Nvidia's Stellar Quarter Clouded by Growing Receivables

Nvidia's fiscal second quarter was marked by impressive numbers, but a closer look at its balance sheet reveals a less-than-stellar trend. The company reported revenue of $96.2 billion, a 106% increase from the same period last year.

This growth in revenue is likely to continue, as management guided investors to expect roughly 70% revenue growth in the next fiscal year. However, Nvidia's total assets jumped by more than 50% over the past six months, with receivables rising from $38.5 billion in January to $63.1 billion at the end of July.

This increase in receivables is partly due to the company's revenue growth, but a closer look at 'days sales outstanding,' or DSO, reveals that customers are taking longer to pay, with an average collection period of 60 days, up from 45 days previously.

Nvidia attributed this change to extended payment terms on large orders from certain customers. While this may help lock in multi-year deals for the company's strongest clients, it raises questions about whether demand appears higher in the revenue numbers than it otherwise would.