 1011 - 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. ~~In addition, U.S. GAAP requires disclosures about the guarantees that an entity has issued, including a tabular reconciliation of the changes of the entity’s product warranty liabilities.~~

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 $16 million and $15 million as of ~~October~~July 29, ~~2017~~2018 and January ~~29, 2017 were as follows:~~

October 29, January 29,
2017 2017
(In millions)
Balance at beginning of period $ 8
$ 11
Additions 13
2
Deductions (3 ) (5 )
Balance at end of period $ 18
$ 8
28, 2018, respectively.

In connection with certain agreements that we have entered into 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.

Note 1112 - Debt

~~Convertible Debt~~

~~1.00% Convertible Senior Notes Due 2018~~

During the third quarter of fiscal year 2018, we paid cash to settle an aggregate of $62 million in principal amount of the Convertible Notes and had $24 million in principal amount outstanding as of October 29, 2017. We also issued 3 million shares of our common stock for the excess conversion value and recognized a loss of $1 million on early conversions of the Convertible Notes. Based on the closing price of our common stock of $201.86 on the last trading day of the third quarter of fiscal year 2018, the if-converted value of the remaining outstanding Convertible Notes as of October 29, 2017 exceeded their principal amount by approximately $217 million. As of October 29, 2017, the conversion rate was 49.8977 shares of common stock per $1,000 principal amount of the Convertible Notes after adjusting for dividend increases (equivalent to an adjusted conversion price of $20.0410 per share of common stock).

~~NVIDIA CORPORATION AND SUBSIDIARIES~~

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

~~(Unaudited)~~

Through the third quarter of fiscal year 2018, we settled an aggregate of $1.48 billion in principal amount of the Convertible Notes. Subsequently, we received additional conversion notices for an aggregate of $8 million in principal amount of the Convertible Notes. Settlements of these conversion requests are expected to be completed in the fourth quarter of fiscal year 2018. The actual number of shares issuable upon conversion will be determined based upon the terms of the Convertible Notes, and we expect to receive an equal number of shares of our common stock under the terms of the Note Hedges.

Holders may convert all or any portion of their Convertible Notes at their option at any time prior to August 1, 2018 under certain circumstances, determined on a quarterly basis. All outstanding Convertible Notes are convertible at the holders’ option through January 28, 2018.

We separately accounted for the liability and equity components of the Convertible Notes at issuance, since our conversion obligation in excess of the aggregate principal could be fully or partially settled in cash. The liability component was assigned by estimating the fair value of a similar debt without the conversion feature. The difference between the net cash proceeds and the liability component was assigned as the equity component. The initial liability component of the Convertible Notes was valued at $1.35 billion and the initial carrying value of the equity component recorded in additional paid-in-capital was valued at $126 million. This equity component, together with the $23 million purchaser's discount to the par value of the Convertible Notes, represented the initial aggregate unamortized debt discount of $148 million. The debt discount is amortized as interest expense over the contractual term of the Convertible Notes using the effective interest method and an interest rate of 3.15%.

As of October 29, 2017, the carrying value of the Convertible Notes was classified as a current liability and the difference between the principal amount and the carrying value of the Convertible Notes was classified as convertible debt conversion obligation in the mezzanine equity section of our Condensed Consolidated Balance Sheet.

~~The following table presents the carrying value of the Convertible Notes:~~

October 29, January 29,
2017 2017
(In millions)
1.00% Convertible Senior Notes $ 24
$ 827
Unamortized debt discount (1) (1 ) (31 )
Net carrying amount $ 23
$ 796

~~(1) As of October 29, 2017, the remaining period over which the unamortized debt discount will be amortized is 1.1 years.~~

~~The following table presents interest expense for the contractual interest and the accretion of debt discount and issuance costs related to the Convertible Notes:~~

Three Months Ended Nine Months Ended
October 29, October 30, October 29, October 30,
2017 2016 2017 2016
(In millions)
Contractual coupon interest expense $ —
$ 3
$ —
$ 10
Amortization of debt discount —
5
2
20
Total interest expense related to Convertible Notes $ —
$ 8
$ 2
$ 30

~~Note Hedges and Warrants~~

Concurrently with the issuance of the Convertible Notes, we entered into the Note Hedges. During the third quarter of fiscal year 2018, we had received 3 million shares of our common stock from the exercise of a portion of the Note Hedges related to the settlement of $62 million in principal amount of the Convertible Notes. Subsequently, we expect to receive additional shares of our common stock related to at least an additional $8 million in principal amount that is expected to settle during the fourth quarter of fiscal year 2018.

~~NVIDIA CORPORATION AND SUBSIDIARIES~~

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

~~(Unaudited)~~

In addition, concurrent with the offering of the Convertible Notes and the purchase of the Note Hedges, we entered into a separate warrant transaction. All outstanding Warrants were terminated by the second quarter of fiscal year 2018.

Long-Term Debt

2.20% Notes Due 2021 and 3.20% Notes Due 2026

In ~~the third quarter of~~ 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 inon March 16 and September 16 of each year, beginning inon March 16, 2017. 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.

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The Notes are our unsecured senior obligations and rank equally in right of payment with all of our 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 ~~our long-term debt~~the Notes and the associated interest rates were as follows:


	Expected Remaining Term (years)	Effective Interest Rate	October 29, 2017			January 29, 2017			Expected Remaining Term (years)	Effective Interest Rate	July 29, 2018			January 28, 2018
			(In millions)								(In millions)
2.20% Notes Due 2021	3.9	2.38%	$	1,000		$	1,000		3.1	2.38%	$	1,000		$	1,000
3.20% Notes Due 2026	8.9	3.31%	1,000			1,000			8.1	3.31%	1,000			1,000
Unamortized debt discount and issuance costs			(15		)	(17		)			(13		)	(15		)
Net carrying amount			$	1,985		$	1,983				$	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. Through the second quarter of fiscal year 2019, we had settled an aggregate of $1.49 billion of the Convertible Notes. The Convertible Notes will mature on December 1, 2018 and we had $14 million in principal amount outstanding as of July 29, 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 second quarter of fiscal year 2019, we paid cash to settle an insignificant amount of the Convertible Notes. Subsequently, we received additional conversion notices for an aggregate of $11 million in principal amount of the Convertible Notes which are expected to be settled in the third quarter of fiscal year 2019. During the second quarter of fiscal year 2019, we also issued one thousand shares of our common stock for the excess conversion value and the related loss on early conversions was not significant. Based on the closing price of our common stock of $252.02 on the last trading day of the second quarter of fiscal year 2019, the if-converted value of the remaining outstanding Convertible Notes exceeded their principal amount by approximately $162 million. As of July 29, 2018, the conversion rate was 49.94 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 July 29, 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 $1.49 billion in principal amount of the Convertible Notes.

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 July 29, 2018, 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 July 29, 2018, we had not issued any commercial paper.

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 1213 - Commitments and Contingencies

~~Operating Lease Financing Arrangement~~

In November 2017, subsequent to the end of the third quarter of fiscal year 2018, we exercised the option to terminate the off-balance sheet, build-to-suit operating lease financing arrangement related to our new Santa Clara campus building. In the fourth quarter of fiscal year 2018, we expect to refinance and purchase the property for approximately $350 million.

Litigation

Polaris Innovations Limited

On May 16, 2016, Polaris Innovations Limited, or Polaris, a non-practicing entity and wholly-owned subsidiary 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 alleging~~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, ~~(DRAM).~~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 7, 2016, NVIDIA filed a petition for inter partes review with the United States Patent and Trademark Office (USPTO) challenging the validity of U.S. Patent No. 7,886,122, which is asserted by Polaris in that California district court litigation. On December 19, 2016, NVIDIA filed an inter partes review request with the USPTO challenging the validity of U.S.

~~NVIDIA CORPORATION AND SUBSIDIARIES~~

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

~~(Unaudited)~~

Patent No. 7,124,325, another patent asserted by Polaris. On May 5, 2017, NVIDIA filed an inter partes review request with the USPTO challenging the validity of U.S. Patent No. 8,161,344, another patent asserted by Polaris. On May 30, 2017, NVIDIA filed an inter partes review request with the USPTO challenging the validity of U.S. Patent No. 6,532,505, another patent asserted by Polaris. On June 22, 2017, the USPTO instituted inter partes review of U.S Patent No. 7,886,122. On June 23, 2017, the USPTO denied institution of inter partes review of U.S. Patent No. 7,124,325. On July 25, 2017, NVIDIA filed inter partes requests with the USPTO challenging the validity of U.S. Patent No. 8,207,976, another patent asserted by Polaris. Also on July 25, 2017, NVIDIA filed inter partes requests with the USPTO for U.S. Patent No. 8,161,344 challenging the validity of further claims and an additional inter partes request for U.S. Patent No. 7,124,325. All of the patents that Polaris has asserted in the U.S. litigation are now subject to requests for inter partes review, with institution decisions forthcoming.

On May 9, 2017, NVIDIA filed a Motion to Stay the California action pending final resolution of the inter partes review of U.S. Patents Nos. 7,886,122; 7,124,325; and 8,161,344. On June 15, 2017, the Motion to Stay was granted. The action has now been stayed until December 14, 2017 pending the institution of the inter partes review of these patents.

On December 30, 2016, ~~NVIDIA received notice that~~ Polaris ~~had~~ filed a complaint against NVIDIA for patent infringement in the Regional Court of Düsseldorf, Germany. ~~The German case~~Polaris alleges ~~infringement~~that NVIDIA has infringed and is continuing to infringe three patents relating to control of ~~European Patent No. EP1428225 and German Patent Nos. DE 10223167 and DE 1020066043668.~~DRAM. On July 14, 2017, NVIDIA filed defenses to the infringement allegations including non-infringement with respect to each of the three asserted patents.

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

OnBetween March 31, 2017 and June 12, 2017, NVIDIA filed nullity actions with the German Patent Court ~~acknowledged receipt of nullity actions filed by NVIDIA~~ challenging the validity of ~~EP1428225~~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 ~~DE 1020066043668.~~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 ~~June 12,~~November 27, 2017, NVIDIA ~~was notified~~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.

ZiiLabs 2 Patents Lawsuits

On December 27, 2017, ZiiLabs filed a second complaint in the United States District Court for the District of Delaware alleging that NVIDIA has infringed four additional U.S. patents, or the ZiiLabs 2 Patents. The second complaint also seeks unspecified monetary damages, enhanced damages, interest, costs, and fees against NVIDIA and an injunction against further direct or direct infringement of the ZiiLabs 2 Patents.

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.

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

On December 29, 2017, ZiiLabs filed a request with the U.S. International Trade Commission, or USITC, 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 ~~nullity actions against EP1428225~~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 ~~DE 1020066043668 were served on Polaris~~Zotac USA Inc.

On February 28, 2018, NVIDIA and ~~that Polaris has filed a formal response opposing each nullity complaint.~~the other respondents answered the ITC complaint and asserted various defenses including non-infringement and invalidity of the four asserted ZiiLabs 2 patents.

On May 10, 2018, the Administrative Law Judge presiding over the investigation issued an Initial Determination terminating the investigation with respect to one of the patents. On July ~~14, 2017,~~17, 2018, the German Patent Court acknowledged receipt of a nullity action filed by NVIDIA challenging the validity of DE 10223167. On September 13, 2017, NVIDIA was notified that the nullity action against DE10223167 was servedUSITC affirmed this decision on ~~Polaris. Polaris has not yet responded to this action.~~

modified grounds.

Accounting for Loss Contingencies

While there can be no assurance of favorable outcomes, we believe the claims made by the other ~~party~~parties in the above ongoing matters are without merit and we intend to vigorously defend the actions. As of ~~October~~July 29, ~~2017,~~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.

Note 1314 - Shareholders’ Equity

Capital Return Program

Beginning August 2004, our Board of Directors authorized us ~~subject to certain specifications,~~ to repurchase ~~shares of~~ our ~~common~~ stock.

During the ~~third quarter and~~ first ~~nine months~~half of fiscal year ~~2018,~~2019, we repurchased a total of 13 million shares ~~and 6 million shares, respectively,~~ for ~~$151 million and $909 million, respectively.~~$655 million. During the ~~third~~second quarter and first ~~nine months~~half of fiscal year ~~2018,~~2019, we also ~~made~~paid $91 million and $182 million, respectively, in cash ~~dividend payments~~dividends to our ~~shareholders of $84 million and $250 million, respectively.~~

shareholders.

Through ~~October~~July 29, ~~2017,~~2018, we have repurchased an aggregate of ~~251~~254 million shares under our share repurchase program for a total cost of ~~$5.50 billion since the inception of the program.~~$6.16 billion. All shares delivered from these repurchases have been placed into treasury stock. As of ~~October~~July 29, ~~2017,~~2018, we were authorized, subject to certain specifications, to repurchase additional shares of our common stock up to ~~$1.82~~$1.16 billion through December 2020.

In November 2017, we declared an increase in our quarterly cash dividend to $0.15 per share from $0.14 per share, to be paid with our next quarterly cash dividend on December 15, 2017, to all shareholders of record on November 24, 2017.

~~NVIDIA CORPORATION AND SUBSIDIARIES~~

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

~~(Unaudited)~~

~~Convertible~~ Preferred Stock

As of ~~October~~July 29, ~~2017~~2018 and January ~~29, 2017,~~28, 2018, there were no shares of preferred stock outstanding.

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 1415 - 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 ~~graphics~~ architecture.

~~Our~~While our GPU and CUDA architecture is unified, 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 consoles and mobile gaming and entertainment ~~devices, as well as autonomous robots, drones and cars.~~devices.

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

~~We have a~~Under the single unifying architecture for our GPU and Tegra ~~Processors. This architecture unification leverages~~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 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, ~~unallocated cost of revenue~~corporate infrastructure and ~~operating expenses,~~support costs, acquisition-related costs, legal settlement costs, contributions, restructuring and other charges, ~~contributions, legal settlement costs,~~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 NVIDIA as a whole. The table below presents details of our reportable segments and the “All Other” category.



	GPU		Tegra Processor		All Other			Consolidated
	(In millions)
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

Three Months Ended July 30, 2017
Revenue	$	1,897	$	333	$	—		$	2,230
Depreciation and amortization expense	$	29	$	9	$	11		$	49
Operating income (loss)	$	761	$	71	$	(144	)	$	688

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

Six Months Ended July 30, 2017
Revenue	$	3,459	$	665	$	43		$	4,167
Depreciation and amortization expense	$	57	$	18	$	21		$	96
Operating income (loss)	$	1,363	$	118	$	(239	)	$	1,242

NVIDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

GPU Tegra Processor All Other Consolidated
(In millions)
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

Three Months Ended October 30, 2016

Revenue $ 1,697
$ 241
$ 66
$ 2,004
Depreciation and amortization expense $ 30
$ 8
$ 10
$ 48
Operating income (loss) $ 678
$ 17
$ (56 ) $ 639

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

Nine Months Ended October 30, 2016
Revenue $ 3,972
$ 567
$ 198
$ 4,737
Depreciation and amortization expense $ 87
$ 22
$ 31
$ 140
Operating income (loss) $ 1,405
$ (35 ) $ (169 ) $ 1,201

Three Months Ended Nine Months Ended
October 29,
2017 October 30,
2016 October 29,
2017 October 30,
2016
(In millions)
Reconciling items included in "All Other" category:
Unallocated revenue $ —
$ 66
$ 43
$ 198
Stock-based compensation expense (107 ) (65 ) (265 ) (176 )
Unallocated cost of revenue and operating expenses (61 ) (53 ) (176 ) (156 )
Acquisition-related costs (3 ) (4 ) (11 ) (12 )
Restructuring and other charges —
—
—
(3 )
Contributions —
—
(2 ) (4 )
Legal settlement costs —
—
—
(16 )
Total $ (171 ) $ (56 ) $ (411 ) $ (169 )

~~NVIDIA CORPORATION AND SUBSIDIARIES~~

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

~~(Unaudited)~~



	Three Months Ended						Six Months Ended
	July 29, 2018			July 30, 2017			July 29, 2018			July 30, 2017
	(In millions)
Reconciling items included in "All Other" category:
Unallocated revenue	$	—		$	—		$	—		$	43
Stock-based compensation expense	(132		)	(81		)	(262		)	(158		)
Unallocated cost of revenue and operating expenses	(65		)	(59		)	(129		)	(114		)
Acquisition-related costs	(2		)	(4		)	(4		)	(8		)
Contributions	—			—			—			(2		)
Total	$	(199	)	$	(144	)	$	(395	)	$	(239	)

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				Nine Months Ended				Three Months Ended				Six Months Ended
	October 29,		October 30,		October 29,		October 30,		July 29,		July 30,		July 29,		July 30,
	2017		2016		2017		2016		2018		2017		2018		2017
	(In millions)								(In millions)
Revenue:
Taiwan	$	864	$	747	$	2,140	$	1,696	$	843	$	674	$	1,810	$	1,277
China									760		481		1,514		810
Other Asia Pacific	612		309		1,409		660		676		420		1,259		797
China	515		341		1,325		845
United States	263		282		894		682		413		278		847		631
Europe									234		178		469		360
Other Americas	187		154		480		360		197		199		431		292
Europe	195		171		555		494
Total revenue	$	2,636	$	2,004	$	6,803	$	4,737	$	3,123	$	2,230	$	6,330	$	4,167

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


	Three Months Ended				Nine Months Ended				Three Months Ended				Six Months Ended
	October 29,		October 30,		October 29,		October 30,		July 29,		July 30,		July 29,		July 30,
	2017		2016		2017		2016		2018		2017		2018		2017
	(In millions)								(In millions)
Revenue:
Gaming	$	1,561	$	1,244	$	3,774	$	2,712	$	1,805	$	1,186	$	3,528	$	2,213
Professional Visualization	239		207		679		610		281		235		532		440
Datacenter	501		240		1,326		534		760		416		1,461		825
Automotive	144		127		426		359		161		142		306		282
OEM & IP	191		186		598		522		116		251		503		407
Total revenue	$	2,636	$	2,004	$	6,803	$	4,737	$	3,123	$	2,230	$	6,330	$	4,167

No customer represented 10% or more of total revenue for the second quarter and first half of fiscal years 2019 and 2018.

Accounts receivable from significant customers, those representing more than 10% ~~or more~~ of total accounts receivable, ~~for the respective periods, is summarized as follows:~~

October 29, January 29,
2017 2017
Accounts Receivable:
Customer A 17 % 19 %

~~Note 15 - Restructuring and Other Charges~~

~~In fiscal year 2016, we began the wind-down~~aggregated approximately 26% of our ~~Icera operations. No restructuring charges were recorded during the third quarter~~accounts receivable balance from two customers as of July 29, 2018, and ~~first nine months~~approximately 28% of ~~fiscal year~~our accounts receivable balance from two customers as of January 28, 2018.

~~NVIDIA CORPORATION AND SUBSIDIARIES~~

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

~~(Unaudited)~~

The following table provides a summary of the restructuring activities and related liabilities recorded in accrued liabilities on our Condensed Consolidated Balance Sheets as of October 29, 2017 and January 29, 2017:

October 29, January 29,
2017 2017
(In millions)
Balance at beginning of period $ 13
$ 23
Restructuring and other charges —
3
Cash payments (5 ) (13 )
Balance at end of period $ 8
$ 13

~~The majority of the remaining balance of $8 million as of October 29, 2017 is expected to be paid during the next twelve months.~~

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 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.

NVIDIA, the NVIDIA logo, GeForce, Quadro, Tegra, Tesla, Turing, Jetson, G-SYNC, Jetson, NVIDIA DGX, NVIDIA DRIVE, NVIDIA ~~GameWorks,~~DRIVE Constellation, NVIDIA DRIVE Sim, NVIDIA GRID, NVIDIA HGX, NVIDIA Holodeck, NVIDIA ~~VRWorks, OptiX,~~Isaac NVIDIA NVSwitch, NVIDIA RTX, NVSwitch, Pascal, TensorRT and ~~TensorRT~~Xavier are trademarks and/or registered trademarks of NVIDIA Corporation in the United States and other countries. ~~MAXQ® is the registered trademark of Maxim Integrated Products, Inc.~~ Other company and product names may be trademarks of the respective companies with which they are associated.

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 ~~29, 2017~~28, 2018 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 ~~emphasis~~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 ~~delivers value to its customers through PC, mobile~~has evolved the GPU into a computer brain at the intersection of virtual reality, high performance computing, or HPC, and cloud architectures. Vertical integration enables us to bring together hardware, system software, programmable algorithms, libraries, systems and services to create unique value for the markets we serve. We specialize in markets in which GPU-based visual computing and accelerated computing platforms can provide enhanced throughput for applications.

artificial intelligence, or AI.

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

~~Our~~While our GPU and CUDA architecture is unified, 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, as well as autonomous robots, drones and cars.~~

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 ~~2018~~2019 Summary


	Three Months Ended													Three Months Ended
	October 29, 2017			July 30, 2017			October 30, 2016			Q/Q		Y/Y		July 29, 2018			April 29, 2018			July 30, 2017			Quarter-over-Quarter Change		Year-over-Year Change
	($ in millions, except per share data)													($ in millions, except per share data)
Revenue	$	2,636		$	2,230		$	2,004		18	%	32	%	$	3,123		$	3,207		$	2,230		(3	)%	40	%
Gross margin	59.5		%	58.4		%	59.0		%	110 bps		50 bps		63.3		%	64.5		%	58.4		%	(120) bps		490 bps
Operating expenses	$	674		$	614		$	544		10	%	24	%	$	818		$	773		$	614		6	%	33	%
Income from operations	$	895		$	688		$	639		30	%	40	%	$	1,157		$	1,295		$	688		(11	)%	68	%
Net income	$	838		$	583		$	542		44	%	55	%	$	1,101		$	1,244		$	583		(11	)%	89	%
Net income per diluted share	$	1.33		$	0.92		$	0.83		45	%	60	%	$	1.76		$	1.98		$	0.92		(11	)%	91	%

Revenue for the ~~third~~second quarter of fiscal year ~~2018~~2019 increased ~~32%~~40% year over year and ~~18%~~decreased 3% sequentially. ~~Growth was driven by GPUs for~~Each of our market platforms - gaming, professional visualization, datacenter, and ~~professional visualization, as well as Tegra processors.~~

automotive - produced sequential and year-over-year growth.

GPU business revenue was ~~$2.22~~$2.66 billion, up ~~31%~~40% from a year earlier and down 4% sequentially, led by gaming, professional visualization, and datacenter, offsetting a substantial decline in cryptocurrency GPUs. Gaming revenue was $1.80 billion, up 52% from a year ago and up 5% sequentially. Gaming GPU growth was fueled by Pascal-based GPUs for desktops and by high-performance notebooks based on our Max-Q technology. Professional visualization revenue was $281 million, up 20% from a year earlier and up 17% sequentially, with strength across all platforms, including gaming, datacenter, and professional visualization. GeForce GPU gaming revenue of $1.56 billion was led by continued strong adoption of Pascal-based GeForce GTX gaming platforms.12% sequentially. Datacenter revenue ~~(including Tesla, NVIDIA GRID and DGX)~~ was ~~$501~~$760 million, up 109% year on year and up 20% sequentially, reflecting shipments of our Volta GPU architecture. Datacenter growth was fueled by strong demand by hyperscale and cloud customers for deep learning training and accelerated GPU computing, as well as demand for HPC, DGX AI supercomputing, and GRID virtualization platforms. Professional visualization revenue grew 15% year over year and 2% sequentially to $239 million, led by high-end mobile platforms.

~~Tegra processor business revenue was $419 million, up 74%~~83% from a year ago and up ~~26% sequentially.~~ 8% sequentially, led by strong sales of our Volta architecture products, including NVIDIA Tesla V100 and DGX systems. OEM and IP revenue was $116 million, down 54% from a year ago and down 70% sequentially, driven by lower demand for GPUs for cryptocurrency mining. Cryptocurrency-related revenue included in OEM was $18 million, and we expect it to be negligible going forward.

Tegra ~~processor~~Processor business revenue - which includes ~~system-on-a-chip (SOCs)~~Automotive, SOC modules for the Nintendo Switch gaming console, and ~~development services. Also included~~other embedded Tegra platforms - was ~~automotive~~$467 million, up 40% from a year ago and up 6% sequentially. Automotive revenue of ~~$144~~$161 million ~~which~~ was up 13% from a year earlier and up 1%11% sequentially, incorporating infotainment modules, production DRIVE PX platforms, and development agreements ~~for self-driving cars.~~

~~Revenue from our patent license agreement~~ with ~~Intel concluded in the first quarter of fiscal year 2018.~~

automotive companies.

Gross margin for the ~~third~~second quarter of fiscal year ~~2018~~2019 was ~~59.5%, increasing~~63.3%. Gross margin is normalizing to our core business and includes only minor benefits from ~~the prior year and the previous quarter due to strong growth in datacenter revenue and the mix within our GeForce gaming GPUs.~~

cryptocurrency mining demand.

Operating expenses for the ~~third~~second quarter of fiscal year ~~2018~~2019 were ~~$674~~$818 million, up ~~24%~~33% from a year earlier and up ~~10%~~6% sequentially, reflecting increased headcount and related costs for our growth initiatives - gaming, ~~artificial intelligence,~~AI, and autonomous driving.

Income from operations for the ~~third~~second quarter of fiscal year ~~2018~~2019 was ~~$895 million,~~$1.16 billion, up ~~40%~~68% from a year earlier and ~~up 30%~~down 11% sequentially. Net income and net income per diluted share for the ~~third~~second quarter of fiscal year ~~2018~~2019 were ~~$838 million~~$1.10 billion and ~~$1.33,~~$1.76, respectively, up ~~55%~~89% and ~~60%~~91%, respectively, from a year earlier, fueled by strong revenue growth and improved gross and operating margins.

During the first ~~nine months~~half of fiscal year ~~2018,~~2019, we returned $837 million to shareholders ~~$909~~through a combination of $655 million in share repurchases and ~~$250~~$182 million in cash dividends. For fiscal year ~~2018,~~2019, we intend to return $1.25 billion to shareholders through ongoing quarterly cash dividends and share repurchases. For fiscal year 2019, we also intend to return $1.25 billion to shareholders through ongoing quarterly cash dividends and share repurchases. In November 2017, we declared an increase in our quarterly cash dividend to $0.15 per share from $0.14 per share, to be paid with our next quarterly cash dividend on December 15, 2017, to all shareholders of record on November 24, 2017.

Cash, cash equivalents and marketable securities were ~~$6.32~~$7.94 billion as of ~~October~~July 29, ~~2017,~~2018, compared with ~~$5.88~~$7.30 billion at the end of the prior quarter. The sequential increase was primarily related to ~~the increase in~~second quarter operating income, ~~as well as strong collections of outstanding accounts receivable.~~partially offset by changes in working capital.

GPU Business

During the third quarter of fiscal year 2018, we released the GeForce GTX 1070 Ti GPU and announced collaborations to bring NVIDIA GameWorks technology to top fall games, including PlayerUnknown’s Battlegrounds, FINAL FANTASY XV, Shadow of War, and Destiny 2. For our datacenter platform, we held GPU Technology Conferences in Beijing, Munich, Tel Aviv, Taipei and Washington, announced that Alibaba, Baidu and Tencent will adopt NVIDIA Volta GPUs for accelerating AI, and that Oracle had added NVIDIA Tesla P100 GPU accelerators to Oracle Cloud. We also launched the NVIDIA GPU Cloud container registry to accelerate deep learning for developers, announced that Huawei, Inspur and Lenovo will use the NVIDIA Volta HGX architecture to build AI systems for datacenters, shared news that Dell EMC, Hewlett Packard Enterprise, IBM and Supermicro had unveiled servers based on NVIDIA Tesla V100 GPU accelerators, and launched the NVIDIA TensorRT 3 AI inference acceleration platform. For our professional visualization platform, we opened early access to NVIDIA Holodeck, and launched the Quadro Virtual Data Center Workstation.

During the second quarter of fiscal year 2019, we marked the launch of the Summit supercomputer at Oak Ridge National Laboratory, powered by NVIDIA Volta Tensor Core GPUs; introduced NVIDIA HGX-2, a unified computing platform for both AI 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 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; and announced NVIDIA’s role in VirtualLink, a consortium establishing an industry standard to enable next-gen VR headsets to connect with PCs using a single, high-bandwidth USB Type-C connector. In August 2018, we ~~introduced Max-Q, a design approach to make gaming laptops thinner, quieter,~~unveiled our first Turing-based GPUs -- NVIDIA Quadro RTX 8000, RTX 6000 and ~~faster. For our datacenter platform,~~RTX 5000 -- which we ~~announced~~believe will revolutionize the work of millions of designers and ~~began shipping NVIDIA Tesla V100 GPU accelerators, the first GPU based on the new Volta architecture; unveiled a new lineup of NVIDIA DGX AI supercomputers;~~artists; and ~~disclosed that the world’s 13 most energy-efficient supercomputers on the Green 500 list run on NVIDIA Tesla accelerators. For our professional visualization platform, we~~ introduced ~~Project Holodeck, a photorealistic, collaborative VR environment; launched external GPU support for creative professionals; and released~~ the NVIDIA ~~Optix 5.0 and NVIDIA VRWorks 360 Video software development kits.~~

RTX Server, a ray-tracing global illumination rendering server for render farms.

During the first quarter of fiscal year ~~2018,~~2019, we announced ~~GeForce GTX 1080 Ti~~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 GPUs with 32GB memory, NVIDIA NVSwitch GPU interconnect fabric, NVIDIA DGX-2, and ~~TITAN Xp for our gaming platform. For our datacenter platform,~~TensorRT 4, the latest version of the TensorRT AI inference accelerator software. In addition, we announced GPU acceleration for Kubernetes to facilitate enterprise inference deployment on multi-cloud GPU clusters and the Quadro GV100 GPU with ~~Microsoft that it is bringing NVIDIA Tesla P100~~RTX technology, making real-time ray tracing possible on professional design and P40 GPUs to the Azure cloud; announced that NVIDIA Tesla accelerators designed for datacenter AI capabilities were added to Google Cloud, Tencent Cloud, IBM Cloud, and Baidu Cloud; announced that the Tokyo Institute of Technology will use NVIDIA’s accelerated computing platform in their AI supercomputer, TSUBAME3.0; announced that Fujitsu is using 24 NVIDIA DGX-1 AI systems to build a new AI supercomputer for the RIKEN research center in Japan; announced together with Facebook the Caffe2 deep learning framework and Big Basin servers with Tesla P100 GPUs; and announced plans to train 100,000 developers this year through the NVIDIA Deep Learning Institute.

content creation applications.

Tegra Processor Business

During the third quarter of fiscal year 2018, we announced NVIDIA DRIVE PX Pegasus, an auto-grade AI computer designed to enable driverless robotaxis without steering wheels, pedals or mirrors, we added Alibaba and Huawei as partners for the NVIDIA Metropolis AI Smart Cities platform, and we announced that we are collaborating with China’s JD.com’s X lab to use NVIDIA Jetson to create autonomous machines that bring AI to logistics and delivery.

During the second quarter of fiscal year ~~2018,~~2019, we announced that ~~Toyota~~Daimler and Bosch have selected ~~NVIDIA~~NVIDIA’s DRIVE ~~PX for its next-generation autonomous cars; Volvo~~platform to bring automated and ~~Autoliv selected DRIVE PX for self-driving cars targeted~~driverless vehicles to ~~hit the market by 2021; ZF and HELLA, two leading automotive suppliers, announced a system based on DRIVE PX~~city streets, with pilot testing set to deliver the highest NCAP safety ratings for cars; and Baidu announced that its Project Apollo open-source self-driving platform for the China market will use DRIVE PX. We also introduced the NVIDIA Isaac robot simulator for training intelligent machinesbegin next year in simulated real-world conditions before deployment; and announced the NVIDIA Metropolis platform, used by more than 50 partners to make cities safer and smarter by applying deep learning to surveillance video streams.

Silicon Valley.

During the first quarter of fiscal year ~~2018,~~2019, we ~~announced~~introduced the NVIDIA DRIVE Constellation server with ~~Bosch, one~~DRIVE Sim software, a complete system to safely test drive autonomous vehicles over billions of the world’s largest auto suppliers, plans to create a new Bosch-branded AI self-driving car computer. We also announced a collaboration with PACCAR, one of the world's largest truck makers with brands including Peterbilt, Kenworthmiles in virtual reality by leveraging NVIDIA GPUs and ~~DAF, to develop solutions for autonomous trucks. We also announced~~ NVIDIA ~~Jetson TX2, a high-performance, low-power computer platform for delivering AI at the edge, with deep learning and computer vision capabilities for robots, drones and smart cameras.~~

DRIVE Pegasus.

Financial Information by Business Segment and Geographic Data

~~Please refer~~Refer to Note 1415 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 29, 2017		October 30, 2016		October 29, 2017		October 30, 2016		July 29, 2018		July 30, 2017		July 29, 2018		July 30, 2017
Revenue	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%
Cost of revenue	40.5		41.0		40.9		41.7		36.7		41.6		36.1		41.2
Gross profit	59.5		59.0		59.1		58.3		63.3		58.4		63.9		58.8
Operating expenses
Research and development	17.5		18.6		19.0		22.6		18.6		18.7		17.8		19.8
Sales, general and administrative	8.0		8.5		8.7		10.3		7.7		8.9		7.4		9.2
Restructuring and other charges	—		—		—		0.1
Total operating expenses	25.5		27.1		27.7		33.0		26.3		27.6		25.2		29.0
Income from operations	34.0		31.9		31.4		25.3		37.0		30.9		38.7		29.8
Interest income	0.6		0.7		0.7		0.8		1.0		0.7		0.9		0.7
Interest expense	(0.6	)	(0.8	)	(0.7	)	(0.8	)	(0.4	)	(0.7	)	(0.5	)	(0.7	)
Other, net	—		(0.8	)	(0.3	)	(0.4	)	0.2		(0.2	)	0.2		(0.5	)
Total other income (expense)	—		(0.9	)	(0.3	)	(0.4	)	0.8		(0.2	)	0.6		(0.5	)
Income before income tax expense	34.0		31.0		31.1		24.9
Income before income tax									37.8		30.7		39.3		29.3
Income tax expense	2.2		3.9		2.8		3.5		2.5		4.5		2.3		3.1
Net income	31.8	%	27.1	%	28.3	%	21.4	%	35.3	%	26.2	%	37.0	%	26.2	%

Revenue

Revenue by Reportable Segments


	Three Months Ended									Nine Months Ended									Three Months Ended								Six Months Ended
	October 29, 2017		October 30, 2016		$ Change			% Change		October 29, 2017		October 30, 2016		$ Change			% Change		July 29, 2018		July 30, 2017		$ Change		% Change		July 29, 2018		July 30, 2017		$ Change			% Change
	($ in millions)																		($ in millions)
GPU	$	2,217	$	1,697	$	520		31	%	$	5,676	$	3,972	$	1,704		43	%	$	2,656	$	1,897	$	759	40	%	$	5,421	$	3,459	$	1,962		57	%
Tegra Processor	419		241		178			74	%	1,084		567		517			91	%	467		333		134		40	%	909		665		244			37	%
All Other	—		66		(66		)	(100	)%	43		198		(155		)	(78	)%	—		—		—		—	%	—		43		(43		)	(100	)%
Total	$	2,636	$	2,004	$	632		32	%	$	6,803	$	4,737	$	2,066		44	%	$	3,123	$	2,230	$	893	40	%	$	6,330	$	4,167	$	2,163		52	%

GPU ~~Business~~Business.. GPU business revenue increased by ~~31%~~40% for the ~~third~~second quarter of fiscal year ~~2018~~2019 compared to the ~~third~~second quarter of fiscal year ~~2017.~~2018. This increase was due primarily to ~~increased revenue from~~50% growth in sales of GeForce GPU products for gaming, ~~which increased over 10%, reflecting continued strong demand~~driven by Pascal-based GPUs for desktops and by high-performance notebooks based on our ~~Pascal-based GPU products.~~Max-Q technology. Datacenter revenue, including Tesla, GRID and DGX, increased ~~109%~~83%, reflecting strong ~~demand from hyperscale~~sales of our Volta architecture products, including NVIDIA Tesla V100 and ~~cloud customers for deep learning training and accelerated GPU computing, as well as demand for high performance computing,~~ DGX ~~AI supercomputing and GRID virtualization platforms.~~systems. Revenue from Quadro GPUs for professional visualization increased ~~15%~~20% due primarily to higher sales ~~in both high-end~~across desktop and ~~overall~~ mobile workstation products. Our PC OEM revenue ~~increased~~decreased by ~~over 90% due primarily to strong~~almost 60% driven by lower demand for GPU products targeted for use in cryptocurrency mining.

GPU business revenue increased by ~~43% in~~57% for the first ~~nine months~~half of fiscal year ~~2018~~2019 compared to the first ~~nine months~~half of fiscal year ~~2017.~~2018. This increase was due primarily to ~~increased revenue from~~almost 60% growth in sales of GeForce GPU products for gaming, ~~which increased over 20%, reflecting continued strong demand~~driven by Pascal-based GPUs for desktops and by high-performance notebooks based on our ~~Pascal-based GPU products.~~Max-Q technology. Datacenter revenue, including Tesla, GRID and DGX, increased ~~over 140%~~77%, reflecting strong ~~demand from hyperscale~~sales of our Volta architecture, including NVIDIA Tesla V100 and ~~cloud customers for deep learning training and accelerated GPU computing, as well as demand for high performance computing,~~ DGX ~~AI supercomputing and GRID virtualization platforms.~~systems. Revenue from Quadro GPUs for professional visualization increased ~~over 10%~~21% due primarily to higher sales ~~in both~~across desktop and mobile workstation products. ~~Revenue from GeForce GPU products for mainstream~~Our PC ~~OEMs~~OEM revenue increased by ~~over 90%~~almost 50% due primarily to ~~strong demand for~~sales of GPU products targeted for use in cryptocurrency ~~mining.~~

mining in the first quarter of fiscal year 2019.

Tegra Processor Business. Tegra Processor business revenue increased by ~~74%~~40% for the ~~third~~second quarter of fiscal year ~~2018~~2019 compared to the ~~third~~second quarter of fiscal year ~~2017.~~2018. This was driven by an increase of over ~~240%~~75% in revenue from SOC modules for gaming ~~development~~ platforms and development services, and an increase of 13% in automotive revenue, primarily from ~~infotainment modules,~~ DRIVE PX platforms and development agreements ~~for self-driving cars.~~with automotive companies, as well as from infotainment modules.

Tegra Processor business revenue increased by ~~91% in~~37% for the first ~~nine months~~half of fiscal year ~~2018~~2019 compared to the first ~~nine months~~half of fiscal year ~~2017.~~2018. This was driven by an increase of over ~~420%~~80% in revenue from SOC modules for gaming ~~development~~ platforms and development services, and an increase of ~~over 15%~~9% in automotive revenue, primarily from ~~infotainment modules,~~ DRIVE PX platforms and development agreements ~~for self-driving cars.~~

with automotive companies, as well as from infotainment modules.

All Other.Our patent license agreement with Intel concluded in the first quarter of fiscal year 2018. ~~For the first nine months of fiscal year 2018, we recognized related revenue of $43 million, down from $198 million for the first nine months of fiscal year 2017.~~

Concentration of Revenue

Revenue from sales to customers outside of the United States and Other Americas accounted for ~~83% and~~ 80% of total revenue for both the ~~third~~second quarter and first ~~nine months~~half of fiscal year ~~2018, respectively.~~2019. Revenue from sales to customers outside of the United States and Other Americas accounted for 79% and 78% of total revenue for ~~both~~ the ~~third~~second quarter and first ~~nine months~~half of fiscal year ~~2017.~~2018, respectively. 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.

No customer represented 10% or more of total revenue for the second quarter and first half of fiscal years 2019 and 2018.

Gross Margin

Our overall gross margin increased to ~~59.5%~~63.3% and 63.9% for the ~~third~~second quarter and first half of fiscal year 2018 from 59.0% for the third quarter of fiscal year 2017, and increased to 59.1% for the first nine months of fiscal year 2018 from 58.3% for the first nine months of fiscal year 2017. These increases were2019, respectively, primarily due to ~~the growth in~~a favorable mix shift within our GPU ~~business revenue from our Datacenter platforms and increased sales of GeForce GTX products for gaming. These increases were partially offset by the absence of licensing revenue from Intel.~~segment.

Inventory ~~provision costs~~provisions totaled ~~$14~~$21 million and $13 million for the ~~third~~second quarter of fiscal years ~~2018~~2019 and ~~2017, respectively, unfavorably impacting our gross margin by 0.5% and 0.7%,~~2018, respectively. Sales of inventory that was previously written-off or written-down totaled $6$12 million and ~~$19~~$9 million for the ~~third~~second quarter of fiscal years ~~2018~~2019 and ~~2017, respectively, favorably impacting our gross margin by 0.2% and 0.9%,~~2018, respectively. As a result, the overall net effect on our gross margin ~~from charges for inventory provision costs~~was an unfavorable impact of 0.3% and ~~sales of items previously written-off or written-down was nominal~~0.2% for the ~~third~~second quarter of fiscal years 2019 and 2018, ~~and 2017.~~respectively.

Inventory ~~provision costs~~provisions totaled ~~$30~~$54 million and ~~$40~~$16 million for the first ~~nine months~~half of fiscal years ~~2018~~2019 and ~~2017, respectively, unfavorably impacting our gross margin by 0.4% and 0.9%,~~2018, respectively. Sales of inventory that was previously written-off or written-down totaled ~~$29~~$16 million and ~~$39~~$22 million for the first ~~nine months~~half of fiscal years ~~2018~~2019 and ~~2017, respectively, favorably impacting our gross margin by 0.4% and 0.8%,~~2018, respectively. As a result, the overall net effect on our gross margin ~~from charges for inventory provision costs and sales~~was an unfavorable impact of ~~items previously written-off or written-down was nominal~~0.6% for the first ~~nine months~~half of fiscal ~~years 2018~~year 2019 and ~~2017.~~

a favorable impact of 0.2% for the first half of fiscal year 2018.

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

GPU ~~Business~~Business.. The gross margin of our GPU business increased during the ~~third~~second quarter and first ~~nine months~~half of fiscal year 2019 compared to the second quarter and first half of fiscal year 2018, ~~compared to the third quarter and first nine months of fiscal year 2017. GPU margins increased~~primarily due to strong sales of ~~our~~high-end GeForce ~~GTX~~ gaming ~~products~~GPUs and revenue growth in Datacenter driven by strong demand for Tesla products by hyperscale and cloud customers for deep learning training and accelerated GPU computing, DGX AI supercomputing and GRID virtualization platforms.Datacenter.

Tegra Processor ~~Business~~Business.. The gross margin of our Tegra Processor business was flat during the second quarter of fiscal year 2019 compared to the second quarter of fiscal year 2018. Gross margin of our Tegra Processor business increased during the ~~third quarter and~~ first ~~nine months~~half of fiscal year 2019 compared to the first half of fiscal year 2018, ~~compared to the third quarter and first nine months of fiscal year 2017. The increase in Tegra margins was~~ primarily due to ~~revenue growth in gaming development platforms and automotive.~~a favorable mix shift.

Operating Expenses

Three Months Ended Nine Months Ended
October 29,
2017 October 30,
2016
$
Change

%
Change
October 29,
2017 October 30,
2016 $
Change %
Change
($ in millions)
Research and development expenses $ 462
$ 373
$ 89
24 % $ 1,290
$ 1,069
$ 221
21 %
Sales, general and administrative expenses 212
171
41
24 % 594
487
107
22 %
Restructuring and other charges —
—
—
— % —
3
(3 ) (100 )%
Total operating expenses $ 674
$ 544
$ 130
24 % $ 1,884
$ 1,559
$ 325
21 %
Research and development expenses as a percentage of net revenue 18 % 19 %

19 % 23 %
Sales, general and administrative expenses as a percentage of net revenue 8 % 9 %

9 % 10 %
Restructuring and other charges as a percentage of net revenue — % — % — % — %



	Three Months Ended										Six Months Ended
	July 29, 2018			July 30, 2017			$ Change		% Change		July 29, 2018			July 30, 2017			$ Change		% Change
	($ in millions)										($ in millions)
Research and development expenses	$	581		$	416		$	165	40	%	$	1,124		$	827		$	297	36	%
% of net revenue	19		%	19		%					18		%	20		%
Sales, general and administrative expenses	237			198			39		20	%	467			383			84		22	%
% of net revenue	8		%	9		%					7		%	9		%
Total operating expenses	$	818		$	614		$	204	33	%	$	1,591		$	1,210		$	381	31	%

Research and Development

Research and development expenses increased by ~~24%~~40% and ~~21%~~36% during the ~~third~~second quarter and first ~~nine months~~half of fiscal year ~~2018, respectively,~~2019, compared to the ~~third~~second quarter and first ~~nine months~~half of fiscal year ~~2017,~~2018, driven primarily by employee additions and increases in employee compensation and other related costs, including stock-based compensation expense.

Sales, General and Administrative

Sales, general and administrative expenses increased by ~~24%~~20% and 22% during the ~~third~~second quarter and first half of fiscal year ~~2018~~2019, compared to the ~~third~~second quarter and first half of fiscal year ~~2017,~~2018, driven primarily by employee additions and increases in employee compensation and other related costs, including stock-based compensation expense.

Sales, general and administrative expenses increased by 22% during the first nine months of fiscal year 2018 compared to the first nine months of fiscal year 2017, driven primarily by employee additions and increases in employee compensation and other related costs, including stock-based compensation expense. Offsetting these increases was a decrease in outside professional fees of $11 million resulting from the resolution of our intellectual property disputes with Samsung and Qualcomm.

~~Restructuring and Other Charges~~

In the second quarter of fiscal year 2016, we began the wind-down of our Icera operations. No restructuring charges were recorded during the third quarter and first nine months of fiscal year 2018. Please refer to Note 15 of the Notes to Condensed Consolidated Financial Statements for further discussion.

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 ~~$17~~$32 million and ~~$14~~$15 million during the ~~third~~second quarter of fiscal years ~~2018~~2019 and ~~2017,~~2018, respectively, and ~~$48~~$57 million and ~~$37~~$31 million during the first ~~nine months~~half of fiscal years ~~2018~~2019 and ~~2017,~~2018, respectively. The increase in interest income was primarily due to higher average cash balances invested in interest bearing securities, as well as higher purchased yields.

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. Interest expense was ~~$15~~$14 million and ~~$16~~$15 million during the ~~third~~second quarter of fiscal years ~~2018~~2019 and ~~2017,~~2018, respectively, and ~~$46~~$29 million and ~~$39~~$31 million during the first ~~nine months~~half of fiscal years 2019 and 2018, ~~and 2017,~~ respectively.

Other, Net

Other, net, consists primarily of realized or unrealized gains and losses from ~~the sale of marketable securities, sales or impairments of~~non-affiliated investments, ~~in non-affiliated companies,~~ 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 year ~~2018.~~2019. Other, net, was annot significant during the second quarter of

fiscal year 2018 and $21 million of expense ~~of $22 million~~ during the first ~~nine months~~half of fiscal year 2018, consisting primarily of $19 million of losses recognized from early conversions of the Convertible Notes. Other, net, was an expense of $16 million and $19 million during the third quarter and first nine months of fiscal year 2017, consisting primarily of $15$17 million of losses recognized from early conversions of the Convertible Notes during the ~~third quarter~~first half of fiscal year ~~2017.~~

2018.

Income Taxes

We recognized income tax expense of ~~$58~~$79 million and ~~$189~~$146 million for the ~~third~~second quarter and first ~~nine months~~half of fiscal year ~~2018,~~2019, respectively, and ~~$79~~$101 million and ~~$168~~$130 million for the ~~third~~second quarter and first ~~nine months~~half of fiscal year ~~2017,~~2018, respectively. Income tax expense as a percentage of income before income tax ~~was 6.5% and 8.9%~~ for the ~~third~~second quarter and first ~~nine months~~half of fiscal year 2019 was 6.7% and 5.9%, respectively, and 14.8% and 10.7% for the second quarter and first half of fiscal year 2018, ~~respectively, and 12.8% and 14.2% for the third quarter and first nine months of fiscal year 2017,~~ respectively.

The decrease in our effective tax rate infor the ~~third~~second quarter and first ~~nine months~~half of fiscal year ~~2018~~2019 as compared to the same periods in the prior fiscal year was primarily ~~reflects the recognition of greater tax benefits related~~due to ~~stock-based compensation and~~ a ~~proportional~~ decrease in the ~~amount~~U.S. statutory tax rate from 35% to 21% as a result of ~~earnings subject to United States tax.~~U.S. tax reform, partially offset by a decrease in the impact of tax benefits from stock-based compensation.

~~Please refer~~Refer to Note 45 of the Notes to Condensed Consolidated Financial Statements for further information.

Liquidity and Capital Resources


	October 29, 2017		January 29, 2017		July 29, 2018		January 28, 2018
	(In millions)				(In millions)
Cash and cash equivalents	$	2,802	$	1,766	$	718	$	4,002
Marketable securities	3,518		5,032		7,225		3,106
Cash, cash equivalents and marketable securities	$	6,320	$	6,798	$	7,943	$	7,108

Nine Months Ended
October 29, 2017 October 30, 2016
(In millions)
Net cash provided by operating activities $ 2,144
$ 951
Net cash provided by (used in) investing activities $ 1,302
$ (420 )
Net cash provided by (used in) financing activities $ (2,410 ) $ 813



	Six Months Ended
	July 29, 2018			July 30, 2017
	(In millions)
Net cash provided by operating activities	$	2,358		$	987
Net cash provided by (used in) investing activities	$	(4,356	)	$	1,016
Net cash used in financing activities	$	(1,286	)	$	(1,781	)

As of ~~October~~July 29, ~~2017,~~2018, we had ~~$6.32~~$7.94 billion in cash, cash equivalents and marketable securities, ~~a decrease~~an increase of ~~$478~~$835 million from the end of fiscal year ~~2017.~~2018. Our portfolio of cash equivalents and marketable securities is managed ~~on our behalf by several financial institutions.~~internally. Our ~~portfolio managers are required to follow our~~ investment policy ~~which~~ requires the purchase of high grade investment securities, the diversification of asset types, and certain limits on our portfolio duration.

Cash provided by operating activities increased in the first ~~nine months~~half of fiscal year ~~2018~~2019 compared to the first ~~nine months~~half of fiscal year ~~2017, primarily~~2018, due to higher net income and changes in working capital.

Cash ~~provided by~~used in investing activities increased in the first ~~nine months~~half of fiscal year 2019 compared to the first half of fiscal year 2018, ~~compared to the first nine months of fiscal year 2017, primarily~~ due to ~~lower~~higher purchases of marketable securities, partially offset by higher maturities of marketable securities.

Cash used in financing activities ~~increased~~decreased in the first ~~nine months~~half of fiscal year 2019 compared to the first half of fiscal year 2018, ~~compared to the first nine months of fiscal year 2017, primarily~~ due to ~~cash provided in the first nine months of fiscal year 2017 from the issuance of $2.00 billion of Notes as well as higher~~lower repayments of Convertible Notes, partially offset by higher ~~payments toward share repurchases and~~ tax payments related to employee stock ~~plans in the first nine months of fiscal year 2018.~~

plans.

Liquidity

Our primary sources of liquidity are our cash and cash equivalents, our marketable securities, and the cash generated by our operations. ~~As of October 29, 2017 and January 29, 2017, we had $6.32 billion and $6.80 billion, respectively, in cash, cash equivalents and marketable securities.~~ Our marketable securities consist ~~principally~~ of debt securities ~~of corporations and United States~~issued by the U.S. government and its agencies, highly rated corporations and financial institutions, asset-backed ~~securities,~~issuers, mortgage-backed securities ~~issued~~ by government-sponsored enterprises, ~~money market funds~~ and foreign government ~~bonds.~~entities. These ~~investments~~marketable securities are denominated in United States dollars. ~~Our investment policy requires~~Refer to Note 6 of the ~~purchase~~Notes to Condensed Consolidated Financial Statements for additional information.

As a result of ~~high grade investment securities~~the Tax Cuts and ~~the diversification of asset types and includes certain limits on our portfolio duration, as specified~~Job Acts that was signed into law in ~~our investment policy guidelines. These guidelines also limit the amount of credit exposure to any one issue, issuer or type of instrument. As of October 29,~~December 2017, ~~we were in compliance with our investment policy. As of October 29, 2017, our investments in government agencies and government-sponsored enterprises represented 27%~~substantially all of our ~~total investment portfolio, while~~cash, cash equivalents and marketable securities held outside of the ~~financial sector accounted~~United States as of July 29, 2018 are available for ~~15% of our total investment portfolio. All of our investments are~~use in ~~A/A3 or better rated securities.~~

~~Please refer~~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.

Our cash balances are held in numerous locations throughout the world, including substantial amounts held outside of the United States. Most of the amounts held outside the United States may be repatriated to the United States. However, if we repatriate foreign earnings for cash requirements in the United States, we would incur U.S. federal income tax at a rate of 35% less utilization of any net operating loss carryforwards, and further offset by any applicable research and foreign tax credits, plus any state income taxes on such income. Repatriation of some foreign balances may be restricted by local laws.

Capital Return to Shareholders

~~Dividend payments and share repurchases must be made from cash held in the United States.~~ During the ~~third quarter and~~ first ~~nine months~~half of fiscal year ~~2018,~~2019, we repurchased a total of 13 million shares ~~and 6 million shares, respectively,~~ for ~~$151 million and $909 million, respectively.~~$655 million. During the ~~third~~second quarter and first ~~nine months~~half of fiscal year ~~2018,~~2019, we also ~~made~~paid $91 million and $182 million, respectively, in cash ~~dividend payments~~dividends to our ~~shareholders of $84 million and $250 million, respectively.~~shareholders.

We intend to return $1.25 billion to our shareholders in fiscal year 2018 through a combination of share repurchases and cash dividends. In November 2017, we declared an increase in our quarterly cash dividend to $0.15 per share from $0.14 per share, to be paid with our next quarterly cash dividend on December 15, 2017, to all shareholders of record on November 24, 2017. For fiscal year 2019, we ~~also~~ intend to return $1.25 billion to shareholders through ongoing quarterly cash dividends and share repurchases.

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

As of ~~October~~July 29, ~~2017,~~2018, we had ~~$24~~$14 million of Convertible Notes ~~outstanding,~~outstanding. Subsequently, we received additional conversion notices for an aggregate of $11 million in principal amount of the Convertible Notes, which ~~$8 million~~ are expected to be settled in the ~~fourth~~third quarter of fiscal year ~~2018. Please refer~~2019. Refer to Note 1112 of the Notes to ~~the~~ Condensed Consolidated Financial Statements for further discussion.

Revolving Credit Facility

Commercial Paper

We have a $575 million commercial paper program to support general corporate purposes. As of July 29, 2018, 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 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 anticipated cash flows from operations will be sufficient to meet our operating requirements for at least the next twelve months.

Off-Balance Sheet Arrangements

~~In the fourth quarter~~As of ~~fiscal year~~July 29, 2018, we ~~plan to refinance the operating lease financing arrangement related to our new Santa Clara campus building and purchase the property for approximately $350 million. Please refer to~~ ~~Note 12~~ ~~of the Notes to Condensed Consolidated Financial Statements for a discussion regarding our operating lease financing arrangement.~~

had no material off-balance sheet arrangements as defined by applicable SEC regulations.

Contractual Obligations

As of October 29, 2017, we had outstanding inventory purchase obligations totaling $1.16 billion. Except as described above with respect to the Convertible Notes and the Notes, and the plan to purchase our Santa Clara campus building, thereThere were no ~~other~~ material changes in our contractual obligations from those disclosed in our Annual Report on Form 10-K for the fiscal year ended January ~~29, 2017.~~28, 2018.

~~Please see~~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 ~~29, 2017~~28, 2018 for a description of our contractual obligations.

Adoption of New and Recently Issued Accounting Pronouncements

~~Please see~~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 ~~2017~~ Annual Report on Form ~~10-K.~~10-K for the fiscal year ended January 28, 2018. As of ~~October~~July 29, ~~2017,~~2018, there have been no material changes to the financial market risks described as of January ~~29, 2017.~~28, 2018.

Foreign Exchange Rate Risk

The impact of foreign currency transactions related to foreign exchange rate risk is described in our ~~2017~~ Annual Report on Form ~~10-K.~~10-K for the fiscal year ended January 28, 2018. As of ~~October~~July 29, ~~2017,~~2018, there have been no material changes to the foreign exchange rate risks described as of January ~~29, 2017.~~28, 2018.

~~Please see~~Refer to Note 910 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 29, ~~2017~~2018, 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) 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 ~~2018~~2019 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

~~Please see~~Refer to Part I, Item 1, Note 1213 of the Notes to Condensed Consolidated Financial Statements for a discussion of significant developments in our legal proceedings since January ~~29, 2017. Please also see~~28, 2018. Also refer to Item 3, “Legal Proceedings” in our Annual Report on Form 10-K for the fiscal year ended January ~~29, 2017~~28, 2018 for a prior discussion of our legal proceedings.

ITEM 1A. RISK FACTORS

~~Please refer~~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 ~~29, 2017.~~28, 2018. 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 ~~29, 2017.~~

28, 2018.

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 ~~29, 2017.~~28, 2018. 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 ~~subject to certain specifications,~~ to repurchase ~~shares of~~ our ~~common~~ stock. In November 2016, the Board authorized an additional $2.00 billion under our repurchase program and extended it through December 2020.

~~Through October 29, 2017,~~Since the inception of our share repurchase program, we have repurchased an aggregate of ~~251~~254 million shares under our share repurchase program for a total cost of ~~$5.50~~$6.16 billion ~~since the inception of the program.~~through July 29, 2018. All shares delivered from these repurchases have been placed into treasury stock. As of ~~October~~July 29, ~~2017,~~2018, we were authorized ~~subject to certain specifications,~~ to repurchase additional shares of our common stock up to ~~$1.82~~$1.16 billion through December 2020. We intend to return $1.25 billion to our shareholders in fiscal year 2018 through a combination of share repurchases and cash dividends. For fiscal year 2019, we also intend to return $1.25 billion to shareholders through ongoing quarterly cash dividends and share repurchases.

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, in compliance with Rule 10b-18 of the Securities Exchange Act of 1934, as amended, subject to market conditions, applicable legal requirements, and other factors.~~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. As part of our share repurchase program, we have entered into, and we may continue to enter into, structured share repurchase transactions with financial institutions. These agreements generally require that we make an up-front payment in exchange for the right to receive a fixed number of shares of our common stock upon execution of the agreement, and a potential incremental number of shares of our common stock, within a pre-determined range, at the end of the term of the agreement.

~~The following table presents details of our~~We had no share repurchase transactions during the ~~third~~second quarter of fiscal year ~~2018:~~

Period Total Number of Shares Purchased (In millions) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Program (In millions) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (In billions)
July 31, 2017 - August 27, 2017 — $ —
— $ 1.97
August 28, 2017 - September 24, 2017 1 $ 180.56
1 $ 1.82
September 25, 2017 - October 29, 2017

— $ —
— $ 1.82
Total 1 1

2019.

Transactions Related to our Convertible Notes and Note Hedges

During the ~~third~~second quarter of fiscal year ~~2018,~~2019, we issued ~~an aggregate of 3 million~~one thousand shares of our common stock upon settlement of Convertible Notes submitted for conversion. In connection with these conversions, we exercised a portion of our Note Hedges to acquire an equal number of shares of our common stock. The counterparty 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.

~~During~~ Subsequently, we received additional conversion notices for an aggregate of $11 million in principal amount of the ~~fourth~~Convertible Notes, which are expected to be settled in the third quarter of fiscal year 2018, we expect to settle at least an aggregate of $8 million in principal amount, and issue shares of our common stock for the excess conversion value, related to the Convertible Notes that were submitted for conversion.2019. The actual number of shares issuable upon conversion will be determined based upon the terms of the Convertible ~~Notes, and we~~Notes. We expect to receive an equal number of shares of our common stock under the terms of the Note Hedges. ~~Please refer~~Refer to Note 1112 of the Notes to Condensed Consolidated Financial Statements for further discussion regarding the Convertible Notes and the Note Hedges.

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 ~~first nine months~~second quarter of fiscal year ~~2018,~~2019, we withheld approximately 40.3 million shares at a total cost of ~~$577~~$66 million through net share settlements. ~~Please refer~~During the first half of fiscal year 2019, we withheld approximately 2.1 million shares at a total cost of $515 million through net share settlements. Refer to Note 23 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+	Amended and Restated 2007 Equity Incentive Plan	8-K	000-23985	10.1	5/21/2018
10.2+	Amended and Restated 2012 Employee Stock Purchase Plan	8-K	000-23985	10.2	5/21/2018
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*	XBRL Instance Document
101.SCH*	XBRL Taxonomy Extension Schema Document
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB*	XBRL Taxonomy Extension Labels Linkbase Document
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase 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 21, 2017~~August 16, 2018



	NVIDIA Corporation
By:	/s/ Colette M. Kress

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

3532



	RSUs, PSUs, and Market-based PSUs Outstanding				Options Outstanding
	Number of Shares		Weighted Average Grant-Date Fair Value Per Share		Number of Shares		Weighted Average Exercise Price Per Share
	(In millions, except per share data)
Balances, January 29, 2017	27		$	32.84	7		$	14.47
Granted (1) (2)	6		$	142.34	—		$	—
Exercised	—		$	—	(2	)	$	14.46
Vested	(10	)	$	26.88	—		$	—
Balances, October 29, 2017	23		$	64.42	5		$	14.47



	October 29, 2017		January 29, 2017
	(In millions)
Designated as cash flow hedges	$	93	$	67
Not designated for hedge accounting	$	74	$	32



Period	Total Number of Shares Purchased (In millions)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Program (In millions)	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (In billions)
July 31, 2017 - August 27, 2017	—	$	—	—	$	1.97
August 28, 2017 - September 24, 2017	1	$	180.56	1	$	1.82
September 25, 2017 - October 29, 2017	—	$	—	—	$	1.82
Total	1			1