TSX:CLS - Post Discussion
Post by
retiredcf on Aug 29, 2024 8:10am
TD
Have a US$61.00 target. GLTA
NVIDIA Q2/F25 READ-THROUGH: COMPUTE AND NETWORKING GROWTH DRIVE BEAT
THE TD COWEN INSIGHT
NVIDIA's results suggest demand strength remains steady and that we remain in the early stages of a multi-year infrastructure build-out. We continue to believe that Celestica will be a beneficiary of these investments. This could drive upside to estimates, particularly with accelerating demand for ethernet-based networking equipment, where Celestica commands market leadership amongst ODM peers.
Event
NVIDIA reported Q2/F25 results last night. See TD Cowen's report here.
Impact: SLIGHTLY POSITIVE read-through for Celestica
Demand strength remains a positive for Celestica. Momentum for GenAI data centre infrastructure remains strong, evidenced by NVIDIA's data centre revenue growing 154% y/ y and 16% q/q. Q3 revenue guidance is slightly above consensus estimates and implies y/y revenue growth of ~80%. Demand for NVIDIA's current generation GPU platform, Hopper, remains strong, with shipments expected to increase sequentially in H2/F25. Q4 will see the start of production ramp for its next-generation platform, Blackwell, where demand remains well above supply and is expected to continue into next year. Management believes C2025 will be another great year with Blackwell strength supporting growth into C2026. We believe NVIDIA's results, guidance, and comments support the view that we remain in the early stages of a multi-year investment cycle.
Hyperscalers continue to drive a large proportion of spend, representing 45% of data centre revenue, consistent from last quarter. Management believes ROI is justified for hyperscalers, particularly for those in an arms race to reach the next level of AI-related offerings. In addition, the growing number of new GenAI start-ups drive tens of billions of revenue in cloud renting opportunities for the hyperscalers. To support the next wave of applications, next-generation LLMs could take 10x-20x more compute to train.
Networking footprint continues to scale. Networking revenue grew 114% y/y and 16% q/ q, with NVIDIA's ethernet-based platform for AI, Spectrum-X, doubling q/q. Management continues to believe that Spectrum-X will be a multi-billion dollar product line within a year. Overall, we believe this is a solid data point for accelerating networking demand and supports our thesis that ethernet is expected to experience solid growth as it competes with InfiniBand going forward. As a leading ODM switch provider, Celestica could see significant upside.
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