UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549FORM 10-QQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended July 30,2023ORTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934Commission file number:0-23985NVIDIA CORPORATION(Exact name of registrant as specified in its charter)Delaware94-3177549(State or other jurisdiction of(I.R.S.Employerincorporation or organization)Identification No.)2788 San Tomas Expressway,Santa Clara,California95051(Address of principal executive offices)(Zip Code)(408)486-2000(Registrants telephone number,including area code)N/A(Former name,former address and former fiscal year if changed since last report)Securities registered pursuant to Section 12(b)of the Act:Title of each classTrading Symbol(s)Name of each exchange on which registeredCommon Stock,$0.001 par value per shareNVDAThe Nasdaq Global Select MarketIndicate 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 duringthe 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 forthe past 90 days.Yes No Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 ofRegulation S-T(232.405 of this chapter)during the preceding 12 months(or for such shorter period that the registrant was required to submit such files).Yes No Indicate by check mark whether the registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,a smaller reporting company,or anemerging growth company.See the definitions of“large accelerated filer,”“accelerated filer,”“smaller reporting company,”and emerging growth company inRule 12b-2 of the Exchange Act.Large accelerated filerAccelerated filerNon-accelerated filerSmaller reporting companyEmerging growth companyIf 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 orrevised financial accounting standards provided pursuant to Section 13(a)of the Exchange Act.Indicate by check mark whether the registrant is a shell company(as defined in Rule 12b-2 of the Exchange Act).Yes No The number of shares of common stock,$0.001 par value,outstanding as of August 18,2023,was 2.47 billion.NVIDIA CORPORATIONFORM 10-QFOR THE QUARTER ENDED JULY 30,2023TABLE OF CONTENTS Page PART I:FINANCIAL INFORMATION Item 1.Financial Statements(Unaudited)a)Condensed Consolidated Statements of Income for the three and six months ended July 30,2023 and July 31,20223b)Condensed Consolidated Statements of Comprehensive Income for the three and six months ended July 30,2023and July 31,20224 c)Condensed Consolidated Balance Sheets as of July 30,2023 and January 29,20235d)Condensed Consolidated Statements of Shareholders Equity for the three and six months ended July 30,2023and July 31,20226 e)Condensed Consolidated Statements of Cash Flows for the six months ended July 30,2023 and July 31,20228 f)Notes to Condensed Consolidated Financial Statements9Item 2.Managements Discussion and Analysis of Financial Condition and Results of Operations25Item 3.Quantitative and Qualitative Disclosures About Market Risk34Item 4.Controls and Procedures34 PART II:OTHER INFORMATION Item 1.Legal Proceedings34Item 1A.Risk Factors35Item 2.Unregistered Sales of Equity Securities and Use of Proceeds45Item 5.Other Information45Item 6.Exhibits46Signature 47WHERE YOU CAN FIND MORE INFORMATIONInvestors and others should note that we announce material financial information to our investors using our investor relations website,pressreleases,SEC filings and public conference calls and webcasts.We also use the following social media channels as a means of disclosinginformation about the company,our products,our planned financial and other announcements and attendance at upcoming investor and industryconferences,and other matters,and for complying with our disclosure obligations under Regulation FD:NVIDIA Company Blog(http:/)NVIDIA LinkedIn Page(http:/ Facebook Page(https:/ Instagram Page(https:/ Twitter Account(https:/ addition,investors and others can view NVIDIA videos on YouTube(https:/www.YouT information we post through these social media channels may be deemed material.Accordingly,investors should monitor these accountsand the blog,in addition to following our press releases,SEC filings and public conference calls and webcasts.This list may be updated fromtime to time.The information we post through these channels is not a part of this Quarterly Report on Form 10-Q.These channels may beupdated from time to time on NVIDIAs investor relations website.2PART I.FINANCIAL INFORMATIONITEM 1.FINANCIAL STATEMENTS(UNAUDITED)NVIDIA CORPORATION AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF INCOME(In millions,except per share data)(Unaudited)Three Months EndedSix Months Ended July 30,July 31,July 30,July 31,2023202220232022Revenue$13,507$6,704$20,699$14,992 Cost of revenue4,045 3,789 6,589 6,646 Gross profit9,462 2,915 14,110 8,346 Operating expenses Research and development2,040 1,824 3,916 3,443 Sales,general and administrative622 592 1,253 1,183 Acquisition termination cost 1,353 Total operating expenses2,662 2,416 5,169 5,979 Operating income6,800 499 8,941 2,367 Interest income187 46 338 64 Interest expense(65)(65)(131)(132)Other,net59(5)42(19)Other income(expense),net181(24)249(87)Income before income tax6,981 475 9,190 2,280 Income tax expense(benefit)793(181)958 6 Net income$6,188$656$8,232$2,274 Net income per share:Basic$2.50$0.26$3.33$0.91 Diluted$2.48$0.26$3.30$0.90 Weighted average shares used in per share computation:Basic2,473 2,495 2,472 2,500 Diluted2,499 2,516 2,495 2,526 See accompanying Notes to Condensed Consolidated Financial Statements.3NVIDIA CORPORATION AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(In millions)(Unaudited)Three Months EndedSix Months Ended July 30,July 31,July 30,July 31,2023202220232022 Net income$6,188$656$8,232$2,274 Other comprehensive loss,net of taxAvailable-for-sale securities:Net change in realized gain(loss)(11)(12)7(35)Reclassification adjustments for net realized gain included in netincome 1 1 Net change in unrealized gain(loss)(11)(11)7(34)Cash flow hedges:Net unrealized gain(loss)22(2)8(30)Reclassification adjustments for net realized loss included in netincome(12)(13)(23)(15)Net change in unrealized gain(loss)10(15)(15)(45)Other comprehensive loss,net of tax(1)(26)(8)(79)Total comprehensive income$6,187$630$8,224$2,195 See accompanying Notes to Condensed Consolidated Financial Statements.4NVIDIA CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS(In millions)(Unaudited)July 30,January 29,20232023ASSETSCurrent assets:Cash and cash equivalents$5,783$3,389 Marketable securities10,240 9,907 Accounts receivable,net7,066 3,827 Inventories4,319 5,159 Prepaid expenses and other current assets1,389 791 Total current assets28,797 23,073 Property and equipment,net3,799 3,807 Operating lease assets1,235 1,038 Goodwill4,430 4,372 Intangible assets,net1,395 1,676 Deferred income tax assets5,398 3,396 Other assets4,501 3,820 Total assets$49,555$41,182 LIABILITIES AND SHAREHOLDERS EQUITY Current liabilities:Accounts payable$1,929$1,193 Accrued and other current liabilities7,156 4,120 Short-term debt1,249 1,250 Total current liabilities10,334 6,563 Long-term debt8,456 9,703 Long-term operating lease liabilities1,041 902 Other long-term liabilities2,223 1,913 Total liabilities22,054 19,081 Commitments and contingencies-see Note 13Shareholders equity:Preferred stock Common stock2 2 Additional paid-in capital12,629 11,971 Accumulated other comprehensive loss(51)(43)Retained earnings14,921 10,171 Total shareholders equity27,501 22,101 Total liabilities and shareholders equity$49,555$41,182 See accompanying Notes to Condensed Consolidated Financial Statements.5NVIDIA CORPORATION AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITYFOR THE THREE MONTHS ENDED JULY 30,2023 AND JULY 31,2022(Unaudited)Common StockOutstandingAdditionalPaid-in CapitalAccumulated OtherComprehensive LossRetainedEarningsTotalShareholdersEquity(In millions,except per share data)SharesAmountBalances,April 30,20232,473$2$12,453$(50)$12,115$24,520 Net income 6,188 6,188 Other comprehensive loss (1)(1)Issuance of common stock from stock plans 5 1 1 Tax withholding related to vesting of restricted stock units(1)(672)(672)Shares repurchased(8)(1)(3,283)(3,284)Cash dividends declared and paid($0.04 per common share)(99)(99)Stock-based compensation 848 848 Balances,July 30,20232,469$2$12,629$(51)$14,921$27,501 Balances,May 1,20222,504$3$10,623$(64)$15,758$26,320 Net income 656 656 Other comprehensive loss (26)(26)Issuance of common stock from stock plans 6 1 1 Tax withholding related to vesting of restricted stock units(2)(299)(299)Shares repurchased(19)(1)(1)(3,343)(3,345)Cash dividends declared and paid($0.04 per common share)(100)(100)Stock-based compensation 644 644 Balances,July 31,20222,489$2$10,968$(90)$12,971$23,851 See accompanying Notes to Condensed Consolidated Financial Statements.6NVIDIA CORPORATION AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITYFOR THE SIX MONTHS ENDED JULY 30,2023 AND JULY 31,2022(Unaudited)Common StockOutstandingAdditionalPaid-inCapitalAccumulated OtherComprehensive LossRetainedEarningsTotalShareholdersEquity(In millions,except per share data)SharesAmountBalances,January 29,20232,466$2$11,971$(43)$10,171$22,101 Net income 8,232 8,232 Other comprehensive loss (8)(8)Issuance of common stock from stock plans 14 247 247 Tax withholding related to vesting of restricted stock units(3)(1,179)(1,179)Shares repurchased(8)(1)(3,283)(3,284)Cash dividends declared and paid($0.08 per common share)(199)(199)Stock-based compensation 1,591 1,591 Balances,July 30,20232,469$2$12,629$(51)$14,921$27,501 Balances,January 30,20222,506$3$10,385$(11)$16,235$26,612 Net income 2,274 2,274 Other comprehensive loss (79)(79)Issuance of common stock from stock plans 15 205 205 Tax withholding related to vesting of restricted stock units(4)(837)(837)Shares repurchased(28)(1)(2)(5,338)(5,341)Cash dividends declared and paid($0.08 per common share)(200)(200)Stock-based compensation 1,217 1,217 Balances,July 31,20222,489$2$10,968$(90)$12,971$23,851 See accompanying Notes to Condensed Consolidated Financial Statements.7NVIDIA CORPORATION AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(In millions)(Unaudited)Six Months EndedJuly 30,July 31,20232022Cash flows from operating activities:Net income$8,232$2,274 Adjustments to reconcile net income to net cash provided by operating activities:Stock-based compensation expense1,576 1,226 Depreciation and amortization749 712(Gains)losses on investments in non-affiliates,net(45)24 Deferred income taxes(1,881)(985)Acquisition termination cost 1,353 Other(102)18 Changes in operating assets and liabilities,net of acquisitions:Accounts receivable(3,239)(668)Inventories861(1,285)Prepaid expenses and other assets(592)(1,554)Accounts payable789 559 Accrued and other current liabilities2,675 1,267 Other long-term liabilities236 60 Net cash provided by operating activities9,259 3,001 Cash flows from investing activities:Proceeds from maturities of marketable securities5,111 10,983 Proceeds from sales of marketable securities 1,731 Purchases of marketable securities(5,343)(7,576)Purchases related to property and equipment and intangible assets(537)(794)Acquisitions,net of cash acquired(83)(49)Investments and other,net(435)(65)Net cash provided by(used in)investing activities(1,287)4,230 Cash flows from financing activities:Proceeds related to employee stock plans247 205 Payments related to repurchases of common stock(3,067)(5,341)Repayment of debt(1,250)Payments related to tax on restricted stock units(1,179)(837)Dividends paid(199)(200)Principal payments on property and equipment and intangible assets(31)(36)Other 1 Net cash used in financing activities(5,479)(6,208)Change in cash,cash equivalents,and restricted cash2,493 1,023 Cash,cash equivalents,and restricted cash at beginning of period3,389 1,990 Cash,cash equivalents,and restricted cash at end of period$5,882$3,013 Reconciliation of cash,cash equivalents,and restricted cash to the Condensed Consolidated Balance Sheet:Cash and cash equivalents$5,783$3,013 Restricted cash,included in prepaid expenses and other current assets99 Total cash,cash equivalents,and restricted cash$5,882$3,013 Supplemental disclosure of cash flow information:Cash paid for income taxes,net$328$1,108 See accompanying Notes to Condensed Consolidated Financial Statements.8NVIDIA CORPORATION AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)Note 1-Summary of Significant Accounting PoliciesBasis of PresentationThe accompanying unaudited condensed consolidated financial statements were prepared in accordance with accounting principles generallyaccepted 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 ofSecurities and Exchange Commission,or SEC,Regulation S-X.The January 29,2023 consolidated balance sheet was derived from our auditedconsolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended January 29,2023,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 recurringadjustments considered necessary for a fair statement of results of operations and financial position,have been included.The results for theinterim periods presented are not necessarily indicative of the results expected for any future period.The following information should be read inconjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal yearended January 29,2023.Significant Accounting PoliciesThere have been no material changes to our significant accounting policies disclosed in Note 1-Organization and Summary of SignificantAccounting Policies,of the Notes to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year endedJanuary 29,2023.Fiscal YearWe operate on a 52-or 53-week year,ending on the last Sunday in January.Fiscal years 2024 and 2023 are both 52-week years.The secondquarters of fiscal years 2024 and 2023 were both 13-week quarters.ReclassificationsCertain prior fiscal year balances have been reclassified to conform to the current fiscal year presentation.Principles of ConsolidationOur condensed consolidated financial statements include the accounts of NVIDIA Corporation and our wholly-owned subsidiaries.Allintercompany balances and transactions have been eliminated in consolidation.Use of EstimatesThe preparation of financial statements in conformity with U.S.GAAP requires management to make estimates and assumptions that affect thereported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and thereported amounts of revenue and expenses during the reporting period.Actual results could differ materially from our estimates.On an on-goingbasis,we evaluate our estimates,including those related to revenue recognition,cash equivalents and marketable securities,accountsreceivable,inventories,income taxes,goodwill,stock-based compensation,litigation,investigation and settlement costs,restructuring and othercharges,property,plant,and equipment,and other contingencies.These estimates are based on historical facts and various other assumptionsthat we believe are reasonable.In February 2023,we completed an assessment of the useful lives of our property,plant,and equipment.Based on advances in technology andusage rate,we increased the estimated useful life of a majority of our server,storage,and network equipment from three to a range of four tofive years,and our assembly and test equipment from five to seven years.This change in accounting estimate became effective at the beginningof fiscal year 2024.Based on the carrying amounts of a majority of our server,storage,network,and assembly and test equipment,net,in useas of the end of fiscal year 2023,the effect of this change in estimate for the three months ended July 30,2023 was a benefit of$5 million and$28 million for cost of revenue and operating expenses,respectively,which resulted in an increase in operating income of$33 million and netincome of$27 million after tax,or$0.01 per both basic and diluted share.The effect of this change in estimate for the first half of fiscal year 2024was a benefit of$7 million and$59 million for9NVIDIA CORPORATION AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)(Unaudited)cost of revenue and operating expenses,respectively,which resulted in an increase in operating income of$66 million and net income of$55 million after tax,or$0.02 per both basic and diluted share.Note 2-Business CombinationTermination of the Arm Share Purchase AgreementIn February 2022,NVIDIA and SoftBank Group Corp,or SoftBank,announced the termination of the Share Purchase Agreement wherebyNVIDIA would have acquired Arm Limited,or Arm,from SoftBank.The parties agreed to terminate due to significant regulatory challengespreventing the completion of the transaction.We recorded an acquisition termination cost of$1.35 billion in fiscal year 2023 reflecting the write-off of the prepayment provided at signing.Note 3-LeasesOur lease obligations primarily consist of operating leases for our headquarters complex,domestic and international office facilities,and datacenter space,with lease periods expiring between fiscal years 2024 and 2035.Future minimum lease payments under our non-cancelable operating leases as of July 30,2023 are as follows:Operating LeaseObligations(In millions)Fiscal Year:2024(excluding first half of fiscal year 2024)$134 2025249 2026227 2027211 2028191 2029 and thereafter415 Total1,427 Less imputed interest178 Present value of net future minimum lease payments1,249 Less short-term operating lease liabilities208 Long-term operating lease liabilities$1,041 In addition,we have operating leases,primarily for our data centers,that are expected to commence between the third quarter of fiscal year2024 and the end of fiscal year 2025 with lease terms of 3 to 8 years for$205 million.Operating lease expenses were$67 million and$47 million for the second quarter of fiscal years 2024 and 2023,respectively,and$126 millionand$90 million for the first half of fiscal years 2024 and 2023,respectively.Short-term and variable lease expenses for the second quarter andfirst half of fiscal years 2024 and 2023 were not significant.10NVIDIA CORPORATION AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)(Unaudited)Other information related to leases was as follows:Six Months EndedJuly 30,2023July 31,2022(In millions)Supplemental cash flows information Operating cash flows used for operating leases$135$91 Operating lease assets obtained in exchange for lease obligations$299$98 As of July 30,2023,our operating leases had a weighted average remaining lease term of 6.5 years and a weighted average discount rate of3.47%.As of January 29,2023,our operating leases had a weighted average remaining lease term of 6.8 years and a weighted averagediscount rate of 3.21%.Note 4-Stock-Based CompensationOur stock-based compensation expense is associated with restricted stock units,or RSUs,performance stock units that are based on ourcorporate financial performance targets,or PSUs,performance stock units that are based on market conditions,or market-based PSUs,and ouremployee stock purchase plan,or ESPP.Our Condensed Consolidated Statements of Income include stock-based compensation expense,net of amounts allocated to inventory,asfollows:Three Months EndedSix Months Ended July 30,2023July 31,2022July 30,2023July 31,2022(In millions)Cost of revenue$31$38$58$76 Research and development600 452 1,124 836 Sales,general and administrative211 159 394 315 Total$842$649$1,576$1,227 Equity Award ActivityThe following is a summary of our equity award transactions under our equity incentive plans:RSUs,PSUs,and Market-based PSUs Outstanding Number of SharesWeighted Average Grant-Date FairValue Per Share(In millions,except per share data)Balances,January 29,202345$158.45 Granted13$359.70 Vested restricted stock(11)$127.12 Canceled and forfeited(1)$194.70 Balances,July 30,202346$219.47 As of July 30,2023,there was$9.69 billion of aggregate unearned stock-based compensation expense.This amount is expected to berecognized over a weighted average period of 2.7 years for RSUs,PSUs,and market-based PSUs,and 1.0 year for ESPP.11NVIDIA CORPORATION AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)(Unaudited)Note 5 Net Income Per ShareThe following is a reconciliation of the denominator of the basic and diluted net income per share computations for the periods presented:Three Months EndedSix Months EndedJuly 30,July 31,July 30,July 31,2023202220232022(In millions,except per share data)Numerator:Net income$6,188$656$8,232$2,274 Denominator:Basic weighted average shares2,473 2,495 2,472 2,500 Dilutive impact of outstanding equity awards26 21 23 26 Diluted weighted average shares2,499 2,516 2,495 2,526 Net income per share:Basic(1)$2.50$0.26$3.33$0.91 Diluted(2)$2.48$0.26$3.30$0.90 Equity awards excluded from diluted net income pershare because their effect would have been anti-dilutive10 33 14 25(1)Calculated as net income divided by basic weighted average shares.(2)Calculated as net income divided by diluted weighted average shares.Note 6 Income TaxesIncome tax was an expense of$793 million and$958 million for the second quarter and first half of fiscal year 2024,respectively,a benefit of$181 million for the second quarter of fiscal year 2023,and an expense of$6 million for the first half of fiscal year 2023.The income tax as apercentage of income before income tax was an expense of 11.4%and 10.4%for the second quarter and first half of fiscal year 2024,respectively,a benefit of 38.0%for the second quarter of fiscal year 2023,and an expense of 0.3%for the first half of fiscal year 2023.The increase in the effective tax rate was primarily due to a decreased impact of tax benefits from the foreign-derived intangible incomededuction,stock-based compensation,and the U.S.federal research tax credit,relative to the increase in income before income tax.Our effective tax rates for the first half of fiscal years 2024 and 2023 were lower than the U.S.federal statutory rate of 21%due to tax benefitsfrom the foreign-derived intangible income deduction,stock-based compensation and the U.S.federal research tax credit.For the first half of fiscal year 2024,there were no material changes to our tax years that remain subject to examination by major taxjurisdictions.We are currently under examination by the Internal Revenue Service for our fiscal years 2018 and 2019.Additionally,there havebeen no material changes to our unrecognized tax benefits and any related interest or penalties since the fiscal year ended January 29,2023.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-notthat 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 aremade or the underlying matters are settled or otherwise resolved with the respective tax authorities.As of July 30,2023,we do not believe thatour estimates,as otherwise provided for,on such tax positions will significantly increase or decrease within the next 12 months.12NVIDIA CORPORATION AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)(Unaudited)Note 7-Cash Equivalents and Marketable Securities Our cash equivalents and marketable securities related to debt securities are classified as“available-for-sale”debt securities.The following is a summary of cash equivalents and marketable securities:July 30,2023AmortizedCostUnrealizedGainUnrealizedLossEstimatedFair ValueReported as CashEquivalentsMarketableSecurities(In millions)Corporate debt securities$5,990$1$(13)$5,978$2,149$3,829 Debt securities issued by the U.S.Treasury3,716 (31)3,685 3,685 Debt securities issued by U.S.government agencies2,903 (4)2,899 647 2,252 Money market funds2,348 2,348 2,348 Certificates of deposit690 690 265 425 Foreign government bonds248 248 199 49 Total$15,895$1$(48)$15,848$5,608$10,240 January 29,2023AmortizedCostUnrealizedGainUnrealizedLossEstimatedFair ValueReported as CashEquivalentsMarketableSecurities(In millions)Corporate debt securities$4,809$(12)$4,797$1,087$3,710 Debt securities issued by the U.S.Treasury4,185 1(44)4,142 4,142 Debt securities issued by U.S.government agencies1,836 (2)1,834 50 1,784 Money market funds1,777 1,777 1,777 Certificates of deposit365 365 134 231 Foreign government bonds140 140 100 40 Total$13,112$1$(58)$13,055$3,148$9,907 13NVIDIA CORPORATION AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)(Unaudited)The following tables provide the breakdown of unrealized losses,aggregated by investment category and length of time that individual securitieshave been in a continuous loss position:July 30,2023 Less than 12 Months12 Months or GreaterTotal Estimated FairValueGrossUnrealizedLossEstimated FairValueGrossUnrealizedLossEstimated FairValueGrossUnrealizedLoss(In millions)Debt securities issued by the U.S.Treasury$1,595$(16)$1,375$(15)$2,970$(31)Corporate debt securities1,379(9)802(4)2,181(13)Debt securities issued by U.S.government agencies2,223(4)2,223(4)Total$5,197$(29)$2,177$(19)$7,374$(48)January 29,2023 Less than 12 Months12 Months or GreaterTotal Estimated FairValueGrossUnrealizedLossEstimated FairValueGrossUnrealizedLossEstimated FairValueGrossUnrealizedLoss(In millions)Debt securities issued by the U.S.Treasury$2,444$(21)$1,172$(23)$3,616$(44)Corporate debt securities1,188(7)696(5)1,884(12)Debt securities issued by U.S.government agencies1,307(2)1,307(2)Total$4,939$(30)$1,868$(28)$6,807$(58)The gross unrealized losses are related to fixed income securities,driven primarily by changes in interest rates.Net realized gains and losseswere not significant for all periods presented.The amortized cost and estimated fair value of cash equivalents and marketable securities are shown below by contractual maturity.July 30,2023January 29,2023Amortized CostEstimated FairValueAmortized CostEstimated FairValue(In millions)Less than one year$12,613$12,592$9,738$9,708 Due in 1-5 years3,282 3,256 3,374 3,347 Total$15,895$15,848$13,112$13,055 Restricted cash was$99 million as of July 30,2023 and primarily represented amounts due to employees.14NVIDIA CORPORATION AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)(Unaudited)Note 8 Fair Value of Financial Assets and LiabilitiesThe fair values of our financial assets and liabilities are determined using quoted market prices of identical assets or quoted market prices ofsimilar assets from active markets.We review fair value hierarchy classification on a quarterly basis.Fair Value atPricingCategoryJuly 30,2023January 29,2023(In millions)AssetsCash equivalents and marketable securities:Money market fundsLevel 1$2,348$1,777 Corporate debt securitiesLevel 2$5,978$4,797 Debt securities issued by the U.S.TreasuryLevel 2$3,685$4,142 Debt securities issued by U.S.government agenciesLevel 2$2,899$1,834 Certificates of depositLevel 2$690$365 Foreign government bondsLevel 2$248$140 Other assets(Investments in non-affiliated entities):Publicly-held equity securitiesLevel 1$124$11 Privately-held equity securitiesLevel 3$676$288 Liabilities(1)0.309%Notes Due 2023Level 2$1,230 0.584%Notes Due 2024Level 2$1,199$1,185 3.20%Notes Due 2026Level 2$959$966 1.55%Notes Due 2028Level 2$1,089$1,099 2.85%Notes Due 2030Level 2$1,355$1,364 2.00%Notes Due 2031Level 2$1,042$1,044 3.50%Notes Due 2040Level 2$848$870 3.50%Notes Due 2050Level 2$1,609$1,637 3.70%Notes Due 2060Level 2$406$410(1)These liabilities are carried on our Condensed Consolidated Balance Sheets at their original issuance value,net of unamortized debt discount and issuance costs.15NVIDIA CORPORATION AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)(Unaudited)Note 9-Amortizable Intangible Assets and GoodwillThe components of our amortizable intangible assets are as follows:July 30,2023January 29,2023 GrossCarryingAmountAccumulatedAmortizationNet CarryingAmountGrossCarryingAmountAccumulatedAmortizationNet CarryingAmount(In millions)Acquisition-relatedintangible assets$2,642$(1,448)$1,194$3,093$(1,614)$1,479 Patents and licensedtechnology453(252)201 446(249)197 Total intangible assets$3,095$(1,700)$1,395$3,539$(1,863)$1,676 Amortization expense associated with intangible assets was$146 million and$327 million for the second quarter and first half of fiscal year2024,respectively,and$182 million and$336 million for the second quarter and first half of fiscal year 2023,respectively.The following table outlines the estimated future amortization expense related to the net carrying amount of intangible assets as of July 30,2023:Future Amortization Expense(In millions)Fiscal Year:2024(excluding first half of fiscal year 2024)$288 2025554 2026259 2027149 202836 2029 and thereafter109 Total$1,395 In the first half of fiscal year 2024,goodwill increased by$58 million from an acquisition,and was assigned to our Compute&Networkingsegment.Note 10-Balance Sheet Components Certain balance sheet components are as follows:July 30,January 29,20232023Inventories(1):(In millions)Raw materials$1,632$2,430 Work in-process1,058 466 Finished goods1,629 2,263 Total inventories$4,319$5,159(1)During the second quarter of fiscal years 2024 and 2023,we recorded an inventory provision of approximately$343 million and$570 million,respectively,in cost of revenue.16NVIDIA CORPORATION AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)(Unaudited)July 30,January 29,20232023Other Assets:(In millions)Prepaid supply and capacity agreements(1)$3,008$2,989 Investments in non-affiliated entities800 299 Prepaid royalties375 387 Prepaid cloud services170 23 Other148 122 Total other assets$4,501$3,820(1)As of July 30,2023 and January 29,2023,there were$799 million and$458 million of short-term prepaid supply and capacity agreements included in Prepaid expenses andother current assets,respectively.July 30,January 29,20232023Accrued and Other Current Liabilities:(In millions)Taxes payable$2,803$467 Customer program accruals1,482 1,196 Excess inventory purchase obligations(1)870 954 Accrued payroll and related expenses642 530 Deferred revenue(2)421 354 Unsettled share repurchases217 Operating leases208 176 Product warranty and return provisions168 108 Licenses and royalties144 149 Other201 186 Total accrued and other current liabilities$7,156$4,120(1)During the second quarter of fiscal years 2024 and 2023,we recorded an expense of approximately$232 million and$650 million,respectively,in cost of revenue for inventorypurchase obligations in excess of our current demand projections,and cancellation and underutilization penalties.(2)Deferred revenue primarily includes customer advances and deferrals related to license and development arrangements,support for hardware and software,and cloudservices.July 30,January 29,20232023Other Long-Term Liabilities:(In millions)Income tax payable(1)$1,350$1,204 Deferred income tax373 247 Deferred revenue(2)308 218 Licenses payable127 181 Other65 63 Total other long-term liabilities$2,223$1,913(1)Income tax payable is comprised of the long-term portion of the one-time transition tax payable,unrecognized tax benefits,and related interest and penalties.(2)Deferred revenue primarily includes deferrals related to support for hardware and software.17NVIDIA CORPORATION AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)(Unaudited)Deferred RevenueThe following table shows the changes in deferred revenue during the first half of fiscal years 2024 and 2023:July 30,July 31,20232022(In millions)Balance at beginning of period$572$502 Deferred revenue additions during the period713 399 Revenue recognized during the period(556)(341)Balance at end of period$729$560 Revenue allocated to remaining performance obligations,which includes deferred revenue and amounts that will be invoiced and recognized asrevenue in future periods,was$717 million as of July 30,2023.We expect to recognize approximately 44%of this revenue over the next twelvemonths and the remainder thereafter.This excludes revenue related to performance obligations for contracts with a length of one year or less.Note 11-Derivative Financial InstrumentsWe enter into foreign currency forward contracts to mitigate the impact of foreign currency exchange rate movements on our operatingexpenses.These contracts are designated as cash flow hedges for hedge accounting treatment.Gains or losses on the contracts are recordedin accumulated other comprehensive income or loss and reclassified to operating expense when the related operating expenses are recognizedin earnings or ineffectiveness should occur.We also enter into foreign currency forward contracts to mitigate the impact of foreign currency movements on monetary assets and liabilitiesthat are denominated in currencies other than the U.S.dollar.These forward contracts were not designated for hedge accounting treatment.Therefore,the change in fair value of these contracts is recorded in other income or expense and offsets the change in fair value of the hedgedforeign currency denominated monetary assets and liabilities,which is also recorded in other income or expense.The table below presents the notional value of our foreign currency forward contracts outstanding:July 30,2023January 29,2023(In millions)Designated as cash flow hedges$1,138$1,128 Non-designated hedges$367$366 The unrealized gains and losses or fair value of our foreign currency forward contracts was not significant as of July 30,2023 and January 29,2023.As of July 30,2023,all designated foreign currency forward contracts mature within 18 months.The expected realized gains and losses deferredinto accumulated other comprehensive income or loss related to foreign currency forward contracts within the next twelve months was notsignificant.During the first half of fiscal years 2024 and 2023,the impact of derivative financial instruments designated for hedge accounting treatment onother comprehensive income or loss was not significant and all such instruments were determined to be highly effective.18NVIDIA CORPORATION AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)(Unaudited)Note 12-DebtLong-Term DebtThe carrying value of our outstanding notes,the calendar year of maturity,and the associated interest rates were as follows:Carrying Value atExpectedRemaining Term(years)EffectiveInterest RateJuly 30,2023January 29,2023(In millions)0.309%Notes Due 20230.41%$1,250 0.584%Notes Due 20240.90.66%1,250 1,250 3.20%Notes Due 20263.13.31%1,000 1,000 1.55%Notes Due 20284.91.64%1,250 1,250 2.85%Notes Due 20306.72.93%1,500 1,500 2.00%Notes Due 20317.92.09%1,250 1,250 3.50%Notes Due 204016.73.54%1,000 1,000 3.50%Notes Due 205026.73.54%2,000 2,000 3.70%Notes Due 206036.73.73P0 500 Unamortized debt discount and issuance costs(45)(47)Net carrying amount9,705 10,953 Less short-term portion(1,249)(1,250)Total long-term portion$8,456$9,703 All our notes are unsecured senior obligations.All existing and future liabilities of our subsidiaries will be effectively senior to the notes.Ournotes pay interest semi-annually.We may redeem each of our notes prior to maturity,subject to a make-whole premium as defined in theapplicable form of note.On June 15,2023,we repaid the 0.309%Notes Due 2023.As of July 30,2023,we were in compliance with the required covenants,which are non-financial in nature,under the outstanding notes.Commercial PaperWe have a$575 million commercial paper program to support general corporate purposes.As of July 30,2023,we had not issued anycommercial paper.Note 13-Commitments and ContingenciesPurchase ObligationsOur purchase obligations reflect our commitments to purchase components used to manufacture our products,including long-term supply andcapacity agreements,certain software and technology licenses,other goods and services and long-lived assets.As of July 30,2023,we had outstanding inventory purchase and long-term supply and capacity obligations totaling$11.15 billion.During thenormal course of business,to manage manufacturing lead times and help ensure adequate supply,we enter into agreements with contractmanufacturers that allow them to procure inventory based upon criteria as defined by us,and in certain instances,these agreements allow usthe option to cancel,reschedule,and adjust our requirements based on our business needs prior to firm orders being19NVIDIA CORPORATION AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)(Unaudited)placed,but these changes may result in the payment of costs incurred through the date of cancellation.Other non-inventory purchaseobligations of$4.31 billion include$3.50 billion of multi-year cloud service agreements.Total future purchase commitments as of July 30,2023 are as follows:Commitments(In millions)Fiscal Year:2024(excluding first half of fiscal year 2024)$8,439 20253,960 2026957 2027999 2028637 2029 and thereafter468 Total$15,460 Accrual for Product Warranty LiabilitiesThe estimated amount of product warranty liabilities was$115 million and$82 million as of July 30,2023 and January 29,2023,respectively.The estimated product returns and estimated product warranty activity consisted of the following:Three Months EndedSix Months EndedJuly 30,2023July 31,2022July 30,2023July 31,2022(In millions)Balance at beginning of period$77$55$82$46 Additions4212255138Utilization(4)(9)(22)(16)Balance at end of period$115$168$115$168 In connection with certain agreements that we have entered in the past,we have provided indemnities for matters such as tax,product,andemployee 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 havenot recorded any liability in our Condensed Consolidated Financial Statements for such indemnifications.LitigationSecurities Class Action and Derivative LawsuitsThe plaintiffs in the putative securities class action lawsuit,captioned 4:18-cv-07669-HSG,initially filed on December 21,2018 in the UnitedStates District Court for the Northern District of California,and titled In Re NVIDIA Corporation Securities Litigation,filed an amended complainton May 13,2020.The amended complaint asserted that NVIDIA and certain NVIDIA executives violated Section 10(b)of the SecuritiesExchange Act of 1934,as amended,or the Exchange Act,and SEC Rule 10b-5,by making materially false or misleading statements related tochannel inventory and the impact of cryptocurrency mining on GPU demand between May 10,2017 and November 14,2018.Plaintiffs alsoalleged that the NVIDIA executives who they named as defendants violated Section 20(a)of the Exchange Act.Plaintiffs sought classcertification,an award of unspecified compensatory damages,an award of reasonable costs and expenses,including attorneys fees and expertfees,and further relief as the Court may deem just and proper.On March 2,2021,the district court granted NVIDIAs motion to dismiss thecomplaint without leave to amend,entered judgment in favor of NVIDIA and closed the case.On March 30,2021,plaintiffs filed an appeal fromjudgment20NVIDIA CORPORATION AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)(Unaudited)in the United States Court of Appeals for the Ninth Circuit,case number 21-15604.On August 25,2023,a majority of a three-judge Ninth Circuitpanel affirmed in part and reversed in part the district courts dismissal of the case,with a third judge dissenting on the basis that the districtcourt did not err in dismissing the case.The putative derivative lawsuit pending in the United States District Court for the Northern District of California,captioned 4:19-cv-00341-HSG,initially filed January 18,2019 and titled In re NVIDIA Corporation Consolidated Derivative Litigation,was stayed pending resolution of theplaintiffs appeal in the In Re NVIDIA Corporation Securities Litigation action.On February 22,2022,the court administratively closed the case,but stated that it would reopen the case once the appeal in the In Re NVIDIA Corporation Securities Litigation action is resolved.The lawsuitasserts claims,purportedly on behalf of us,against certain officers and directors of the Company for breach of fiduciary duty,unjust enrichment,waste of corporate assets,and violations of Sections 14(a),10(b),and 20(a)of the Exchange Act based on the dissemination of allegedly falseand misleading statements related to channel inventory and the impact of cryptocurrency mining on GPU demand.The plaintiffs are seekingunspecified damages and other relief,including reforms and improvements to NVIDIAs corporate governance and internal procedures.The putative derivative actions initially filed September 24,2019 and pending in the United States District Court for the District of Delaware,Lipchitz v.Huang,et al.(Case No.1:19-cv-01795-UNA)and Nelson v.Huang,et.al.(Case No.1:19-cv-01798-UNA),remain stayed pendingresolution of the plaintiffs appeal in the In Re NVIDIA Corporation Securities Litigation action.The lawsuits assert claims,purportedly on behalfof us,against certain officers and directors of the Company for breach of fiduciary duty,unjust enrichment,insider trading,misappropriation ofinformation,corporate waste and violations of Sections 14(a),10(b),and 20(a)of the Exchange Act based on the dissemination of allegedlyfalse,and misleading statements related to channel inventory and the impact of cryptocurrency mining on GPU demand.The plaintiffs seekunspecified damages and other relief,including disgorgement of profits from the sale of NVIDIA stock and unspecified corporate governancemeasures.Accounting for Loss ContingenciesAs of July 30,2023,we have not recorded any accrual for contingent liabilities associated with the legal proceedings described above based onour belief that liabilities,while possible,are not probable.Further,except as specifically described above,any possible loss or range of loss inthese matters cannot be reasonably estimated at this time.We are engaged in legal actions not described above arising in the ordinary course ofbusiness and,while there can be no assurance of favorable outcomes,we believe that the ultimate outcome of these actions will not have amaterial adverse effect on our operating results,liquidity or financial position.Note 14-Shareholders Equity Capital Return Program During the second quarter and first half of fiscal year 2024,we repurchased 7.5 million shares of our common stock for$3.28 billion.During thesecond quarter and first half of fiscal year 2023,we repurchased 19 million and 28 million shares for$3.35 billion and$5.34 billion,respectively.Since the inception of our share repurchase program through July 30,2023,we have repurchased an aggregate of 1.11 billion shares for a totalcost of$20.40 billion.As of July 30,2023,we were authorized,subject to certain specifications,to repurchase shares of our common stock up to$3.95 billion.On August 21,2023,our Board of Directors approved an increase to our share repurchase program of an additional$25.00 billion,without expiration.From July 31,2023 through August 24,2023,we repurchased 2 million shares for$998 million pursuant to a Rule 10b5-1trading plan.As of August 24,2023,a total of$27.95 billion was available for repurchase.Our share repurchase program aims to offset dilutionfrom shares issued to employees.We may pursue additional share repurchases as we weigh market factors and other investment opportunities.During the second quarter and first half of fiscal year 2024,we paid$99 million and$199 million in cash dividends to our shareholders,respectively.During the second quarter and first half of fiscal year 2023,we paid$100 million and$200 million in cash dividends to ourshareholders,respectively.Our cash dividend program and the payment of future cash dividends under that program are subject to our Board ofDirectors21NVIDIA CORPORATION AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)(Unaudited)continuing determination that the dividend program and the declaration of dividends thereunder are in the best interests of our shareholders.Note 15-Segment InformationOur Chief Executive Officer,who is considered to be our chief operating decision maker,or CODM,reviews financial information presented onan operating segment basis for purposes of making decisions and assessing financial performance.The Compute&Networking segment includes our Data Center accelerated computing platform;networking;automotive artificial intelligence,orAI,Cockpit,autonomous driving development agreements,and autonomous vehicle solutions;electric vehicle computing platforms;Jetson forrobotics and other embedded platforms;NVIDIA AI Enterprise and other software;and cryptocurrency mining processors,or CMP.The Graphics segment includes GeForce GPUs for gaming and PCs,the GeForce NOW game streaming service and related infrastructure,andsolutions for gaming platforms;Quadro/NVIDIA RTX GPUs for enterprise workstation graphics;virtual GPU software for cloud-based visual andvirtual computing;automotive platforms for infotainment systems;and Omniverse Enterprise software for building and operating 3D internetapplications.Operating results by segment include costs or expenses that are directly attributable to each segment,and costs or expenses that are leveragedacross our unified architecture and therefore allocated between our two segments.The“All Other”category includes the expenses that our CODM does not assign to either Compute&Networking or Graphics for purposes ofmaking operating decisions or assessing financial performance.The expenses include stock-based compensation expense,acquisition-relatedand other costs,corporate infrastructure and support costs,acquisition termination cost,intellectual property related,or IP-related and legalsettlement costs,contributions,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.Depreciation and amortization expensedirectly attributable to each reportable segment is included in operating results for each segment.However,our CODM does not evaluatedepreciation and amortization expense by operating segment and,therefore,it is not separately presented.There is no intersegment revenue.The accounting policies for segment reporting are the same as for our consolidated financial statements.The table below presents details of ourreportable segments and the“All Other”category.22NVIDIA CORPORATION AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)(Unaudited)Compute&NetworkingGraphicsAll OtherConsolidated(In millions)Three Months Ended July 30,2023 Revenue$10,402$3,105$13,507 Operating income(loss)$6,728$1,211$(1,139)$6,800 Three Months Ended July 31,2022 Revenue$3,907$2,797$6,704 Operating income(loss)$816$657$(974)$499 Six Months Ended July 30,2023Revenue$14,862$5,837$20,699 Operating income(loss)$8,887$2,258$(2,204)$8,941 Six Months Ended July 31,2022Revenue$7,579$7,413$14,992 Operating income(loss)$2,422$3,133$(3,188)$2,367 Three Months EndedSix Months EndedJuly 30,2023July 31,2022July 30,2023July 31,2022(In millions)Reconciling items included in All Other category:Stock-based compensation expense$(842)$(649)$(1,576)$(1,227)Unallocated cost of revenue and operating expenses(163)(148)(317)(275)Acquisition-related and other costs(137)(175)(311)(324)IP-related and legal settlement costs(2)(10)(7)Acquisition termination cost (1,353)Contributions(2)(2)Other5 10 Total$(1,139)$(974)$(2,204)$(3,188)Revenue by geographic region is allocated to individual countries based on the billing location of the customer.End customer location may bedifferent than our customers billing location.The following table23NVIDIA CORPORATION AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)(Unaudited)summarizes information pertaining to our revenue from customers based on the invoicing address by geographic regions:Three Months EndedSix Months EndedJuly 30,July 31,July 30,July 31,2023202220232022(In millions)Revenue:United States$6,043$1,988$8,428$3,921 Taiwan2,839 1,204 4,635 3,981 China(including Hong Kong)2,740 1,602 4,330 3,683 Other countries1,885 1,910 3,306 3,407 Total revenue$13,507$6,704$20,699$14,992 One data center distributor customer represented approximately 17%and 13%of total revenue for the second quarter and first half of fiscal year2024,respectively,and was attributable to the Compute&Networking segment.There were no customers with 10%or more of total revenue forthe second quarter and first half of fiscal year 2023.A large cloud service provider,or CSP,which primarily purchases indirectly through multiple system integrators and distributors,is estimated torepresent approximately 22%and 19%of total revenue for the second quarter and first half of fiscal year 2024,respectively,and was attributableto our Compute&Networking segment.Two customers accounted for 16%and 13%of our accounts receivable balance as of July 30,2023.Two customers accounted for 14%and11%of our accounts receivable balance as of January 29,2023.The following table summarizes information pertaining to our revenue by each of the specialized markets we serve:Three Months EndedSix Months EndedJuly 30,July 31,July 30,July 31,2023202220232022(In millions)Revenue:Data Center$10,323$3,806$14,607$7,556 Gaming2,486 2,042 4,726 5,662 Professional Visualization379 496 674 1,118 Automotive253 220 549 358 OEM and Other66 140 143 298 Total revenue$13,507$6,704$20,699$14,992 24ITEM 2.MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSForward-Looking Statements This Quarterly Report on Form 10-Q contains forward-looking statements which are based on our managements beliefs and assumptions andon 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 expressionsintended to identify forward-looking statements.These statements involve known and unknown risks,uncertainties and other factors,which maycause our actual results,performance,time frames or achievements to be materially different from any future results,performance,time framesor achievements expressed or implied by the forward-looking statements.We discuss many of these risks,uncertainties and other factors in thisQuarterly Report on Form 10-Q and our Annual Report on Form 10-K for the fiscal year ended January 29,2023 in greater detail under theheading“Risk Factors”of such reports.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 shouldread this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results may be materially different fromwhat we expect.We hereby qualify our forward-looking statements by these cautionary statements.Except as required by law,we assume noobligation to update these forward-looking statements publicly,or to update the reasons actual results could differ materially from thoseanticipated 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.2023 NVIDIA Corporation.All rights reserved.The following discussion and analysis of our financial condition and results of operations shouldbe read in conjunction with the risk factors set forth in Item 1A.“Risk Factors”of our Annual Report on Form 10-K for the fiscal year endedJanuary 29,2023 and Part II,Item 1A.“Risk Factors”of this Quarterly Report on Form 10-Q and our Condensed Consolidated FinancialStatements and related Notes thereto,as well as other cautionary statements and risks described elsewhere in this Quarterly Report on Form10-Q and our other filings with the SEC,before deciding to purchase or sell shares of our common stock.OverviewOur Company and Our BusinessesSince our founding in 1993,NVIDIA has been a pioneer in accelerated computing.Our invention of the GPU in 1999 has sparked the growth ofthe PC gaming market,redefined computer graphics,ignited the era of modern AI and has fueled industrial digitalization across markets.NVIDIAis now a full-stack computing company with data-center-scale offerings that are reshaping industry.Our two operating segments are Compute&Networking and Graphics,as described in Note 15 of the Notes to Condensed ConsolidatedFinancial Statements.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 ChallengesDemand and Supply,Product Transitions,and New Products and Business ModelsDemand for our data center systems and products has surged over the last two quarters and our demand visibility extends into next year.Inorder to meet this demand,we have increased our purchase obligations with existing suppliers,added new suppliers and entered into prepaidsupply and capacity agreements.These increased purchase volumes and number of suppliers may create more supply chain complexity andexecution risk.We expect our supply to increase each quarter through next year.We have entered and expect to continue to enter into supplierand capacity arrangements.Product transitions are complex as we often ship both new and prior architecture products simultaneously and we and our channel partnersprepare to ship and support new products.We are in various stages of transitioning the architecture of our Data Center,ProfessionalVisualization,and Gaming products.Qualification time for new products,customers anticipating product transitions and channel partners25reducing channel inventory of prior architectures ahead of new product introductions can create reductions or volatility in our revenue.Inaddition,the bring up of new product architectures is complex due to functionality challenges and quality concerns not identified in manufacturingtesting.These product quality issues may incur costs,increase our warranty costs,and delay further production of our architecture.While wehave managed prior product transitions and have previously sold multiple product architectures at the same time,these transitions are difficult,may impair our ability to predict demand and impact our supply mix,and we may incur additional costs.We build technology and products for use cases and applications that may be new or may not yet exist such as our Omniverse platform,third-party large language models,and generative AI models.We have recently begun offering enterprise customers NVIDIA DGX cloud servicesdirectly and through our network of partners,which includes cloud-based infrastructure and software and services for training and deploying AImodels,and NVIDIA AI Foundations for customizable pretrained AI models.Our demand estimates for new use cases,applications,and servicescan be incorrect and create volatility in our revenue or supply levels,and we may not be able to generate significant revenue from these usecases,applications,and services.New technologies such as generative AI models have emerged,and while they have driven increased demandfor Data Center compute infrastructure,the long-term trajectory is unknown.Global TradeDuring the third quarter of fiscal year 2023,the U.S.government,or the USG,announced license requirements that,with certain exceptions,impact exports to China(including Hong Kong and Macau)and Russia of our A100 and H100 integrated circuits,DGX or any other systems orboards which incorporate A100 or H100 integrated circuits.During the second quarter of fiscal year 2024,the USG informed us of an additionallicensing requirement for a subset of A100 and H100 products destined to certain customers and other regions,including some countries in theMiddle East.We have sold alternative products in China not subject to the license requirements,such as our A800 or H800 offerings.Given the strength of demand for our products worldwide,we do not anticipate that additional export restrictions,if adopted,would have animmediate material impact on our financial results.However,over the long term,our results and competitive position may be harmed,and wemay be effectively excluded from all or part of the China market if there are further changes in the USGs export controls,if customers in Chinado not want to purchase our alternative product offerings,if customers purchase product from competitors,if customers develop their owninternal solution,if the USG does not grant licenses in a timely manner or denies licenses to significant customers,or if we incur significanttransition costs.While we work to enhance the resiliency and redundancy of our supply chain,which is currently concentrated in the Asia-Pacific,includingChina,Hong Kong,Korea and Taiwan,new export controls or changes to existing export controls could negatively impact our business.Macroeconomic FactorsMacroeconomic factors,includinginflation,increased interest rates,significant capital market volatility,global supply chain constraints and globaleconomic and geopolitical developments,may have direct and indirect impacts on our results of operations.While difficult to isolate and quantify,these macroeconomic factors can impact our supply chain and manufacturing costs,employee wages,costs for capital equipment and value ofour investments.Our product and solution pricing strategy generally does not fluctuate with short-term changes in our costs.Within our supplychain,we continuously manage product availability and costs with our vendors.26Second Quarter of Fiscal Year 2024 SummaryThree Months Ended July 30,2023April 30,2023July 31,2022Quarter-over-QuarterChangeYear-over-YearChange($in millions,except per share data)Revenue$13,507$7,192$6,704 881%Gross margin70.1d.6C.5%5.5 pts26.6 ptsOperating expenses$2,662$2,508$2,416 6%Operating income$6,800$2,140$499 218%1,263%Net income$6,188$2,043$656 2033%Net income per diluted share$2.48$0.82$0.26 2024%We specialize in markets where our computing platforms can provide tremendous acceleration for applications.These platforms incorporateprocessors,interconnects,software,algorithms,systems,and services to deliver unique value.Our platforms address four large markets whereour expertise is critical:Data Center,Gaming,Professional Visualization,and Automotive.Revenue for the second quarter of fiscal year 2024 was$13.51 billion,up 101%from a year ago and up 88%sequentially.Data Center revenue was up 171%from a year ago and up 141%sequentially,led by CSPs and large consumer internet companies.Strongdemand for the NVIDIA HGX platform based on our Hopper and Ampere GPU architectures was primarily driven by the development of largelanguage models and generative AI.Data Center Compute grew 195%from a year ago and 157%sequentially,largely reflecting the strong rampof our Hopper-based HGX platform.Networking was up 94%from a year ago and up 85%sequentially,primarily on strong growth in InfiniBandinfrastructure to support our HGX platform.In the second quarter of fiscal year 2024,CSPs represented slightly more than half of our estimatedData Center end demand,with large consumer internet companies being the next largest end demand,followed by enterprise and highperformance computing.Gaming revenue was up 22%from a year ago and up 11%sequentially,primarily reflecting demand for our GeForce RTX 40 Series GPUsbased on the NVIDIA Ada Lovelace architecture following normalization of channel inventory levels.Professional Visualization revenue was down 24%from a year ago and up 28%sequentially.The year-on-year decrease primarily reflects lowersell-in to partners following normalization of channel inventory levels.The sequential increase was primarily due to stronger enterpriseworkstation demand and the ramp of NVIDIA RTX products based on the Ada Lovelace Architecture.Automotive revenue was up 15%from a year ago and down 15%sequentially.The year-on-year increase was primarily driven by sales of self-driving platforms.The sequential decrease primarily reflects lower overall auto demand,particularly in China.Gross margin increased from a year ago and sequentially,primarily reflecting growth in Data Center sales.The year-on-year increase alsoreflects the impact on the year-ago gross margin from$1.34 billion in inventory provisions and related charges.Operating expenses were up 10%from a year ago and up 6%sequentially,primarily driven by compensation and benefits,including stock-basedcompensation,reflecting growth in employees and compensation increases.Market Platform HighlightsData Center revenue for the second quarter of fiscal year 2024 was$10.32 billion,up 171%from a year ago.We announced that the NVIDIAGH200 Grace Hopper Superchip is available in the third quarter of fiscal year 2024;announced the NVIDIA L40S GPU-a universal data centerprocessor for compute-intensive applications,including AI training and inference,is available now;unveiled the NVIDIA MGX server referencedesign;announced NVIDIA Spectrum-X,an accelerated networking platform for AI;and partnered with a27range of companies on AI initiatives,including ServiceNow,Accenture,VMware,Snowflake,WPP,SoftBank,and Hugging Face.Gaming revenue for the second quarter of fiscal year 2024 was$2.49 billion,up 22%from a year ago.We began shipping the GeForce RTX4060 family of GPUs;and announced NVIDIA Avatar Cloud Engine for Games,a custom AI model foundry service using AI-powered naturallanguage interactions to transform games.Professional Visualization revenue for the second quarter of fiscal year 2024 was$379 million,down 24%from a year ago.We announced newNVIDIA RTX GPUs for desktop workstations based on the Ada Lovelace architecture;and a major release of the NVIDIA Omniverse platform.Automotive revenue for the second quarter of fiscal year 2024 was$253 million,up 15%from a year ago.We announced that NVIDIA DRIVEOrin is powering the new XPENG G6 Coupe SUVs;and announced a partnership with MediaTek,which will develop mainstream automotivesystems on chips for global OEMs integrating a new NVIDIA GPU chiplet IP for AI and graphics.Financial Information by Business Segment and Geographic DataRefer to Note 15 of the Notes to Condensed Consolidated Financial Statements for disclosure regarding segment information.Critical Accounting Policies and EstimatesRefer to Part II,Item 7,Critical Accounting Policies and Estimates of our Annual Report on Form 10-K for the fiscal year ended January 29,2023.There have been no material changes to our Critical Accounting Policies and Estimates.Results of OperationsThe following table sets forth,for the periods indicated,certain items in our Condensed Consolidated Statements of Income expressed as apercentage of revenue.Three Months EndedSix Months Ended July 30,2023July 31,2022July 30,2023July 31,2022Revenue100.00.00.00.0%Cost of revenue29.9 56.5 31.8 44.3 Gross profit70.1 43.5 68.2 55.7 Operating expenses Research and development15.1 27.2 18.9 23.0 Sales,general and administrative4.7 8.8 6.1 7.9 Acquisition termination cost 9.0 Total operating expenses19.8 36.0 25.0 39.9 Operating income50.3 7.5 43.2 15.8 Interest income1.4 0.7 1.6 0.4 Interest expense(0.5)(1.0)(0.6)(0.9)Other,net0.4(0.1)0.2(0.1)Other income(expense),net1.3(0.4)1.2(0.6)Income before income tax51.6 7.1 44.4 15.2 Income tax expense(benefit)5.9(2.7)4.6 Net income45.7%9.89.8.2(RevenueRevenue for the second quarter and first half of fiscal year 2024 was$13.51 billion and$20.70 billion,up 101%and 38%,respectively.Revenue by Reportable SegmentsThree Months EndedSix Months Ended July 30,2023July 31,2022$Change%ChangeJuly 30,2023July 31,2022$Change%Change($in millions)Compute&Networking$10,402$3,907$6,495 166%$14,862$7,579$7,283 96%Graphics3,105 2,797 308 11%5,837 7,413(1,576)(21)%Total$13,507$6,704$6,803 101%$20,699$14,992$5,707 38%Compute&Networking-The increase in the second quarter and first half of fiscal year 2024 compared to the second quarter and first half offiscal year 2023 was primarily due to higher Data Center revenue.Compute GPUs grew 208%year-on-year and 112%compared to the first halfof fiscal year 2023 led by demand for NVIDIA HGX platform based on our Hopper and Ampere GPU architecture for large language models andgenerative AI.Networking was up 94%year-on-year and 63%compared to the first half of last year driven primarily by strong growth inInfiniBand infrastructure to support our HGX platform.Graphics-The increase in the second quarter of fiscal year 2024 compared to the second quarter of fiscal year 2023 primarily reflects growth inGaming GPUs related to the demand for our GeForce RTX 40 Series GPUs based on the NVIDIA Ada Lovelace architecture followingnormalization of channel inventory levels.The decrease in the first half of fiscal year 2024 compared to the first half of fiscal year 2023 primarilyreflects 16%lower Gaming GPU sales and 36%lower Professional Visualization GPU sales,due to lower sell-in to partners followingnormalization of channel inventory levels.Concentration of Revenue Revenue by geographic region is allocated to countries based on the billed location even if the revenue may be attributable to end customers ina different location.Revenue from sales to customers outside of the United States accounted for 55%and 59%of total revenue for the secondquarter and first half of fiscal year 2024,respectively,and 70%and 74%of total revenue for the second quarter and first half of fiscal year 2023,respectively.The increase in revenue to the United States for the second quarter and first half of fiscal year 2024 was primarily due to higherU.S.-based Data Center end demand.Our customer and partner network incorporates original equipment manufacturers,original device manufacturers,system builders,systemintegrators,add-in board manufacturers,retailers/distributors,independent software vendors,internet and CSPs,automotive manufacturers andtier-1 automotive suppliers,mapping companies,start-ups,and other ecosystem participants.One data center distributor customer representedapproximately 17%and 13%of total revenue for the second quarter and first half of fiscal year 2024,respectively,and was attributable to theCompute&Networking segment.There were no customers with 10%or more of total revenue for the second quarter and first half of fiscal year2023.A large CSP,which primarily purchases indirectly through multiple system integrators and distributors,is estimated to represent approximately22%and 19%of total revenue for the second quarter and first half of fiscal year 2024,respectively,and was attributable to our Compute&Networking segment.Our estimated Compute&Networking end customer demand is concentrated among several large CSPs and consumerinternet companies.Most of these large companies do not purchase directly from us but often purchase through multiple system integrators,distributors,and channel partners.We expect this concentration trend will continue.Gross MarginOur overall gross margin increased to 70.1%and 68.2%for the second quarter and first half of fiscal year 2024,respectively,from 43.5%and55.7%for the second quarter and first half of fiscal year 2023,respectively.The increase in the second quarter and first half of fiscal year 2024compared to second quarter and first half of fiscal year 2023 was primarily due to higher revenue from Compute GPUs of 208%and 112%,respectively,and lower inventory provisions.29Provisions for inventory and excess inventory purchase obligations totaled$576 million and$709 million for the second quarter and first half offiscal year 2024,respectively.Sales of inventory that was previously written off or down,or settlements of excess inventory purchase obligations,totaled$84 million and$134 million for the second quarter and first half of fiscal year 2024,respectively.As a result,the overall net effect on ourgross margin was an unfavorable impact of 3.6%and 2.8%in the second quarter and first half of fiscal year 2024,respectively.Provisions for inventory and excess inventory purchase obligations totaled$1.22 billion and$1.31 billion for the second quarter and first half offiscal year 2023,respectively.Sales of inventory that was previously written off or down,or settlements of excess inventory purchase obligations,totaled$23 million and$38 million for the second quarter and first half of fiscal year 2023,respectively.As a result,the overall net effect on ourgross margin was an unfavorable impact of 17.8%and 8.5%in the second quarter and first half of fiscal year 2023,respectively.Operating Expenses Three Months EndedSix Months Ended July 30,2023July 31,2022$Change%ChangeJuly 30,2023July 31,2022$Change%Change($in millions)Research and developmentexpenses$2,040$1,824$216 12%$3,916$3,443$473 14%of net revenue15.1.2.9#.0%Sales,general and administrativeexpenses622 592 30 5%1,253 1,183 70 6%of net revenue4.7%8.8%6.1%7.9quisition termination cost%1,353(1,353)(100)%of net revenue%9.0%Total operating expenses$2,662$2,416$246 10%$5,169$5,979$(810)(14)%of net revenue19.86.0%.09.9%The increases in research and development expenses and sales,general and administrative expenses for the second quarter and first half offiscal year 2024 were primarily driven by compensation and benefits,including stock-based compensation,reflecting employee growth andcompensation increases.Acquisition termination costWe recorded an acquisition termination cost related to the Arm transaction of$1.35 billion in fiscal year 2023 reflecting the write-off of theprepayment provided at signing.Operating IncomeOperating income for the second quarter and first half of fiscal year 2024 was$6.80 billion and$8.94 billion,respectively,up 1,263%and 278%from a year ago,respectively.Operating income by Reportable SegmentsThree Months EndedSix Months EndedJuly 30,2023July 31,2022$Change%ChangeJuly 30,2023July 31,2022$Change%Change($in millions)Compute&Networking$6,728$816$5,912 725%$8,887$2,422$6,465 267%Graphics1,211 657 554 84%2,258 3,133(875)(28)%All Other(1,139)(974)(165)17%(2,204)(3,188)984(31)%Total$6,800$499$6,301 1,263%$8,941$2,367$6,574 2780Compute&Networking Segment operating income increased during the second quarter and first half of fiscal year 2024 compared to thesecond quarter and first half of fiscal year 2023 primarily due to higher revenues.Graphics-Segment operating income increased during the second quarter of fiscal year 2024 compared to the second quarter of fiscal year2023 primarily due to higher revenues of 11%.Segment operating income was also impacted by inventory provisions which were$81 million inthe second quarter of fiscal year 2024 compared to$396 million in the second quarter of fiscal year 2023.Segment operating income decreasedduring the first half of fiscal year 2024 compared to the first half of fiscal year 2023 primarily due to lower revenues of 21%.Segment operatingincome was also impacted by inventory provisions which were$125 million in the first half of fiscal year 2024 compared to$416 million in thefirst half of fiscal year 2023.All Other expenses increased during the second quarter of fiscal year 2024 compared to the second quarter of fiscal year 2023 primarily due tohigher stock-based compensation expense.All Other expenses decreased during the first half of fiscal year 2024 compared to the first half offiscal year 2023 primarily due to an acquisition termination cost of$1.35 billion related to the Arm transaction in the prior year.Other Income(Expense),NetThree Months EndedSix Months Ended July 30,2023July 31,2022$ChangeJuly 30,2023July 31,2022$Change($in millions)Interest income$187$46$141$338$64$274 Interest expense(65)(65)(131)(132)1 Other,net59(5)64 42(19)61 Other income(expense),net$181$(24)$205$249$(87)$336 Interest income consists of interest earned on cash,cash equivalents and marketable securities.The increase in interest income was primarilydue to higher yields earned on our investments.Interest expense is primarily comprised of coupon interest and debt discount amortization related to our notes.Other,net,consists primarily of realized or unrealized gains and losses from investments in non-affiliated entities and the impact of changes inforeign currency rates.Change in other,net,compared to the second quarter and first half of fiscal year 2023 was primarily driven by mark-to-market gains from publicly traded equity investments.Income TaxesIncome tax was an expense of$793 million and$958 million for the second quarter and first half of fiscal year 2024,respectively,a benefit of$181 million for the second quarter of fiscal year 2023,and an expense of$6 million for the first half of fiscal year 2023.The income tax as apercentage of income before income tax was an expense of 11.4%and 10.4%for the second quarter and first half of fiscal year 2024,respectively,a benefit of 38.0%for the second quarter of fiscal year 2023,and an expense of 0.3%for the first half of fiscal year 2023.The increase in the effective tax rate was primarily due to a decreased impact of tax benefits from the foreign-derived intangible incomededuction,stock-based compensation,and the U.S.federal research tax credit,relative to the increase in income before income tax.31Liquidity and Capital Resources July 30,2023January 29,2023(In millions)Cash and cash equivalents$5,783$3,389 Marketable securities10,240 9,907 Cash,cash equivalents and marketable securities$16,023$13,296 Six Months EndedJuly 30,2023July 31,2022(In millions)Net cash provided by operating activities$9,259$3,001 Net cash provided by(used in)investing activities$(1,287)$4,230 Net cash used in financing activities$(5,479)$(6,208)As of July 30,2023,we had$16.02 billion in cash,cash equivalents,and marketable securities,an increase of$2.73 billion from the end of fiscalyear 2023.Our investment policy requires the purchase of highly rated fixed income securities,the diversification of investment types and creditexposures,and certain maturity limits on our portfolio.Cash provided by operating activities increased in the first half of fiscal year 2024 compared to the first half of fiscal year 2023,primarily due tohigher revenue and lower inventory,partially offset by higher accounts receivable.Accounts receivable in the second quarter of fiscal year 2024benefited by approximately$1.25 billion from customer payments received ahead of the invoice due date.Cash used in investing activities increased in the first half of fiscal year 2024 compared to the first half of fiscal year 2023,primarily driven bylower marketable securities sales and maturities,partially offset by lower purchases of marketable securities.Cash used in financing activities decreased in the first half of fiscal year 2024 compared to the first half of fiscal year 2023,which primarilyreflects lower share repurchases partially offset by a debt repayment in the second quarter of fiscal year 2024.LiquidityOur primary sources of liquidity are our cash,cash equivalents,and marketable securities,and the cash generated by our operations.As ofJuly 30,2023,we had$16.02 billion in cash,cash equivalents,and marketable securities.Our marketable securities consist of debt securitiesissued by the USG and its agencies,highly rated corporations and financial institutions,and foreign government entities,as well as certificates ofdeposit issued by highly rated financial institutions.These marketable securities are primarily denominated in U.S.dollars.Refer to Note 7 of theNotes to Condensed Consolidated Financial Statements for additional information.We believe that we have sufficient liquidity to meet ouroperating requirements for at least the next twelve months,and for the foreseeable future,including our debt obligations,future supplyobligations and vendor and supplier prepayments.We continuously evaluate our liquidity and capital resources,including our access to externalcapital,to ensure we can finance future capital requirements.Except for approximately$1.38 billion of cash,cash equivalents,and marketable securities held outside the U.S.for which we have not accruedany related foreign or state taxes if we repatriate these amounts to the U.S.,substantially all of our cash,cash equivalents and marketablesecurities held outside of the U.S.as of July 30,2023 are available for use in the U.S.without incurring additional U.S.federal income taxes.Weexpect to pay approximately$3.81 billion in cash taxes in the third quarter of fiscal year 2024 as we had previously deferred our federal incometax payments due to the disaster relief made available by the Internal Revenue Service for certain California taxpayers.Primarily based upon increased cash tax payments,we expect that our cash flow from operations will decline in the third quarter of fiscal year2024 compared to the second quarter of fiscal year 2024.32Capital Return to ShareholdersDuring the second quarter and first half of fiscal year 2024,we returned$3.28 billion in share repurchases and$99 million and$199 million,respectively,in cash dividends.From July 31,2023 through August 24,2023,we repurchased 2 million shares for$998 million pursuant to aRule 10b5-1 trading plan.Our cash dividend program and the payment of future cash dividends under that program are subject to the continuing determination by ourBoard of Directors that the dividend program and the declaration of dividends thereunder are in the best interests of our shareholders.As of July 30,2023,we were authorized,subject to certain specifications,to repurchase additional shares of our common stock up to$3.95billion.On August 21,2023,our Board of Directors approved an increase to our share repurchase program of an additional$25.00 billion,without expiration.As of August 24,2023,a total of$27.95 billion was available for repurchase.Our share repurchase program aims to offsetdilution from shares issued to employees.We may pursue additional share repurchases as we weigh market factors and other investmentopportunities.We plan to continue share repurchases this fiscal year.The U.S.Inflation Reduction Act of 2022 was enacted on August 16,2022 and requires a 1%excise tax on certain share repurchases in excessof shares issued for employee compensation made after December 31,2022.We do not expect this provision to have a material effect on ourconsolidated financial statements.Outstanding Indebtedness and Commercial PaperOur aggregate debt maturities as of July 30,2023,by year payable,are as follows:July 30,2023(In millions)Due in one year$1,250 Due in one to five years2,250 Due in five to ten years2,750 Due in greater than ten years3,500 Unamortized debt discount and issuance costs(45)Net carrying amount9,705 Less short-term portion(1,249)Total long-term portion$8,456 We have a$575 million commercial paper program to support general corporate purposes.As of July 30,2023,we had not issued anycommercial paper.Material Cash Requirements and Other ObligationsWe have unrecognized tax benefits of$1.25 billion,which includes related interest and penalties of$128 million recorded in non-current incometax payable as of July 30,2023.We are unable to reasonably estimate the timing of any potential tax liability,interest payments,or penalties inindividual years due to uncertainties in the underlying income tax positions and the timing of the effective settlement of such tax positions.Weare currently under examination by the Internal Revenue Service for our fiscal years 2018 and 2019.Refer to Note 6 of the Notes to CondensedConsolidated Financial Statements for further information.Other than the contractual obligations described above,there were no material changes outside the ordinary course of business in ourcontractual obligations from those disclosed in our Annual Report on Form 10-K for the fiscal year ended January 29,2023.Refer to Item 7,“Managements Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources”in our AnnualReport on Form 10-K for the fiscal year ended January 29,2023 for a description of our contractual obligations.For a description of ouroperating lease obligations,long-term debt,and purchase obligations,refer to Note 3,Note 12,and Note 13 of the Notes to CondensedConsolidated Financial Statements,respectively.33Climate ChangeTo date,there has been no material impact to our results of operations associated with global sustainability regulations,compliance,costs fromsourcing renewable energy or climate-related business trends.Adoption of New and Recently Issued Accounting PronouncementsThere has been no adoption of any new and recently issued accounting pronouncements.ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKInvestment and Interest Rate RiskFinancial market risks related to investment and interest rate risk are described in Part II,Item 7A,“Quantitative and Qualitative DisclosuresAbout Market Risk”in our Annual Report on Form 10-K for the fiscal year ended January 29,2023.As of July 30,2023,there have been nomaterial changes to the financial market risks described as of January 29,2023.Foreign Exchange Rate RiskThe impact of foreign currency transactions related to foreign exchange rate risk is described in Part II,Item 7A,“Quantitative and QualitativeDisclosures About Market Risk”in our Annual Report on Form 10-K for the fiscal year ended January 29,2023.As of July 30,2023,there havebeen no material changes to the foreign exchange rate risks described as of January 29,2023.ITEM 4.CONTROLS AND PROCEDURESControls and ProceduresDisclosure Controls and ProceduresBased on their evaluation as of July 30,2023,our management,including our Chief Executive Officer and Chief Financial Officer,has concludedthat our disclosure controls and procedures(as defined in Exchange Act Rule 13a-15(e)and 15d-15(e)were effective to provide reasonableassurance.Changes in Internal Control Over Financial ReportingThere were no changes that occurred during the second quarter of fiscal year 2024 that have materially affected,or are reasonably likely tomaterially affect,our internal control over financial reporting.In fiscal year 2022,we began an upgrade of our enterprise resource planning,orERP,system,which will update much of our existing core financial systems.The ERP system is designed to accurately maintain our financialrecords used to report operating results.The upgrade will occur in phases.We will continue to evaluate each quarter whether there are changesthat materially affect our internal control over financial reporting.Inherent Limitations on Effectiveness of ControlsOur management,including our Chief Executive Officer and Chief Financial Officer,does not expect that our disclosure controls and proceduresor our internal controls,will prevent all error and all fraud.A control system,no matter how well conceived and operated,can provide onlyreasonable,not absolute,assurance that the objectives of the control system are met.Further,the design of a control system must reflect thefact that there are resource constraints,and the benefits of controls must be considered relative to their costs.Because of the inherent limitationsin all control systems,no evaluation of controls can provide absolute assurance that all control issues and instances of fraud,if any,withinNVIDIA have been detected.PART II.OTHER INFORMATIONITEM 1.LEGAL PROCEEDINGSRefer to Part I,Item 1,Note 13 of the Notes to Condensed Consolidated Financial Statements for a discussion of significant developments in ourlegal proceedings since January 29,2023.Also refer to Item 3,“Legal Proceedings”in our Annual Report on Form 10-K for the fiscal year endedJanuary 29,2023 for a prior discussion of our legal proceedings.34ITEM 1A.RISK FACTORSOther than the risk factors listed below,there have been no material changes from the risk factors previously described under Item 1A of ourAnnual Report on Form 10-K for the fiscal year ended January 29,2023 and Item 1A of our Quarterly Report on Form 10-Q for the fiscal quarterended April 30,2023.Purchasing or owning NVIDIA common stock involves investment risks including,but not limited to,the risks described in Item 1A of our AnnualReport on Form 10-K for the fiscal year ended January 29,2023,in Item 1A of our Quarterly Report on Form 10-Q for the fiscal quarter endedApril 30,2023,and below.Additionally,any one of those risks could harm our business,financial condition and results of operations orreputation,which could cause our stock price to decline.Additional risks,trends and uncertainties not presently known to us or that we currentlybelieve are immaterial may also harm our business,financial condition,results of operations or reputation.Failure to meet the evolving needs of our industry and markets may adversely impact our financial results.Our accelerated computing platforms experience rapid changes in technology,customer requirements,competitive products,and industrystandards.Our success depends on our ability to:timely identify industry changes,adapt our strategies,and develop new or enhance and maintain existing products and technologies thatmeet the evolving needs of these markets,including due to unexpected changes in industry standards or disruptive technologicalinnovation that could render our products incompatible with products developed by other companies;develop or acquire new products and technologies through investments in research and development;launch new offerings with new business models including software,services and cloud solutions,as well as software-,infrastructure-,orplatform-as-a-service solutions;expand the ecosystem for our products and technologies;meet evolving and prevailing customer and industry safety,security,reliability expectations,and compliance standards;manage product and software lifecycles to maintain customer and end user satisfaction;develop,acquire,and maintain the internal and external infrastructure needed to scale our business,including acquisition integrations,customer support,e-commerce,IP licensing capabilities and cloud service capacity;andcomplete technical,financial,operational,compliance,sales and marketing investments for the above activities.We have invested in research and development in markets where we have a limited operating history,which may not produce meaningfulrevenue for several years,if at all.If we fail to develop or monetize new products and technologies,or if they do not become widely adopted,ourfinancial results could be adversely affected.Obtaining design wins may involve a lengthy process and depend on our ability to anticipate andprovide features and functionality that customers will demand.They also do not guarantee revenue.Failure to obtain a design win may preventus from obtaining future design wins in subsequent generations.We cannot ensure that the products and technologies we bring to market willprovide value to our customers and partners.If we fail any of these key success criteria,our financial results may be harmed.We have recently begun offering enterprise customers NVIDIA DGX cloud services directly and through our network of partners,which includescloud-based infrastructure and software and services for training and deploying AI models,and NVIDIA AI Foundations for customizablepretrained AI models.We have partnered with CSPs to host these software and services in their data centers,and we entered and may continueto enter into multi-year cloud service agreements to support these offerings and our research and development activities.The timing andavailability of these cloud services has changed and may continue to change,impacting our revenue,expenses and development timelines.NVIDIA DGX cloud services may not be successful and will take time,resources and investment.We also offer or plan to offer standalonesoftware35solutions including NVIDIA AI Enterprise,NVIDIA Omniverse,NVIDIA DRIVE,and several other software solutions.These new business modelsor strategies may not be successful and we may fail to sell any meaningful standalone software or services.We may incur significant costs andmay not achieve any significant revenue from these offerings.Failure to estimate customer demand properly has led and could lead to mismatches between supply and demand.We use third parties to manufacture and assemble our products,and we have had and may in the future have long manufacturing lead times.We are not provided guaranteed wafer,component and capacity supply,and our supply deliveries and production may be non-linear within aquarter or year.If our estimates of customer demand are ultimately inaccurate,as we have experienced in the past,there could be a significantmismatch between supply and demand.This mismatch has resulted in both product shortages and excess inventory,has varied across ourmarket platforms,and has significantly harmed our financial results.We build finished products and maintain inventory in advance of anticipated demand.While we have in the past entered and may in the futureenter into long-term supply and capacity commitments,we may not be able to secure sufficient commitments for capacity to address ourbusiness needs or our long-term demand expectations may change.Additionally,our ability to sell certain products has been and could beimpeded if components from third parties that are necessary for the finished product are not available.This risk may increase as a result of ourplatform strategy.In periods of shortages impacting the semiconductor industry and/or limited supply or capacity in our supply chain,the leadtimes on our orders may be extended.We have previously experienced extended lead times of more than 12 months.We have paid premiumsand provided deposits to secure future supply and capacity,which have increased our product costs and may continue to do so.We may nothave the ability to reduce our supply commitments at the same rate or at all if our revenue declines.Many additional factors have caused and/or could in the future cause us to either underestimate or overestimate our customers future demandfor our products,or otherwise cause a mismatch between supply and demand for our products and impact the timing and volume of our revenue,including:competing technologies and competitor product releases and announcements;changes in business and economic conditions resulting in decreased end demand;sudden or sustained government lockdowns or actions to control case spread of global or local health issues;rapidly changing technology or customer requirements;time to market;new product introductions and transitions resulting in less demand for existing products;new or unexpected end use cases;increase in demand for competitive products,including competitive actions;business decisions made by third parties;the demand for accelerated or AI-related cloud services,including our own software and NVIDIA DGX cloud services;changes that impact the ecosystem for the architectures underlying our products and technologies;the demand for our products relating to cryptocurrency mining,our Omniverse platform,third-party large language models andgenerative AI models;orgovernment actions or changes in governmental policies,such as increased restrictions on gaming usage.Demand for our data center systems and products has surged over the last two quarters and our demand visibility extends into next year.Inorder to meet this demand,we have increased our purchase obligations36with existing suppliers,added new suppliers,and entered into prepaid supply and capacity agreements.These increased purchase volumes andnumber of suppliers may create more supply chain complexity and execution risk.We expect our supply to increase each quarter through nextyear.We have entered and expect to continue to enter into supplier and capacity arrangements.We may incur inventory provisions orimpairments if our inventory or supply and capacity commitments are impacted by changes in demand for our products.Our customer orders and longer-term demand estimates may change or may not be correct,as we have experienced in the past.Producttransitions are complex and can impact our revenue as we often ship both new and prior architecture products simultaneously and we and ourchannel partners prepare to ship and support new products.Our architecture transitions of Data Center,Professional Visualization,and Gamingproducts may impair our ability to predict demand and impact our supply mix.Qualification time for new products,customers anticipating producttransitions and channel partners reducing channel inventory of prior architectures ahead of new product introductions can create reductions orvolatility in our revenue.We have experienced and may in the future experience reduced demand for current generation architectures whencustomers anticipate transitions,and we may be unable to sell multiple product architectures at the same time for current and future architecturetransitions.If we are unable to execute our architectural transitions as planned for any reason,our financial results may be negatively impacted.In addition,the bring up of new product architectures is complex due to functionality challenges and quality concerns not identified inmanufacturing testing.These product quality issues may incur costs,increase our warranty costs,and delay further production of ourarchitecture.While we have managed prior product transitions and have previously sold multiple product architectures at the same time,thesetransitions are difficult,and we may incur additional costs.We sell most of our products through channel partners,who sell to distributors,retailers,and/or end customers.As a result,the decisions madeby our channel partners,distributors,retailers,and in response to changing market conditions and changes in end user demand for our productshave impacted and could in the future continue to impact our ability to properly forecast demand,particularly as they are based on estimatesprovided by various downstream parties.If we underestimate our customers future demand for our products,our foundry partners may not have adequate lead-time or capacity toincrease production and we may not be able to obtain sufficient inventory to fill orders on a timely basis.Even if we are able to increaseproduction levels to meet customer demand,we may not be able to do so in a timely manner,or our contract manufacturers may experiencesupply constraints.If we cannot procure sufficient supply to meet demand or otherwise fail to fulfill our customers orders on a timely basis,or atall,our customer relationships could be damaged,we could lose revenue and market share and our reputation could be harmed.Additionally,since some of our products are part of a complex data center buildout,supply constraints or availability issues with respect to any onecomponent have had and may have a broader revenue impact.If we overestimate our customers future demand for our products,or if customers cancel or defer orders or choose to purchase from ourcompetitors,we may not be able to reduce our inventory or other contractual purchase commitments.In the past,we have experienced areduction in average selling prices,including due to channel pricing programs that we have implemented and may continue to implement,as aresult of our overestimation of future demand,and we may need to continue these reductions.We have had to increase prices for certain of ourproducts as a result of our suppliers increase in prices,and we may need to continue to do so for other products in the future.We have alsowritten-down our inventory,incurred cancellation penalties,and recorded impairments.These impacts were amplified by our placement of non-cancellable and non-returnable purchasing terms,well in advance of our historical lead times and could be exacerbated if we need to makechanges to the design of future products.The risk of these impacts has increased and may continue to increase as our purchase obligations andprepaids have grown and are expected to continue to grow and become a greater portion of our total supply.All of these factors may negativelyimpact our gross margins and financial results.We build technology and products for use cases and applications that may be new or may not yet exist,such as NVIDIA DGX cloud services,ourOmniverse platform,third-party large language models and generative AI models.Our demand estimates for new use cases,applications,andservices can be incorrect and create volatility in our revenue or supply levels,and we may not be able to generate significant revenue from theseuse cases,applications,and services.New technologies such as generative AI models have emerged,and while they have driven increaseddemand for Data Center compute infrastructure,the long-term trajectory is37unknown.Because our products may be used in multiple use cases and applications,it is difficult for us to estimate with any reasonable degreeof precision the impact of generative AI models on our reported revenue or forecasted demand.Additionally,we expect to start shipping our CPUproduct offerings,the Grace CPU and Grace Hopper Superchips,in the third quarter of fiscal year 2024.Our ability to adequately predict ourCPU demand may create volatility in our revenue or supply levels.Challenges in estimating demand could become more pronounced or volatile in the future on both a global and regional basis.Extended leadtimes may occur if we experience other supply constraints caused by natural disasters,pandemics or other events.In addition,geopoliticaltensions,such as those involving Taiwan and China,which comprise a significant portion of our revenue and where we have suppliers,contractmanufacturers,and assembly partners who are critical to our supply continuity,could have a material adverse impact on us.The use of our GPUs other than that for which they were designed and marketed,including new and unexpected use cases,has impacted andcan in the future impact demand for our products,including by leading to inconsistent spikes and drops in demand.For example,several yearsago,our Gaming GPUs began to be used for mining digital currencies such as Ethereum.It is difficult for us to estimate with any reasonabledegree of precision the past or current impact of cryptocurrency mining,or forecast the future impac

0人已浏览 2023-12-07 51页 5星级

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington,D.C.20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended October 29,2023 OR 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(Address of principal executive offices)(Zip Code)(408)486-2000(Registrants telephone number,including area code)N/A(Former name,former address and former fiscal year if changed since last report)Securities registered pursuant to Section 12(b)of the Act:Title of each class Trading Symbol(s)Name of each exchange on which registered Common Stock,$0.001 par value per share NVDA The Nasdaq Global Select Market 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 No Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T(232.405 of this chapter)during the preceding 12 months(or for such shorter period that the registrant was required to submit such files).Yes No 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 the 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 Accelerated filer Non-accelerated filer Smaller reporting company Emerging growth 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.Indicate by check mark whether the registrant is a shell company(as defined in Rule 12b-2 of the Exchange Act).Yes No The number of shares of common stock,$0.001 par value,outstanding as of November 17,2023,was 2.47 billion.NVIDIA CORPORATION FORM 10-Q FOR THE QUARTER ENDED OCTOBER 29,2023 TABLE OF CONTENTS Page PART I:FINANCIAL INFORMATION Item 1.Financial Statements(Unaudited)a)Condensed Consolidated Statements of Income for the three and nine months ended October 29,2023 and October 30,2022 3 b)Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended October 29,2023 and October 30,2022 4 c)Condensed Consolidated Balance Sheets as of October 29,2023 and January 29,2023 5 d)Condensed Consolidated Statements of Shareholders Equity for the three and nine months ended October 29,2023 and October 30,2022 6 e)Condensed Consolidated Statements of Cash Flows for the nine months ended October 29,2023 and October 30,2022 8 f)Notes to Condensed Consolidated Financial Statements 9 Item 2.Managements Discussion and Analysis of Financial Condition and Results of Operations 25 Item 3.Quantitative and Qualitative Disclosures About Market Risk 35 Item 4.Controls and Procedures 35 PART II:OTHER INFORMATION Item 1.Legal Proceedings 35 Item 1A.Risk Factors 36 Item 2.Unregistered Sales of Equity Securities,Use of Proceeds,and Issuer Purchases of Equity Securities 45 Item 5.Other Information 46 Item 6.Exhibits 47 Signature 48 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 Company Blog(http:/)NVIDIA LinkedIn Page(http:/ Facebook Page(https:/ Instagram Page(https:/ Twitter Account(https:/ addition,investors and others can view NVIDIA videos on YouTube(https:/www.YouT 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 NVIDIAs investor relations website.2 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 October 29,October 30,October 29,October 30,2023 2022 2023 2022 Revenue$18,120$5,931$38,819$20,923 Cost of revenue 4,720 2,754 11,309 9,400 Gross profit 13,400 3,177 27,510 11,523 Operating expenses Research and development 2,294 1,945 6,210 5,387 Sales,general and administrative 689 631 1,942 1,815 Acquisition termination cost 1,353 Total operating expenses 2,983 2,576 8,152 8,555 Operating income 10,417 601 19,358 2,968 Interest income 234 88 572 152 Interest expense(63)(65)(194)(198)Other,net(66)(11)(24)(29)Other income(expense),net 105 12 354 (75)Income before income tax 10,522 613 19,712 2,893 Income tax expense(benefit)1,279 (67)2,237 (61)Net income$9,243$680$17,475$2,954 Net income per share:Basic$3.75$0.27$7.07$1.18 Diluted$3.71$0.27$7.01$1.17 Weighted average shares used in per share computation:Basic 2,468 2,483 2,470 2,495 Diluted 2,494 2,499 2,494 2,517 See accompanying Notes to Condensed Consolidated Financial Statements.3 NVIDIA CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(In millions)(Unaudited)Three Months Ended Nine Months Ended October 29,October 30,October 29,October 30,2023 2022 2023 2022 Net income$9,243$680$17,475$2,954 Other comprehensive loss,net of tax Available-for-sale securities:Net change in unrealized gain(loss)(18)7 (53)Reclassification adjustments for net realized gain included in net income 1 Net change in unrealized gain(loss)(18)7 (52)Cash flow hedges:Net change in unrealized loss(23)(14)(14)(44)Reclassification adjustments for net realized loss included in net income(14)(1)(38)(16)Net change in unrealized loss(37)(15)(52)(60)Other comprehensive loss,net of tax(37)(33)(45)(112)Total comprehensive income$9,206$647$17,430$2,842 See accompanying Notes to Condensed Consolidated Financial Statements.4 NVIDIA CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS(In millions)(Unaudited)October 29,January 29,2023 2023 ASSETS Current assets:Cash and cash equivalents$5,519$3,389 Marketable securities 12,762 9,907 Accounts receivable,net 8,309 3,827 Inventories 4,779 5,159 Prepaid expenses and other current assets 1,289 791 Total current assets 32,658 23,073 Property and equipment,net 3,844 3,807 Operating lease assets 1,316 1,038 Goodwill 4,430 4,372 Intangible assets,net 1,251 1,676 Deferred income tax assets 5,982 3,396 Other assets 4,667 3,820 Total assets$54,148$41,182 LIABILITIES AND SHAREHOLDERS EQUITY Current liabilities:Accounts payable$2,380$1,193 Accrued and other current liabilities 5,472 4,120 Short-term debt 1,249 1,250 Total current liabilities 9,101 6,563 Long-term debt 8,457 9,703 Long-term operating lease liabilities 1,091 902 Other long-term liabilities 2,234 1,913 Total liabilities 20,883 19,081 Commitments and contingencies-see Note 13 Shareholders equity:Preferred stock Common stock 2 2 Additional paid-in capital 12,991 11,971 Accumulated other comprehensive loss(88)(43)Retained earnings 20,360 10,171 Total shareholders equity 33,265 22,101 Total liabilities and shareholders equity$54,148$41,182 See accompanying Notes to Condensed Consolidated Financial Statements.5 NVIDIA CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY FOR THE THREE MONTHS ENDED OCTOBER 29,2023 AND OCTOBER 30,2022(Unaudited)Common Stock Outstanding Additional Paid-in Capital Accumulated Other Comprehensive Loss Retained Earnings Total Shareholders Equity(In millions,except per share data)Shares Amount Balances,July 30,2023 2,469$2$12,629$(51)$14,921$27,501 Net income 9,243 9,243 Other comprehensive loss (37)(37)Issuance of common stock from stock plans 7 157 157 Tax withholding related to vesting of restricted stock units(2)(764)(764)Shares repurchased(8)(14)(3,705)(3,719)Cash dividends declared and paid($0.04 per common share)(99)(99)Stock-based compensation 983 983 Balances,October 29,2023 2,466$2$12,991$(88)$20,360$33,265 Balances,July 31,2022 2,489$2$10,968$(90)$12,971$23,851 Net income 680 680 Other comprehensive loss (33)(33)Issuance of common stock from stock plans 9 143 143 Tax withholding related to vesting of restricted stock units(2)(294)(294)Shares repurchased(28)(1)(3,646)(3,647)Cash dividends declared and paid($0.04 per common share)(100)(100)Stock-based compensation 749 749 Balances,October 30,2022 2,468$2$11,565$(123)$9,905$21,349 See accompanying Notes to Condensed Consolidated Financial Statements.6 NVIDIA CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY FOR THE NINE MONTHS ENDED OCTOBER 29,2023 AND OCTOBER 30,2022(Unaudited)Common Stock Outstanding Additional Paid-in Capital Accumulated Other Comprehensive Loss Retained Earnings Total Shareholders Equity(In millions,except per share data)Shares Amount Balances,January 29,2023 2,466$2$11,971$(43)$10,171$22,101 Net income 17,475 17,475 Other comprehensive loss (45)(45)Issuance of common stock from stock plans 21 403 403 Tax withholding related to vesting of restricted stock units(5)(1,942)(1,942)Shares repurchased(16)(15)(6,990)(7,005)Cash dividends declared and paid($0.12 per common share)(296)(296)Stock-based compensation 2,574 2,574 Balances,October 29,2023 2,466$2$12,991$(88)$20,360$33,265 Balances,January 30,2022 2,506$3$10,385$(11)$16,235$26,612 Net income 2,954 2,954 Other comprehensive loss (112)(112)Issuance of common stock from stock plans 24 349 349 Tax withholding related to vesting of restricted stock units(6)(1,131)(1,131)Shares repurchased(56)(1)(3)(8,984)(8,988)Cash dividends declared and paid($0.12 per common share)(300)(300)Stock-based compensation 1,965 1,965 Balances,October 30,2022 2,468$2$11,565$(123)$9,905$21,349 See accompanying Notes to Condensed Consolidated Financial Statements.7 NVIDIA CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(In millions)(Unaudited)Nine Months Ended October 29,October 30,2023 2022 Cash flows from operating activities:Net income$17,475$2,954 Adjustments to reconcile net income to net cash provided by operating activities:Stock-based compensation expense 2,555 1,971 Depreciation and amortization 1,121 1,118 Losses on investments in non-affiliates 24 35 Deferred income taxes(2,411)(1,517)Acquisition termination cost 1,353 Other(170)(27)Changes in operating assets and liabilities,net of acquisitions:Accounts receivable(4,482)(258)Inventories 405 (1,848)Prepaid expenses and other assets(337)(1,307)Accounts payable 1,250 (358)Accrued and other current liabilities 953 1,175 Other long-term liabilities 208 102 Net cash provided by operating activities 16,591 3,393 Cash flows from investing activities:Proceeds from maturities of marketable securities 8,001 16,792 Proceeds from sales of marketable securities 1,806 Purchases of marketable securities(10,688)(9,764)Purchases related to property and equipment and intangible assets(815)(1,324)Acquisitions,net of cash acquired(83)(49)Investments in non-affiliates and other,net(872)(83)Net cash provided by(used in)investing activities(4,457)7,378 Cash flows from financing activities:Proceeds related to employee stock plans 403 349 Payments related to repurchases of common stock(6,874)(8,826)Repayment of debt(1,250)Payments related to tax on restricted stock units(1,942)(1,131)Dividends paid(296)(300)Principal payments on property and equipment and intangible assets(44)(54)Other(1)1 Net cash used in financing activities(10,004)(9,961)Change in cash,cash equivalents,and restricted cash 2,130 810 Cash,cash equivalents,and restricted cash at beginning of period 3,389 1,990 Cash,cash equivalents,and restricted cash at end of period$5,519$2,800 Supplemental disclosure of cash flow information:Cash paid for income taxes,net$4,676$1,372 See accompanying Notes to Condensed Consolidated Financial Statements.8 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 29,2023 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 29,2023,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 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 29,2023.Significant Accounting Policies There have been no material changes to our significant accounting policies disclosed 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 29,2023.Fiscal Year We operate on a 52-or 53-week year,ending on the last Sunday in January.Fiscal years 2024 and 2023 are both 52-week years.The third quarters of fiscal years 2024 and 2023 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 our estimates.On an on-going basis,we evaluate our estimates,including those related to revenue recognition,cash equivalents and marketable securities,accounts receivable,inventories,income taxes,goodwill,stock-based compensation,litigation,investigation and settlement costs,restructuring and other charges,property,plant,and equipment,and other contingencies.These estimates are based on historical facts and various other assumptions that we believe are reasonable.In February 2023,we completed an assessment of the useful lives of our property,plant,and equipment.Based on advances in technology and usage rate,we increased the estimated useful life of a majority of our server,storage,and network equipment from three to a range of four to five years,and our assembly and test equipment from five to seven years.This change in accounting estimate became effective at the beginning of fiscal year 2024.Based on the carrying amounts of a majority of our server,storage,network,and assembly and test equipment,net,in use as of the end of fiscal year 2023,the estimated effect of this change for the three months ended October 29,2023 was a benefit of$17 million and$24 million for cost of revenue and operating expenses,respectively,which resulted in an increase in operating income of$41 million and net income of$36 million after tax,or$0.01 per both basic and diluted share.The estimated effect of this change for the first nine months of fiscal year 2024 was a benefit of$24 million and$83 million 9 NVIDIA CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)(Unaudited)for cost of revenue and operating expenses,respectively,which resulted in an increase in operating income of$107 million and net income of$91 million after tax,or$0.04 per both basic and diluted share.Note 2-Business Combination Termination of the Arm Share Purchase Agreement In February 2022,NVIDIA and SoftBank Group Corp,or SoftBank,announced the termination of the Share Purchase Agreement whereby NVIDIA would have acquired Arm Limited,or Arm,from SoftBank.The parties agreed to terminate due to significant regulatory challenges preventing the completion of the transaction.We recorded an acquisition termination cost of$1.35 billion in fiscal year 2023 reflecting the write-off of the prepayment provided at signing.Note 3-Leases Our lease obligations primarily consist of operating leases for our headquarters complex,domestic and international office facilities,and data center space,with lease periods expiring between fiscal years 2024 and 2035.Future minimum lease payments under our non-cancelable operating leases as of October 29,2023 are as follows:Operating Lease Obligations (In millions)Fiscal Year:2024(excluding first nine months of fiscal year 2024)$84 2025 269 2026 248 2027 233 2028 220 2029 and thereafter 454 Total 1,508 Less imputed interest 187 Present value of net future minimum lease payments 1,321 Less short-term operating lease liabilities 230 Long-term operating lease liabilities$1,091 In addition,we have operating leases,primarily for our data centers,that are expected to commence between the fourth quarter of fiscal year 2024 and fiscal year 2025 with lease terms of 3 to 10 years for$924 million.Operating lease expenses were$69 million and$49 million for the third quarter of fiscal years 2024 and 2023,respectively,and$195 million and$139 million for the first nine months of fiscal years 2024 and 2023,respectively.Short-term and variable lease expenses for the third quarter and first nine months of fiscal years 2024 and 2023 were not significant.10 NVIDIA CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)(Unaudited)Other information related to leases was as follows:Nine Months Ended October 29,2023 October 30,2022 (In millions)Supplemental cash flows information Operating cash flows used for operating leases$200$134 Operating lease assets obtained in exchange for lease obligations$439$213 As of October 29,2023,our operating leases had a weighted average remaining lease term of 6.3 years and a weighted average discount rate of 3.64%.As of January 29,2023,our operating leases had a weighted average remaining lease term of 6.8 years and a weighted average discount rate of 3.21%.Note 4-Stock-Based Compensation Our stock-based compensation expense is associated with restricted stock units,or RSUs,performance stock units that are based on our corporate financial performance targets,or PSUs,performance stock units that are based on market conditions,or market-based PSUs,and our employee stock purchase plan,or ESPP.Our Condensed Consolidated Statements of Income include stock-based compensation expense,net of amounts allocated to inventory,as follows:Three Months Ended Nine Months Ended October 29,2023 October 30,2022 October 29,2023 October 30,2022 (In millions)Cost of revenue$38$32$96$108 Research and development 701 530 1,826 1,365 Sales,general and administrative 240 183 633 498 Total$979$745$2,555$1,971 Equity Award Activity The following is a summary of our equity award transactions under our equity incentive plans:RSUs,PSUs,and Market-based PSUs Outstanding Number of Shares Weighted Average Grant-Date Fair Value Per Share (In millions,except per share data)Balances,January 29,2023 45$158.45 Granted 13$364.52 Vested(16)$141.02 Canceled and forfeited(1)$201.49 Balances,October 29,2023 41$230.11 As of October 29,2023,there was$9.03 billion of aggregate unearned stock-based compensation expense.This amount is expected to be recognized over a weighted average period of 2.6 years for RSUs,PSUs,and market-based PSUs,and 11 months for ESPP.11 NVIDIA CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)(Unaudited)Note 5 Net Income Per Share The following is a reconciliation of the denominator of the basic and diluted net income per share computations for the periods presented:Three Months Ended Nine Months Ended October 29,October 30,October 29,October 30,2023 2022 2023 2022 (In millions,except per share data)Numerator:Net income$9,243$680$17,475$2,954 Denominator:Basic weighted average shares 2,468 2,483 2,470 2,495 Dilutive impact of outstanding equity awards 26 16 24 22 Diluted weighted average shares 2,494 2,499 2,494 2,517 Net income per share:Basic(1)$3.75$0.27$7.07$1.18 Diluted(2)$3.71$0.27$7.01$1.17 Equity awards excluded from diluted net income per share because their effect would have been anti-dilutive 1 36 14 29 (1)Calculated as net income divided by basic weighted average shares.(2)Calculated as net income divided by diluted weighted average shares.Diluted net income per share is computed using the weighted average number of common and potentially dilutive shares outstanding during the period,using the treasury stock method.Any anti-dilutive effect of equity awards outstanding is not included in the computation of diluted net income per share.Note 6 Income Taxes Income tax was an expense of$1.28 billion and$2.24 billion for the third quarter and first nine months of fiscal year 2024,respectively,and a benefit of$67 million and$61 million for the third quarter and first nine months of fiscal year 2023,respectively.Income tax as a percentage of income before income tax was an expense of 12.2%and 11.3%for the third quarter and first nine months of fiscal year 2024,respectively,and a benefit of 10.9%and 2.1%for the third quarter and first nine months of fiscal year 2023,respectively.During the third quarter of fiscal year 2024,the Internal Revenue Service,or IRS,audit of our federal income tax returns for fiscal years 2018 and 2019 was resolved.We recognized a non-cash net benefit of$145 million,related to this IRS audit resolution,for effectively settled positions.This benefit consists of a reduction in unrecognized tax benefits of$236 million and related accrued interest of$17 million,net of federal benefit partially offset by additional cash tax payments and reductions in tax attribute carryforwards of$108 million.The effective tax rate increased due to a decreased impact of tax benefits from the foreign-derived intangible income deduction,stock-based compensation,and the U.S.federal research tax credit,relative to the increase in income before income tax.The increase in the effective tax rate was partially offset by a benefit due to the IRS audit resolution.Our effective tax rates for the first nine months of fiscal years 2024 and 2023 were lower than the U.S.federal statutory rate of 21%due to tax benefits from the foreign-derived intangible income deduction,stock-based compensation and the U.S.federal research tax credit.Our effective tax rate for the first nine months of fiscal year 2024 was additionally benefited by the IRS audit resolution.12 NVIDIA CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)(Unaudited)Other than the IRS audit resolution,for the first nine months of fiscal year 2024,there were no material changes to our tax years that remain subject to examination by major tax jurisdictions.Additionally,there have been no other material changes to our unrecognized tax benefits and any related interest or penalties since the fiscal year ended January29,2023.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 October29,2023,we do not believe that our estimates,as otherwise provided for,on such tax positions will significantly increase or decrease within the next 12 months.Note 7-Cash Equivalents and Marketable Securities Our cash equivalents and marketable securities related to debt securities are classified as“available-for-sale”debt securities.The following is a summary of cash equivalents and marketable securities:October 29,2023 Amortized Cost Unrealized Gain Unrealized Loss Estimated Fair Value Reported as Cash Equivalents Marketable Securities (In millions)Corporate debt securities$6,937$1$(20)$6,918$1,714$5,204 Debt securities issued by the U.S.Treasury 5,075 1 (24)5,052 5,052 Money market funds 3,190 3,190 3,190 Debt securities issued by U.S.government agencies 2,316 (5)2,311 100 2,211 Certificates of deposit 418 418 198 220 Foreign government bonds 175 175 100 75 Total$18,111$2$(49)$18,064$5,302$12,762 January 29,2023 Amortized Cost Unrealized Gain Unrealized Loss Estimated Fair Value Reported as Cash Equivalents Marketable Securities (In millions)Corporate debt securities$4,809$(12)$4,797$1,087$3,710 Debt securities issued by the U.S.Treasury 4,185 1 (44)4,142 4,142 Debt securities issued by U.S.government agencies 1,836 (2)1,834 50 1,784 Money market funds 1,777 1,777 1,777 Certificates of deposit 365 365 134 231 Foreign government bonds 140 140 100 40 Total$13,112$1$(58)$13,055$3,148$9,907 13 NVIDIA CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)(Unaudited)The following tables provide the breakdown of unrealized losses,aggregated by investment category and length of time that individual securities have been in a continuous loss position:October 29,2023 Less than 12 Months 12 Months or Greater Total Estimated Fair Value Gross Unrealized Loss Estimated Fair Value Gross Unrealized Loss Estimated Fair Value Gross Unrealized Loss (In millions)Corporate debt securities$2,773$(16)$852$(4)$3,625$(20)Debt securities issued by the U.S.Treasury 2,098 (12)1,371 (12)3,469 (24)Debt securities issued by U.S.government agencies 1,447 (5)1,447 (5)Total$6,318$(33)$2,223$(16)$8,541$(49)January 29,2023 Less than 12 Months 12 Months or Greater Total Estimated Fair Value Gross Unrealized Loss Estimated Fair Value Gross Unrealized Loss Estimated Fair Value Gross Unrealized Loss (In millions)Debt securities issued by the U.S.Treasury$2,444$(21)$1,172$(23)$3,616$(44)Corporate debt securities 1,188 (7)696 (5)1,884 (12)Debt securities issued by U.S.government agencies 1,307 (2)1,307 (2)Total$4,939$(30)$1,868$(28)$6,807$(58)The gross unrealized losses are related to fixed income securities,driven primarily by changes in interest rates.Net realized gains and losses were not significant for all periods presented.The amortized cost and estimated fair value of cash equivalents and marketable securities are shown below by contractual maturity.October 29,2023 January 29,2023 Amortized Cost Estimated Fair Value Amortized Cost Estimated Fair Value (In millions)Less than one year$11,405$11,388$9,738$9,708 Due in 1-5 years 6,706 6,676 3,374 3,347 Total$18,111$18,064$13,112$13,055 14 NVIDIA CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)(Unaudited)Note 8 Fair Value of Financial Assets and Liabilities The fair values of our financial assets and liabilities are determined using quoted market prices of identical assets or quoted market prices of similar assets from active markets.We review fair value hierarchy classification on a quarterly basis.Fair Value at Pricing Category October 29,2023 January 29,2023 (In millions)Assets Cash equivalents and marketable securities:Money market funds Level 1$3,190$1,777 Corporate debt securities Level 2$6,918$4,797 Debt securities issued by the U.S.Treasury Level 2$5,052$4,142 Debt securities issued by U.S.government agencies Level 2$2,311$1,834 Certificates of deposit Level 2$418$365 Foreign government bonds Level 2$175$140 Other assets(Investments in non-affiliated entities):Publicly-held equity securities Level 1$153$11 Privately-held equity securities Level 3$1,019$288 Liabilities(1)0.309%Notes Due 2023 Level 2$1,230 0.584%Notes Due 2024 Level 2$1,212$1,185 3.20%Notes Due 2026 Level 2$945$966 1.55%Notes Due 2028 Level 2$1,060$1,099 2.85%Notes Due 2030 Level 2$1,289$1,364 2.00%Notes Due 2031 Level 2$981$1,044 3.50%Notes Due 2040 Level 2$756$870 3.50%Notes Due 2050 Level 2$1,388$1,637 3.70%Notes Due 2060 Level 2$342$410 (1)These liabilities are carried on our Condensed Consolidated Balance Sheets at their original issuance value,net of unamortized debt discount and issuance costs.15 NVIDIA CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)(Unaudited)Note 9-Amortizable Intangible Assets and Goodwill The components of our amortizable intangible assets are as follows:October 29,2023 January 29,2023 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount (In millions)Acquisition-related intangible assets$2,642$(1,584)$1,058$3,093$(1,614)$1,479 Patents and licensed technology 450 (257)193 446 (249)197 Total intangible assets$3,092$(1,841)$1,251$3,539$(1,863)$1,676 Amortization expense associated with intangible assets was$144 million and$471 million for the third quarter and first nine months of fiscal year 2024,respectively,and$181 million and$518 million for the third quarter and first nine months of fiscal year 2023,respectively.The following table outlines the estimated future amortization expense related to the net carrying amount of intangible assets as of October 29,2023:Future Amortization Expense (In millions)Fiscal Year:2024(excluding first nine months of fiscal year 2024)$143 2025 554 2026 259 2027 149 2028 37 2029 and thereafter 109 Total$1,251 In the first nine months of fiscal year 2024,goodwill increased by$58 million from an acquisition,and was assigned to our Compute&Networking segment.Note 10-Balance Sheet Components Two customers each accounted for 11%of our accounts receivable balance as of October 29,2023.Two customers accounted for 14%and 11%of our accounts receivable balance as of January 29,2023.Certain balance sheet components are as follows:October 29,January 29,2023 2023 Inventories(1):(In millions)Raw materials$1,663$2,430 Work in-process 1,338 466 Finished goods 1,778 2,263 Total inventories$4,779$5,159 16 NVIDIA CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)(Unaudited)(1)During the third quarter of fiscal years 2024 and 2023,we recorded an inventory provision of approximately$208 million and$354 million,respectively,in cost of revenue.October 29,January 29,2023 2023 Other Assets:(In millions)Prepaid supply and capacity agreements(1)$2,927$2,989 Investments in non-affiliated entities 1,172 299 Prepaid royalties 369 387 Prepaid cloud services 60 23 Other 139 122 Total other assets$4,667$3,820 (1)As of October 29,2023 and January 29,2023,there were an additional$743 million and$458 million of short-term prepaid supply and capacity agreements included in Prepaid expenses and other current assets,respectively.October 29,January 29,2023 2023 Accrued and Other Current Liabilities:(In millions)Customer program accruals$1,771$1,196 Excess inventory purchase obligations(1)1,280 954 Accrued payroll and related expenses 516 530 Deferred revenue(2)513 354 Taxes payable 420 467 Product warranty and return provisions 299 108 Operating leases 230 176 Licenses and royalties 150 149 Unsettled share repurchases 117 Other 176 186 Total accrued and other current liabilities$5,472$4,120 (1)During the third quarter of fiscal years 2024 and 2023,we recorded an expense of approximately$473 million and$348 million,respectively,in cost of revenue for inventory purchase obligations in excess of our current demand projections,supplier charges and for penalties related to cancellations and underutilization.(2)Deferred revenue primarily includes customer advances and deferrals related to license and development arrangements,support for hardware and software,and cloud services.October 29,January 29,2023 2023 Other Long-Term Liabilities:(In millions)Income tax payable(1)$1,206$1,204 Deferred revenue(2)425 218 Deferred income tax 424 247 Licenses payable 113 181 Other 66 63 Total other long-term liabilities$2,234$1,913 (1)Income tax payable is comprised of the long-term portion of the one-time transition tax payable,unrecognized tax benefits,and related interest and penalties.(2)Deferred revenue primarily includes deferrals related to support for hardware and software.17 NVIDIA CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)(Unaudited)Deferred Revenue The following table shows the changes in deferred revenue during the first nine months of fiscal years 2024 and 2023:October 29,October 30,2023 2022 (In millions)Balance at beginning of period$572$502 Deferred revenue additions during the period 1,269 577 Revenue recognized during the period(903)(528)Balance at end of period$938$551 Revenue allocated to remaining performance obligations,which includes deferred revenue and amounts that will be invoiced and recognized as revenue in future periods,was$896 million as of October 29,2023.We expect to recognize approximately 42%of this revenue over the next twelve months and the remainder thereafter.This excludes revenue related to performance obligations for contracts with a length of one year or less.Note 11-Derivative Financial Instruments We enter into foreign currency forward contracts to mitigate the impact of foreign currency exchange rate movements on our operating expenses.These contracts are designated as cash flow hedges for hedge accounting treatment.Gains or losses on the contracts are recorded in accumulated other comprehensive income or loss and reclassified to operating expense when the related operating expenses are recognized in earnings or ineffectiveness should occur.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 the U.S.dollar.These forward contracts were not designated for hedge accounting treatment.Therefore,the change in fair value of these contracts is recorded in other income or expense and offsets the change in fair value of the hedged foreign currency denominated monetary assets and liabilities,which is also recorded in other income or expense.The table below presents the notional value of our foreign currency forward contracts outstanding:October 29,2023 January 29,2023 (In millions)Designated as cash flow hedges$1,148$1,128 Non-designated hedges$365$366 The unrealized gains and losses or fair value of our foreign currency forward contracts was not significant as of October 29,2023 and January 29,2023.As of October 29,2023,all designated foreign currency forward contracts mature within 18 months.The expected realized gains and losses deferred into accumulated other comprehensive income or loss related to foreign currency forward contracts within the next twelve months was not significant.During the first nine months of fiscal years 2024 and 2023,the impact of derivative financial instruments designated for hedge accounting treatment on other comprehensive income or loss was not significant and all such instruments were determined to be highly effective.18 NVIDIA CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)(Unaudited)Note 12-Debt Long-Term Debt The carrying value of our outstanding notes,the calendar year of maturity,and the associated interest rates were as follows:Carrying Value at Expected Remaining Term(years)Effective Interest Rate October 29,2023 January 29,2023 (In millions)0.309%Notes Due 2023 0.41%$1,250 0.584%Notes Due 2024 0.6 0.66%1,250 1,250 3.20%Notes Due 2026 2.9 3.31%1,000 1,000 1.55%Notes Due 2028 4.6 1.64%1,250 1,250 2.85%Notes Due 2030 6.4 2.93%1,500 1,500 2.00%Notes Due 2031 7.6 2.09%1,250 1,250 3.50%Notes Due 2040 16.4 3.54%1,000 1,000 3.50%Notes Due 2050 26.4 3.54%2,000 2,000 3.70%Notes Due 2060 36.4 3.73P0 500 Unamortized debt discount and issuance costs (44)(47)Net carrying amount 9,706 10,953 Less short-term portion (1,249)(1,250)Total long-term portion$8,457$9,703 All our notes are unsecured senior obligations.All existing and future liabilities of our subsidiaries will be effectively senior to the notes.Our notes pay interest semi-annually.We may redeem each of our notes prior to maturity,subject to a make-whole premium as defined in the applicable form of note.On June 15,2023,we repaid the 0.309%Notes Due 2023.As of October 29,2023,we were in compliance with the required covenants,which are non-financial in nature,under the outstanding notes.Commercial Paper We have a$575 million commercial paper program to support general corporate purposes.As of October 29,2023,we had not issued any commercial paper.Note 13-Commitments and Contingencies Purchase Obligations Our purchase obligations reflect our commitments to purchase components used to manufacture our products,including long-term supply and capacity agreements,certain software and technology licenses,other goods and services and long-lived assets.As of October 29,2023,we had outstanding inventory purchase and long-term supply and capacity obligations totaling$17.11 billion.We enter into agreements with contract manufacturers that allow them to procure inventory based upon criteria as defined by us,and in certain instances,these agreements allow us the option to cancel,reschedule,and adjust our requirements based on our business needs prior to firm orders being placed,but these changes may result in the payment of costs incurred through the date of 19 NVIDIA CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)(Unaudited)cancellation.Other non-inventory purchase obligations were$4.43 billion,which includes$3.60 billion of multi-year cloud service agreements,primarily to support our research and development efforts.Total future purchase commitments as of October 29,2023 are as follows:Commitments (In millions)Fiscal Year:2024(excluding first nine months of fiscal year 2024)$6,499 2025 11,861 2026 1,128 2027 1,038 2028 660 2029 and thereafter 354 Total$21,540 Accrual for Product Warranty Liabilities The estimated amount of product warranty liabilities was$142 million and$82 million as of October 29,2023 and January 29,2023,respectively.The estimated product returns and estimated product warranty activity consisted of the following:Three Months Ended Nine Months Ended October 29,2023 October 30,2022 October 29,2023 October 30,2022 (In millions)Balance at beginning of period$115$168$82$46 Additions 50 3 105 141 Utilization(23)(67)(45)(83)Balance at end of period$142$104$142$104 We have provided indemnities for matters such as tax,product,and employee liabilities.We have included intellectual property indemnification provisions in our technology-related agreements with third parties.Maximum potential future payments cannot be estimated because many of these agreements do not have a maximum stated liability.We have not recorded any liability in our Condensed Consolidated Financial Statements for such indemnifications.Litigation Securities Class Action and Derivative Lawsuits The plaintiffs in the putative securities class action lawsuit,captioned 4:18-cv-07669-HSG,initially filed on December 21,2018 in the United States District Court for the Northern District of California,and titled In Re NVIDIA Corporation Securities Litigation,filed an amended complaint on May 13,2020.The amended complaint asserted that NVIDIA and certain NVIDIA executives violated Section 10(b)of the Securities Exchange Act of 1934,as amended,or the Exchange Act,and SEC Rule 10b-5,by making materially false or misleading statements related to channel inventory and the impact of cryptocurrency mining on GPU demand between May 10,2017 and November 14,2018.Plaintiffs also alleged that the NVIDIA executives who they named as defendants violated Section 20(a)of the Exchange Act.Plaintiffs sought class certification,an award of unspecified compensatory damages,an award of reasonable costs and expenses,including attorneys fees and expert fees,and further relief as the Court may deem just and proper.On March 2,2021,the district court granted NVIDIAs motion to dismiss the complaint without leave to amend,entered judgment in favor of NVIDIA and closed the case.On March 30,2021,plaintiffs filed an appeal from judgment 20 NVIDIA CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)(Unaudited)in the United States Court of Appeals for the Ninth Circuit,case number 21-15604.On August 25,2023,a majority of a three-judge Ninth Circuit panel affirmed in part and reversed in part the district courts dismissal of the case,with a third judge dissenting on the basis that the district court did not err in dismissing the case.On November 15,2023,the Ninth Circuit denied NVIDIAs petition for rehearing en banc of the Ninth Circuit panels majority decision to reverse in part the dismissal of the case,which NVIDIA had filed on October 10,2023.The putative derivative lawsuit pending in the United States District Court for the Northern District of California,captioned 4:19-cv-00341-HSG,initially filed January 18,2019 and titled In re NVIDIA Corporation Consolidated Derivative Litigation,was stayed pending resolution of the plaintiffs appeal in the In Re NVIDIA Corporation Securities Litigation action.On February 22,2022,the court administratively closed the case,but stated that it would reopen the case once the appeal in the In Re NVIDIA Corporation Securities Litigation action is resolved.Following the Ninth Circuits denial of NVIDIAs petition for rehearing on November 15,2023,the parties will meet and confer regarding the next steps in this derivative matter.The lawsuit asserts claims,purportedly on behalf of us,against certain officers and directors of the Company for breach of fiduciary duty,unjust enrichment,waste of corporate assets,and violations of Sections 14(a),10(b),and 20(a)of the Exchange Act based on the dissemination of allegedly false and misleading statements related to channel inventory and the impact of cryptocurrency mining on GPU demand.The plaintiffs are seeking unspecified damages and other relief,including reforms and improvements to NVIDIAs corporate governance and internal procedures.The putative derivative actions initially filed September 24,2019 and pending in the United States District Court for the District of Delaware,Lipchitz v.Huang,et al.(Case No.1:19-cv-01795-UNA)and Nelson v.Huang,et.al.(Case No.1:19-cv-01798-UNA),remain stayed pending resolution of the plaintiffs appeal in the In Re NVIDIA Corporation Securities Litigation action.Following the Ninth Circuits denial of NVIDIAs petition for rehearing on November 15,2023,the parties will meet and confer regarding the next steps in these derivative matters.The lawsuits assert claims,purportedly on behalf of us,against certain officers and directors of the Company for breach of fiduciary duty,unjust enrichment,insider trading,misappropriation of information,corporate waste and violations of Sections 14(a),10(b),and 20(a)of the Exchange Act based on the dissemination of allegedly false and misleading statements related to channel inventory and the impact of cryptocurrency mining on GPU demand.The plaintiffs seek unspecified damages and other relief,including disgorgement of profits from the sale of NVIDIA stock and unspecified corporate governance measures.Another putative derivative action was filed on October 30,2023 in the Court of Chancery of the State of Delaware,captioned Horanic v.Huang,et al.(Case No.2023-1096-KSJM).This lawsuit asserts claims,purportedly on behalf of us,against certain officers and directors of the Company for breach of fiduciary duty and insider trading based on the dissemination of allegedly false and misleading statements related to channel inventory and the impact of cryptocurrency mining on GPU demand.The plaintiffs seek unspecified damages and other relief,including disgorgement of profits from the sale of NVIDIA stock and reform of unspecified corporate governance measures.Accounting for Loss Contingencies As of October 29,2023,we have not recorded any accrual for contingent liabilities associated with the legal proceedings described above based on our belief that liabilities,while possible,are not probable.Further,except as specifically described above,any possible loss or range of loss in these matters cannot be reasonably estimated at this time.We are engaged in legal actions not described above arising in the ordinary course of 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 14-Shareholders Equity Capital Return Program During the third quarter and first nine months of fiscal year 2024,we repurchased 8.3 million and 15.9 million shares of our common stock for$3.72 billion and$7.01 billion,respectively.During the third quarter and first nine months of fiscal year 2023,we repurchased 28 million and 56 million shares of our common stock for 21 NVIDIA CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)(Unaudited)$3.65 billion and$8.99 billion,respectively.In August 2023,our Board of Directors approved an increase to our share repurchase program of an additional$25.00 billion,without expiration.As of October 29,2023,we were authorized,subject to certain specifications,to repurchase additional shares of our common stock up to$25.24 billion.From October 30,2023 through November 17,2023,we repurchased 0.8 million shares for$366 million pursuant to a Rule 10b5-1 trading plan.Our share repurchase program aims to offset dilution from shares issued to employees.We may pursue additional share repurchases as we weigh market factors and other investment opportunities.During the third quarter and first nine months of fiscal year 2024,we paid$99 million and$296 million in cash dividends to our shareholders,respectively.During the third quarter and first nine months of fiscal year 2023,we paid$100 million and$300 million in cash dividends to our shareholders,respectively.Our cash dividend program and the payment of future cash dividends under that program are subject to our Board of Directors continuing determination that the dividend program and the declaration of dividends thereunder are in the best interests of our shareholders.Note 15-Segment Information Our Chief Executive Officer,who is considered to be our chief operating decision maker,or CODM,reviews financial information presented on an operating segment basis for purposes of making decisions and assessing financial performance.The Compute&Networking segment includes our Data Center accelerated computing platform;networking;automotive artificial intelligence,or AI,Cockpit,autonomous driving development agreements,and autonomous vehicle solutions;electric vehicle computing platforms;Jetson for robotics and other embedded platforms;NVIDIA AI Enterprise and other software;and DGX Cloud.The Graphics segment includes GeForce GPUs for gaming and PCs,the GeForce NOW game streaming service and related infrastructure,and solutions for gaming platforms;Quadro/NVIDIA RTX GPUs for enterprise workstation graphics;virtual GPU software for cloud-based visual and virtual computing;automotive platforms for infotainment systems;and Omniverse Enterprise software for building and operating 3D internet applications.Operating results by segment include costs or expenses that are directly attributable to each segment,and costs or expenses that are leveraged across our unified architecture and therefore allocated between our two segments.The“All Other”category includes the expenses that our CODM does not assign to either Compute&Networking or Graphics for purposes of making operating decisions or assessing financial performance.The expenses include stock-based compensation expense,corporate infrastructure and support costs,acquisition-related and other costs,intellectual property related,or IP-related costs,acquisition termination cost,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.Depreciation and amortization expense directly attributable to each reportable segment is included in operating results for each segment.However,our CODM does not evaluate depreciation and amortization expense by operating segment and,therefore,it is not separately presented.There is no intersegment revenue.The accounting policies for segment reporting are the same as for our consolidated financial statements.The table below presents details of our reportable segments and the“All Other”category.22 NVIDIA CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)(Unaudited)Compute&Networking Graphics All Other Consolidated (In millions)Three Months Ended October 29,2023 Revenue$14,645$3,475$18,120 Operating income(loss)$10,262$1,493$(1,338)$10,417 Three Months Ended October 30,2022 Revenue$3,816$2,115$5,931 Operating income(loss)$1,086$606$(1,091)$601 Nine Months Ended October 29,2023 Revenue$29,507$9,312$38,819 Operating income(loss)$19,149$3,751$(3,542)$19,358 Nine Months Ended October 30,2022 Revenue$11,395$9,528$20,923 Operating income(loss)$3,509$3,739$(4,280)$2,968 Three Months Ended Nine Months Ended October 29,2023 October 30,2022 October 29,2023 October 30,2022 (In millions)Reconciling items included in All Other category:Stock-based compensation expense$(979)$(745)$(2,555)$(1,971)Unallocated cost of revenue and operating expenses(198)(156)(515)(432)Acquisition-related and other costs(135)(174)(446)(499)IP-related costs(26)(36)Acquisition termination cost (1,353)Other (16)10 (25)Total$(1,338)$(1,091)$(3,542)$(4,280)23 NVIDIA CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)(Unaudited)Revenue by geographic region is designated based upon the billing location of the customer.Revenue by Geographic areas were as follows:Three Months Ended Nine Months Ended October 29,October 30,October 29,October 30,2023 2022 2023 2022 (In millions)Revenue:United States$6,302$2,148$14,730$6,069 Taiwan 4,333 1,153 8,968 5,134 China(including Hong Kong)4,030 1,148 8,360 4,831 Singapore 2,702 536 4,506 1,963 Other countries 753 946 2,255 2,926 Total revenue$18,120$5,931$38,819$20,923 Revenue from sales to customers outside of the United States accounted for 65%and 62%of total revenue for the third quarter and first nine months of fiscal year 2024,respectively,and 64%and 71%of total revenue for the third quarter and first nine months of fiscal year 2023,respectively.The increase in revenue to the United States for the third quarter and first nine months of fiscal year 2024 was primarily due to higher U.S.-based Data Center end demand.Sales to one customer,or Customer A,represented 12%of total revenue for the third quarter of fiscal year 2024,and sales to a second customer,or Customer B,represented 11%of total revenue for the first nine months of fiscal year 2024,both of which were attributable to the Compute&Networking segment.In the first nine months of fiscal year 2023,there were no customers with 10%or more of total revenue.In the third quarter of fiscal year 2023,one customer represented 10%of total revenue,primarily attributable to the Compute&Networking segment.The following table summarizes information pertaining to our revenue by each of the specialized markets we serve:Three Months Ended Nine Months Ended October 29,October 30,October 29,October 30,2023 2022 2023 2022 (In millions)Revenue:Data Center$14,514$3,833$29,121$11,389 Gaming 2,856 1,574 7,582 7,236 Professional Visualization 416 200 1,090 1,318 Automotive 261 251 810 609 OEM and Other 73 73 216 371 Total revenue$18,120$5,931$38,819$20,923 24 ITEM 2.MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Forward-Looking Statements This Quarterly Report on Form 10-Q contains forward-looking statements which are based on our managements 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 and our Annual Report on Form 10-K for the fiscal year ended January 29,2023 and in our Quarterly Reports on Form 10-Q for the fiscal quarters ended April 30,2023 and July 30,2023 in greater detail under the heading“Risk Factors”of such reports.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.2023 NVIDIA Corporation.All rights reserved.The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the risk factors set forth in this Quarterly Report on Form 10-Q,our Annual Report on Form 10-K for the fiscal year ended January 29,2023,and our Quarterly Reports on Form 10-Q for the fiscal quarters ended April 30,2023 and July 30,2023 under the heading“Risk Factors”of such reports,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 and our other filings with the SEC,before deciding to purchase or sell shares of our common stock.Overview Our Company and Our Businesses Since our founding in 1993,NVIDIA has been a pioneer in accelerated computing.Our invention of the GPU in 1999 has sparked the growth of the PC gaming market,redefined computer graphics,ignited the era of modern AI and has fueled industrial digitalization across markets.NVIDIA is now a full-stack computing company with data-center-scale offerings that are reshaping industry.Our two operating segments are Compute&Networking and Graphics,as described in Note 15 of the Notes to Condensed Consolidated Financial Statements.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 Demand and Supply,Product Transitions,and New Products and Business Models Demand for our data center systems and products has surged over the last three quarters and our demand visibility extends into next year.To meet this expected demand,we have increased our purchase obligations with existing suppliers,added new suppliers and entered into prepaid supply and capacity agreements.These increased purchase volumes,the number of suppliers,and the integration of new suppliers into our supply chain may create more supply chain complexity and execution risk.We expect to continue to enter into supplier and capacity arrangements and expect our supply to increase each quarter through next year.We may incur inventory provisions or impairments if our inventory or supply or capacity commitments exceed demand for our products or demand declines.25 We build finished products and maintain inventory in advance of anticipated demand.While we have entered into long-term supply and capacity commitments,we may not be able to secure sufficient commitments for capacity to address our business needs,or our long-term demand expectations may change.These risks may increase as we shorten our product development cycles or enter new lines of business,which may require us to integrate new suppliers into our supply chain,creating additional supply chain complexity.Product transitions are complex as we often ship both new and prior architecture products simultaneously and we and our channel partners prepare to ship and support new products.Due to our product introduction cycles,we are almost always in various stages of transitioning the architecture of our Data Center,Professional Visualization,and Gaming products.We will have a broader and faster Data Center product launch cadence to meet a growing and diverse set of AI opportunities.The increased frequency of these transitions may magnify the challenges associated with managing our supply and demand due to long manufacturing lead times.Qualification time for new products,customers anticipating product transitions and channel partners reducing channel inventory of prior architectures ahead of new product introductions can create reductions or volatility in our revenue.In addition,the bring up of new product architectures is complex due to functionality challenges and quality concerns not identified in manufacturing testing.These product quality issues may incur costs,increase our warranty costs,and delay further production of our architecture.Deployment of new products to customers creates additional challenges due to the complexity of our technologies,which has impacted and may in the future impact the timing of customer purchases or otherwise impact our demand.While we have managed prior product transitions and have previously sold multiple product architectures at the same time,these transitions are difficult,may impair our ability to predict demand and impact our supply mix,and we may incur additional costs.We build technology and products for use cases and applications that may be new or may not yet exist such as our Omniverse platform,third-party large language models,and generative AI models.We have recently begun offering enterprise customers NVIDIA DGX cloud services directly and through our network of partners,which includes cloud-based infrastructure and software and services for training and deploying AI models,and NVIDIA AI Foundations for customizable pretrained AI models.Our demand estimates for new use cases,applications,and services can be incorrect and create volatility in our revenue or supply levels,and we may not be able to generate significant revenue from these use cases,applications,and services.New technologies such as generative AI models have emerged,and while they have driven increased demand for Data Center compute infrastructure,the long-term trajectory is unknown.Global Trade During the third quarter of fiscal year 2023,the U.S.government,or the USG,announced licensing requirements that,with certain exceptions,impact exports to China(including Hong Kong and Macau)and Russia of our A100 and H100 integrated circuits,DGX or any other systems or boards which incorporate A100 or H100 integrated circuits.During the second quarter of fiscal year 2024,the USG informed us of an additional licensing requirement for a subset of A100 and H100 products destined to certain customers and other regions,including some countries in the Middle East.On October 17,2023,the USG announced new and updated licensing requirements effective in our fourth quarter of fiscal year 2024 for exports to China and Country Groups D1,D4,and D5(including but not limited to Saudi Arabia,the United Arab Emirates,and Vietnam,but excluding Israel)of our products exceeding certain performance thresholds,including A100,A800,H100,H800,L4,L40,L40S and RTX 4090.The licensing requirements also apply to the export of products exceeding certain performance thresholds to a party headquartered in,or with an ultimate parent headquartered in,Country Group D5,including China.On October 23,2023,the USG informed us the licensing requirements were effective immediately for shipments of our A100,A800,H100,H800,and L40S products.These licensing requirements did not have a meaningful impact on our revenue in the third quarter of fiscal year 2024 as they were announced near the end of the fiscal quarter and we had additional demand from customers outside of the named country groups.Our sales to China and other affected destinations,derived from products that are now subject to licensing requirements,have consistently contributed approximately 20-25%of Data Center revenue over the past few quarters.We expect that our sales to these destinations will decline significantly in the fourth quarter of fiscal year 2024,though we believe the decline will be more than offset by strong growth in other regions.We are working to expand our Data Center product portfolio to offer new regulation-compliant solutions,including those for which the USG does not wish to have any advance notice before each shipment.To the 26 extent that a customer requires products covered by the licensing requirements,we may seek a license for the customer but have no assurance that the USG will grant such a license,or that the USG will act on the license application in a timely manner or at all.Our competitive position has been harmed,and our competitive position and future results may be further harmed over the long-term,if there are further changes in the USGs export controls.Given the increasing strategic importance of AI and rising geopolitical tensions,the USG has changed and may again change the export control rules at any time and further subject a wider range of our products to export restrictions and licensing requirements,negatively impacting our business and financial results.In the event of such change,we may be unable to sell our inventory of such products and may be unable to develop replacement products not subject to the licensing requirements,effectively excluding us from all or part of the China market,as well as other impacted markets,including the Middle East.Our sales to China will decrease significantly in the fourth quarter of fiscal year 2024.While we work to enhance the resiliency and redundancy of our supply chain,which is currently concentrated in the Asia-Pacific,including China,Hong Kong,Korea and Taiwan,new and existing export controls or changes to existing export controls could limit alternative manufacturing locations and negatively impact our business.Macroeconomic Factors Macroeconomic factors,includinginflation,increased interest rates,capital market volatility,global supply chain constraints and global economic and geopolitical developments,may have direct and indirect impacts on our results of operations,particularly demand for our products.While difficult to isolate and quantify,these macroeconomic factors can also impact our supply chain and manufacturing costs,employee wages,costs for capital equipment and value of our investments.Our product and solution pricing strategy generally does not fluctuate with short-term changes in our costs.Within our supply chain,we continuously manage product availability and costs with our vendors.Israel We are monitoring the impact of the geopolitical conflict in and around Israel on our operations,including the health and safety of our approximately 3,400 employees in the region who primarily support the research and development,operations,and sales and marketing of our networking products.Our operating expenses in the third quarter of fiscal year 2024 include expenses for financial support to impacted employees and charitable activity.We believe our global supply chain for our networking products has not experienced any significant impact.Further,in connection with the conflict,a significant number and percentage of our employees have been called-up for active military duty in Israel.Accordingly,some of our employees in Israel may be absent for an extended and indeterminate period,which may cause disruption to our product development or operations.In the third quarter of fiscal year 2024,we did not experience any significant impact or expense to our business;however,if the conflict is extended,it could impact future product development,operations,and revenue or create other uncertainty for our business.Third Quarter of Fiscal Year 2024 Summary Three Months Ended October 29,2023 July 30,2023 October 30,2022 Quarter-over-Quarter Change Year-over-Year Change ($in millions,except per share data)Revenue$18,120$13,507$5,931 34 6%Gross margin 74.0p.1S.6%3.9 pts 20.4 pts Operating expenses$2,983$2,662$2,576 12%Operating income$10,417$6,800$601 53%1,633%Net income$9,243$6,188$680 49%1,259%Net income per diluted share$3.71$2.48$0.27 50%1,274%We specialize in markets where our computing platforms can provide tremendous acceleration for applications.These platforms incorporate processors,interconnects,software,algorithms,systems,and 27 services to deliver unique value.Our platforms address four large markets where our expertise is critical:Data Center,Gaming,Professional Visualization,and Automotive.Revenue for the third quarter of fiscal year 2024 was$18.12 billion,up 206%from a year ago and up 34%sequentially.Data Center revenue was up 279%from a year ago and up 41%sequentially.Strong sales of the NVIDIA HGX platform were driven by global demand for the training and inferencing of large language models,recommendation engines,and generative AI applications.Data Center compute grew 324%from a year ago and 38%sequentially,largely reflecting the strong ramp of our Hopper GPU architecture-based HGX platform from cloud service providers,or CSPs,including GPU-specialized CSPs;consumer internet companies;and enterprises.Our sales of Ampere GPU architecture-based Data Center products were significant but declined sequentially,as we approach the tail end of this architecture.We recognized initial revenue on the ramp of our L40S GPU and the GH200 Grace Hopper Superchip for a broad range of customers.CSPs drove roughly half of Data Center revenue,while consumer internet companies and enterprises comprised approximately the other half.Networking was up 155%from a year ago and up 52%sequentially,almost entirely due to strong growth in InfiniBand infrastructure to support our HGX platform.Gaming revenue was up 81%from a year ago and up 15%sequentially.Strong year-on-year growth reflects higher sell-in to partners following normalization of channel inventory levels.Sequential growth reflects strong demand for our GeForce RTX 40 Series GPUs for back-to-school and the start of the holiday season.Professional Visualization revenue was up 108%from a year ago and up 10%sequentially.The year-on-year increase reflects higher sell-in to partners following normalization of channel inventory levels.The sequential increase was primarily due to stronger enterprise workstation demand and the ramp of notebook workstations based on the Ada Lovelace GPU architecture.Automotive revenue was up 4%from a year ago and up 3%sequentially.The year-on-year increase primarily reflects growth in sales of auto cockpit solutions and self-driving platforms.The sequential increase was driven by sales of self-driving platforms.Gross margin increased significantly from a year ago and sequentially,driven by improved product mix from Data Center revenue growth and lower net inventory provisions and related charges.In the third quarter of fiscal year 2024,provisions for inventory and related charges were$681 million.Sales of previously reserved inventory or settlements of excess inventory purchase obligations resulted in a provision release of$239 million,primarily from Ampere GPU architecture products.The net inventory provisions were$442 million and the unfavorable effect on our gross margin was 2.4 percentage points.In the third quarter of fiscal year 2023,provisions for inventory and related charges were$702 million.Sales of previously reserved inventory or settlements of excess inventory purchase obligations resulted in a provision release of$21 million.The net inventory provisions were$681 million and the unfavorable effect on our gross margin was 11.5 percentage points.Operating expenses were up 16%from a year ago and up 12%sequentially,driven by compensation and benefits,including stock-based compensation,primarily reflecting growth in employees and compensation increases.Market Platform Highlights Data Center revenue for the third quarter of fiscal year 2024 was$14.51 billion,up 279%from a year ago and up 41%from the previous quarter.We announced NVIDIA HGX H200 with the H200 Tensor Core GPU;introduced an AI foundry service,first available on Microsoft Azure;announced that the NVIDIA Spectrum-X will be integrated into servers from Dell Technologies,Hewlett Packard Enterprise and Lenovo in the first quarter of next year;announced that NVIDIA GH200 Grace Hopper Superchips will power more than 40 new supercomputers and began shipping in the third quarter of fiscal year 2024;and partnered with a range of leading companies on AI initiatives,including Amdocs,Dropbox,Foxconn,Genentech(member of Roche Group),Infosys,Lenovo,Reliance Industries,Scaleway,and Tata Group.Gaming revenue for the third quarter of fiscal year 2024 was$2.86 billion,up 81%from a year ago and up 15%from the previous quarter.We launched DLSS 3.5 Ray Reconstruction;released TensorRT-LLM for Windows;added 56 DLSS games and over 15 Reflex games;and surpassed 1,700 games on GeForce NOW.28 Professional Visualization revenue for the third quarter of fiscal year 2024 was$416 million,up 108%from a year ago and up 10%from the previous quarter.We announced a new line of desktop workstations with NVIDIA RTX 6000 Ada Generation GPUs and NVIDIA ConnectX smart interface cards.Automotive revenue for the third quarter of fiscal year 2024 was$261 million,up 4%from a year ago and up 3%from the previous quarter.We furthered our collaboration with Foxconn to develop next-generation electric vehicles.Financial Information by Business Segment and Geographic Data Refer to Note 15 of the Notes to Condensed Consolidated Financial Statements for disclosure regarding segment information.Critical Accounting Policies and Estimates Refer to Part II,Item 7,Critical Accounting Policies and Estimates of our Annual Report on Form 10-K for the fiscal year ended January 29,2023.There have been no material changes to our Critical Accounting Policies and Estimates.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 October 29,2023 October 30,2022 October 29,2023 October 30,2022 Revenue 100.00.00.00.0%Cost of revenue 26.0 46.4 29.1 44.9 Gross profit 74.0 53.6 70.9 55.1 Operating expenses Research and development 12.7 32.8 16.0 25.7 Sales,general and administrative 3.8 10.6 5.0 8.7 Acquisition termination cost 6.5 Total operating expenses 16.5 43.4 21.0 40.9 Operating income 57.5 10.2 49.9 14.2 Interest income 1.3 1.5 1.5 0.7 Interest expense(0.3)(1.1)(0.5)(0.9)Other,net(0.4)(0.2)(0.1)(0.1)Other income(expense),net 0.6 0.2 0.9 (0.3)Income before income tax 58.1 10.4 50.8 13.9 Income tax expense(benefit)7.1 (1.1)5.8 (0.3)Net income 51.0.5E.0.2%Revenue Revenue for the third quarter and first nine months of fiscal year 2024 was$18.12 billion and$38.82 billion,up 206%and 86%,respectively.29 Revenue by Reportable Segments Three Months Ended Nine Months Ended October 29,2023 October 30,2022$Change%Change October 29,2023 October 30,2022$Change%Change ($in millions)Compute&Networking$14,645$3,816$10,829 284%$29,507$11,395$18,112 159%Graphics 3,475 2,115 1,360 64%9,312 9,528 (216)(2)%Total$18,120$5,931$12,189 206%$38,819$20,923$17,896 86%Compute&Networking-The increase in the third quarter and first nine months of fiscal year 2024 compared to the third quarter and first nine months of fiscal year 2023 was due to higher Data Center revenue.Compute GPUs grew 369%year-on-year and 193%compared to the first nine months of fiscal year 2023 led by strong demand for the NVIDIA HGX platform driven by global demand for the training and inferencing of large language models,recommendation engines and inferencing of generative AI applications.Networking was up 155%year-on-year and 99%compared to the first nine months of last year,almost entirely due to strong growth in InfiniBand infrastructure to support our HGX platform.Graphics-The increase in the third quarter of fiscal year 2024 compared to the third quarter of fiscal year 2023 reflects growth in Gaming GPUs reflecting higher sell-in to partners following normalization of channel inventory levels earlier this year.The decrease in the first nine months of fiscal year 2024 compared to the first nine months of fiscal year 2023 primarily reflects 57%lower enterprise graphics and 14%lower Professional Visualization GPUs,partially offset by 7%growth in Gaming GPUs,following normalization of channel inventory levels earlier this year.Concentration of Revenue Revenue by geographic region is designated based on the billing location even if the revenue may be attributable to end customers,or End Customers,such as CSPs,enterprises,and gamers in a different location.Revenue from sales to customers outside of the United States accounted for 65%and 62%of total revenue for the third quarter and first nine months of fiscal year 2024,respectively,and 64%and 71%of total revenue for the third quarter and first nine months of fiscal year 2023,respectively.Our customers include original equipment manufacturers,original device manufacturers,system builders,system integrators,add-in board manufacturers,retailers/distributors,automotive manufacturers,tier-1 automotive suppliers,and other enterprises.Sales to Customer A represented 12%of total revenue for the third quarter of fiscal year 2024,and sales to Customer B represented 11%of total revenue for the first nine months of fiscal year 2024,both of which were attributable to the Compute&Networking segment.Our customers sell to End Customers.Our End Customers often do not purchase directly from us but purchase through multiple original equipment manufacturers,original device manufacturers,system integrators,distributors,and other channel partners.Our sales to Customer A and Customer B were largely in support of two End Customers.One End Customer is estimated to have represented approximately 15%and 17%of total revenue for the third quarter and first nine months of fiscal year 2024,respectively.A second End Customer is estimated to have represented approximately 13%and 10%of total revenue for the third quarter and first nine months of fiscal year 2024,respectively.Both of these End Customers were primarily attributable to our Compute&Networking segment.Our estimated Compute&Networking End Customer demand is expected to remain concentrated.In the first nine months of fiscal year 2023,there were no customers with 10%or more of total revenue.In the third quarter of fiscal year 2023,one customer represented 10%of total revenue,primarily attributable to the Compute&Networking segment.Gross Margin Our overall gross margin increased to 74.0%and 70.9%for the third quarter and first nine months of fiscal year 2024,respectively,from 53.6%and 55.1%for the third quarter and first nine months of fiscal year 2023,30 respectively.The year over year increase in the third quarter and first nine months of fiscal year 2024 was primarily due to improved product mix from Data Center revenue growth of 279%and 156%,respectively,and lower net inventory provisions and related charges.Provisions for inventory and excess inventory purchase obligations totaled$681 million and$1.39 billion for the third quarter and first nine months of fiscal year 2024,respectively.Sales of previously reserved inventory or settlements of excess inventory purchase obligations resulted in a provision release of$239 million and$372 million,primarily from Ampere GPU architecture products,for the third quarter and first nine months of fiscal year 2024,respectively.The net effect on our gross margin was an unfavorable impact of 2.4%and 2.6%in the third quarter and first nine months of fiscal year 2024.Provisions for inventory and excess inventory purchase obligations totaled$702 million and$2.01 billion for the third quarter and first nine months of fiscal year 2023,respectively.Sales of previously reserved inventory or settlements of excess inventory purchase obligations resulted in a provision release of$21 million and$59 million for the third quarter and first nine months of fiscal year 2023,respectively.The net effect on our gross margin was an unfavorable impact of 11.5%and 9.3%in the third quarter and first nine months of fiscal year 2023,respectively.Operating Expenses Three Months Ended Nine Months Ended October 29,2023 October 30,2022$Change%Change October 29,2023 October 30,2022$Change%Change ($in millions)Research and development expenses$2,294$1,945$349 18%$6,210$5,387$823 15%of net revenue 12.72.8.0%.7%Sales,general and administrative expenses 689 631 58 9%1,942 1,815 127 7%of net revenue 3.8.6%5.0%8.7quisition termination cost%1,353 (1,353)(100)%of net revenue%6.5%Total operating expenses$2,983$2,576$407 16%$8,152$8,555$(403)(5)%of net revenue 16.5C.4!.0.9%The increases in research and development expenses and sales,general and administrative expenses for the third quarter and first nine months of fiscal year 2024 were primarily driven by compensation and benefits,including stock-based compensation,reflecting employee growth and compensation increases.Acquisition Termination Cost We recorded an acquisition termination cost related to the Arm transaction of$1.35 billion in fiscal year 2023 reflecting the write-off of the prepayment provided at signing.Operating Income Operating income for the third quarter and first nine months of fiscal year 2024 was$10.42 billion and$19.36 billion,respectively,up 1,633%and 552%from a year ago,respectively.31 Operating Income by Reportable Segments Three Months Ended Nine Months Ended October 29,2023 October 30,2022$Change%Change October 29,2023 October 30,2022$Change%Change ($in millions)Compute&Networking$10,262$1,086$9,176 845%$19,149$3,509$15,640 446%Graphics 1,493 606 887 146%3,751 3,739 12%All Other(1,338)(1,091)(247)23%(3,542)(4,280)738 (17)%Total$10,417$601$9,816 1,633%$19,358$2,968$16,390 552%Compute&Networking Segment operating income increased during the third quarter and first nine months of fiscal year 2024 compared to the third quarter and first nine months of fiscal year 2023 primarily due to growth in revenue.Graphics-Segment operating income increased during the third quarter of fiscal year 2024 compared to the third quarter of fiscal year 2023 due to growth in revenue.Segment operating income was flat during the first nine months of fiscal year 2024 compared to the first nine months of fiscal year 2023 due to a decline in revenue of$216 million,offset by lower provisions for inventory and excess inventory purchase obligations of$337 million in fiscal year 2024.All Other expenses increased during the third quarter of fiscal year 2024 compared to the third quarter of fiscal year 2023 due to higher stock-based compensation expense.All Other expenses decreased during the first nine months of fiscal year 2024 compared to the first nine months of fiscal year 2023 due to an acquisition termination cost of$1.35 billion related to the Arm transaction in the prior year,partially offset by higher stock-based compensation expense of$584 million.Other Income(Expense),Net Three Months Ended Nine Months Ended October 29,2023 October 30,2022$Change October 29,2023 October 30,2022$Change ($in millions)Interest income$234$88$146$572$152$420 Interest expense(63)(65)2 (194)(198)4 Other,net(66)(11)(55)(24)(29)5 Other income(expense),net$105$12$93$354$(75)$429 Interest income consists of interest earned on cash,cash equivalents and marketable securities.The increase in interest income was due to higher yields.Interest expense is comprised of coupon interest and debt discount amortization related to our notes.Other,net,consists of realized or unrealized gains and losses from investments in non-affiliated entities and the impact of changes in foreign currency rates.The loss in Other,net,in the third quarter of fiscal year 2024 was driven by mark-to-market losses from publicly traded equity investments.Income Taxes Income tax was an expense of$1.28 billion and$2.24 billion for the third quarter and first nine months of fiscal year 2024,respectively,and a benefit of$67 million and$61 million for the third quarter and first nine months of fiscal year 2023,respectively.Income tax as a percentage of income before income tax was an expense of 12.2%and 11.3%for the third quarter and first nine months of fiscal year 2024,respectively,and a benefit of 10.9%and 2.1%for the third quarter and first nine months of fiscal year 2023,respectively.32 The effective tax rate increased due to a decreased impact of tax benefits from the foreign-derived intangible income deduction,stock-based compensation,and the U.S.federal research tax credit,relative to the increase in income before income tax.The increase in the effective tax rate was partially offset by a benefit due to the IRS audit resolution.Liquidity and Capital Resources October 29,2023 January 29,2023 (In millions)Cash and cash equivalents$5,519$3,389 Marketable securities 12,762 9,907 Cash,cash equivalents and marketable securities$18,281$13,296 Nine Months Ended October 29,2023 October 30,2022 (In millions)Net cash provided by operating activities$16,591$3,393 Net cash provided by(used in)investing activities$(4,457)$7,378 Net cash used in financing activities$(10,004)$(9,961)As of October 29,2023,we had$18.28 billion in cash,cash equivalents,and marketable securities,an increase of$4.99 billion from the end of fiscal year 2023.Our investment policy requires the purchase of highly rated fixed income securities,the diversification of investment types and credit exposures,and certain maturity limits on our portfolio.Cash provided by operating activities increased in the first nine months of fiscal year 2024 compared to the first nine months of fiscal year 2023,due to growth in revenue,partially offset by higher accounts receivable balance and taxes paid.Accounts receivable balance in the third quarter of fiscal year 2024 reflected approximately$570 million from customer payments received ahead of the invoice due date.Cash provided by investing activities decreased in the first nine months of fiscal year 2024 compared to the first nine months of fiscal year 2023,primarily driven by lower marketable securities maturities.Cash used in financing activities increased in the first nine months of fiscal year 2024 compared to the first nine months of fiscal year 2023,due to a debt repayment in the second quarter of fiscal year 2024 and higher tax payments related to RSUs,partially offset by lower share repurchases.Liquidity Our primary sources of liquidity are our cash,cash equivalents,and marketable securities,and the cash generated by our operations.As of October 29,2023,we had$18.28 billion in cash,cash equivalents,and marketable securities.Our marketable securities consist of debt securities issued by the USG and its agencies,highly rated corporations and financial institutions,and foreign government entities,as well as certificates of deposit issued by highly rated financial institutions.These marketable securities are primarily denominated in U.S.dollars.Refer to Note 7 of the Notes to Condensed Consolidated Financial Statements for additional information.We believe that we have sufficient liquidity to meet our operating requirements for at least the next twelve months,and for the foreseeable future,including our debt obligations,future supply obligations and vendor and supplier prepayments.We continuously evaluate our liquidity and capital resources,including our access to external capital,to ensure we can finance future capital requirements.Except for approximately$1.38 billion of cash,cash equivalents,and marketable securities held outside the U.S.for which we have not accrued any related foreign or state taxes if we repatriate these amounts to the U.S.,substantially all of our cash,cash equivalents and marketable securities held outside of the U.S.as of October 29,2023 are available for use in the U.S.without incurring additional U.S.federal income taxes.We 33 paid$4.35 billion in cash taxes in the third quarter of fiscal year 2024,largely for previously deferred federal income tax payments related to the disaster relief made available by the IRS for certain California taxpayers.Capital Return to Shareholders During the third quarter and first nine months of fiscal year 2024,we returned$3.72 billion and$7.01 billion,respectively,in share repurchases and$99 million and$296 million,respectively,in cash dividends.Our cash dividend program and the payment of future cash dividends under that program are subject to the continuing determination by our Board of Directors that the dividend program and the declaration of dividends thereunder are in the best interests of our shareholders.On August 21,2023,our Board of Directors approved an increase to our share repurchase program of an additional$25.00 billion,without expiration.As of October 29,2023,we were authorized,subject to certain specifications,to repurchase additional shares of our common stock up to$25.24 billion.From October 30,2023 through November 17,2023,we repurchased 0.8 million shares for$366 million pursuant to a Rule 10b5-1 trading plan.Our share repurchase program aims to offset dilution from shares issued to employees.We may pursue additional share repurchases as we weigh market factors and other investment opportunities.We plan to continue share repurchases this fiscal year.The U.S.Inflation Reduction Act of 2022 requires a 1%excise tax on certain share repurchases in excess of shares issued for employee compensation made after December 31,2022.This provision has not had a material effect on our consolidated financial statements.Outstanding Indebtedness and Commercial Paper Our aggregate debt maturities as of October 29,2023,by year payable,are as follows:October 29,2023 (In millions)Due in one year$1,250 Due in one to five years 2,250 Due in five to ten years 2,750 Due in greater than ten years 3,500 Unamortized debt discount and issuance costs (44)Net carrying amount 9,706 Less short-term portion (1,249)Total long-term portion$8,457 We have a$575 million commercial paper program to support general corporate purposes.As of October 29,2023,we had not issued any commercial paper.Material Cash Requirements and Other Obligations We have unrecognized tax benefits of$1.10 billion,which includes related interest and penalties of$115 million recorded in non-current income tax payable as of October 29,2023.We are unable to reasonably estimate the timing of any potential tax liability,interest payments,or penalties in individual years due to uncertainties in the underlying income tax positions and the timing of the effective settlement of such tax positions.Refer to Note 6 of the Notes to Condensed Consolidated Financial Statements for further information.Other than the contractual obligations described above,there were no material changes outside the ordinary course of business in our contractual obligations from those disclosed in our Annual Report on Form 10-K for the fiscal year ended January29,2023.Refer to Item 7,“Managements 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 January29,2023 for a description of our contractual obligations.For a description of our operating lease obligations,long-term debt,and purchase obligations,refer to Note 3,Note 12,and Note 13 of the Notes to Condensed Consolidated Financial Statements,respectively.34 Climate Change To date,there has been no material impact to our results of operations associated with global sustainability regulations,compliance,costs from sourcing renewable energy or climate-related business trends.Adoption of New and Recently Issued Accounting Pronouncements There has been no adoption of any 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 Part II,Item 7A,“Quantitative and Qualitative Disclosures About Market Risk”in our Annual Report on Form 10-K for the fiscal year ended January 29,2023.As of October 29,2023,there have been no material changes to the financial market risks described as of January 29,2023.Foreign Exchange Rate Risk The impact of foreign currency transactions related to foreign exchange rate risk is described in Part II,Item 7A,“Quantitative and Qualitative Disclosures About Market Risk”in our Annual Report on Form 10-K for the fiscal year ended January 29,2023.As of October 29,2023,there have been no material changes to the foreign exchange rate risks described as of January 29,2023.ITEM 4.CONTROLS AND PROCEDURES Controls and Procedures Disclosure Controls and Procedures Based on their evaluation as of October 29,2023,our management,including our Chief Executive Officer and Chief Financial Officer,has concluded that our disclosure controls and procedures(as defined in Exchange Act Rule 13a-15(e)and 15d-15(e)were effective to provide reasonable assurance.Changes in Internal Control Over Financial Reporting There were no changes that occurred during the third quarter of fiscal year 2024 that have materially affected,or are reasonably likely to materially affect,our internal control over financial reporting.In fiscal year 2022,we began an upgrade of our enterprise resource planning,or ERP,system,which will update much of our existing core financial systems.The ERP system is designed to accurately maintain our financial records used to report operating results.The upgrade will occur in phases.We will continue to evaluate each quarter whether there are changes that materially affect our internal control over financial reporting.Inherent Limitations on Effectiveness of Controls Our management,including our Chief Executive Officer and Chief Financial Officer,does not expect that our disclosure controls and procedures or our internal controls,will prevent all error and all fraud.A control system,no matter how well conceived and operated,can provide only reasonable,not absolute,assurance that the objectives of the control system are met.Further,the design of a control system must reflect the fact that there are resource constraints,and the benefits of controls must be considered relative to their costs.Because of the inherent limitations in all control systems,no evaluation of controls can provide absolute assurance that all control issues and instances of fraud,if any,within NVIDIA have been detected.PART II.OTHER INFORMATION ITEM 1.LEGAL PROCEEDINGS Refer to Part I,Item 1,Note 13 of the Notes to Condensed Consolidated Financial Statements for a discussion of significant developments in our legal proceedings since January 29,2023.Also refer to Item 3,“Legal Proceedings”in our Annual Report on Form 10-K for the fiscal year ended January 29,2023 for a prior discussion of our legal proceedings.35 ITEM 1A.RISK FACTORS Other than the risk factors listed below,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 29,2023 and Items 1A of our Quarterly Reports on Form 10-Q for the fiscal quarters ended April 30,2023 and July 30,2023.Purchasing or owning NVIDIA common stock involves investment 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 29,2023,in Items 1A of our Quarterly Reports on Form 10-Q for the fiscal quarters ended April 30,2023 and July 30,2023,and below.Additionally,any one of those risks could harm our business,financial condition and results of operations or reputation,which could cause our stock price to decline.Additional risks,trends and uncertainties not presently known to us or that we currently believe are immaterial may also harm our business,financial condition,results of operations or reputation.Failure to estimate customer demand properly has led and could lead to mismatches between supply and demand.We use third parties to manufacture and assemble our products,and we have long manufacturing lead times.We are not provided guaranteed wafer,component and capacity supply,and our supply deliveries and production may be non-linear within a quarter or year.If our estimates of customer demand are ultimately inaccurate,as we have experienced in the past,there could be a significant mismatch between supply and demand.This mismatch has resulted in both product shortages and excess inventory,has varied across our market platforms,and has significantly harmed our financial results.We build finished products and maintain inventory in advance of anticipated demand.While we have in the past entered and may in the future enter into long-term supply and capacity commitments,we may not be able to secure sufficient commitments for capacity to address our business needs,or our long-term demand expectations may change.These risks may increase as we shorten our product development cycles or enter new lines of business,which may require us to integrate new suppliers into our supply chain,creating additional supply chain complexity.Additionally,our ability to sell certain products has been and could be impeded if components from third parties that are necessary for the finished product are not available.This risk may increase as a result of our platform strategy.In periods of shortages impacting the semiconductor industry and/or limited supply or capacity in our supply chain,the lead times on our orders may be extended.We have previously experienced and may continue to experience extended lead times of more than 12 months.We have paid premiums and provided deposits to secure future supply and capacity,which have increased our product costs and may continue to do so.If our existing suppliers are unable to scale their capabilities to meet our supply needs,we may require additional sources of capacity,which may require additional deposits.We may not have the ability to reduce our supply commitments at the same rate or at all if our revenue declines.Many additional factors have caused and/or could in the future cause us to either underestimate or overestimate our customers future demand for our products,or otherwise cause a mismatch between supply and demand for our products and impact the timing and volume of our revenue,including:changes in product development cycles and time to market;competing technologies and competitor product releases and announcements;changes in business and economic conditions resulting in decreased end demand;sudden or sustained government lockdowns or actions to control case spread of global or local health issues;rapidly changing technology or customer requirements;new product introductions and transitions resulting in less demand for existing products;new or unexpected end use cases;increase in demand for competitive products,including competitive actions;36 business decisions made by third parties;the demand for accelerated or AI-related cloud services,including our own software and NVIDIA DGX cloud services;changes that impact the ecosystem for the architectures underlying our products and technologies;the demand for our products relating to cryptocurrency mining,our Omniverse platform,third-party large language models and generative AI models;or government actions or changes in governmental policies,such as export controls or increased restrictions on gaming usage.Demand for our data center systems and products has surged over the last three quarters and our demand visibility extends into next year.To meet this expected demand,we have increased our purchase obligations with existing suppliers,added new suppliers,and entered into prepaid supply and capacity agreements.These increased purchase volumes,the number of suppliers,and the integration of new suppliers into our supply chain,may create more supply chain complexity and execution risk.We expect to continue to enter into supplier and capacity arrangements and expect our supply to increase each quarter through next year.We may incur inventory provisions or impairments if our inventory or supply or capacity commitments exceed demand for our products or demand declines.Our customer orders and longer-term demand estimates may change or may not be correct,as we have experienced in the past.Product transitions are complex and can impact our revenue as we often ship both new and prior architecture products simultaneously and we and our channel partners prepare to ship and support new products.Due to our product introduction cycles,we are almost always in various stages of transitioning the architecture of our Data Center,Professional Visualization,and Gaming products.We will have a broade

0人已浏览 2023-12-07 52页 5星级

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549FORM 10-QQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended April 30,2023ORTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934Commission file number:0-23985NVIDIA CORPORATION(Exact name of registrant as specified in its charter)Delaware94-3177549(State or Other Jurisdiction of(I.R.S.EmployerIncorporation or Organization)Identification No.)2788 San Tomas ExpresswaySanta Clara,California 95051(408)486-2000(Address,including zip code,and telephone number,including area code,of principal executive offices)N/A(Former name,former address and former fiscal year if changed since last report)Securities registered pursuant to Section 12(b)of the Act:Title of each classTrading Symbol(s)Name of each exchange on which registeredCommon Stock,$0.001 par value per shareNVDAThe Nasdaq Global Select MarketIndicate 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 duringthe 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 forthe past 90 days.Yes No Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 ofRegulation S-T(232.405 of this chapter)during the preceding 12 months(or for such shorter period that the registrant was required to submit such files).Yes No Indicate by check mark whether the registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,a smaller reporting company,or anemerging growth company.See definitions of“large accelerated filer”,“accelerated filer”,“smaller reporting company”,and emerging growth company in Rule12b-2 of the Exchange Act.Large accelerated filerAccelerated filerNon-accelerated filerSmaller reporting companyEmerging growth companyIf 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 orrevised financial accounting standards provided pursuant to Section 13(a)of the Exchange Act.Indicate by check mark whether the registrant is a shell company(as defined in Rule 12b-2 of the Exchange Act).Yes No The number of shares of common stock,$0.001 par value,outstanding as of May 19,2023,was 2.47 billion.NVIDIA CORPORATIONFORM 10-QFOR THE QUARTER ENDED April 30,2023TABLE OF CONTENTS Page PART I:FINANCIAL INFORMATION Item 1.Financial Statements(Unaudited)a)Condensed Consolidated Statements of Income for the three months ended April 30,2023 and May 1,20223b)Condensed Consolidated Statements of Comprehensive Income for the three months ended April 30,2023 andMay 1,20224 c)Condensed Consolidated Balance Sheets as of April 30,2023 and January 29,20235d)Condensed Consolidated Statements of Shareholders Equity for the three months ended April 30,2023 and May1,20226 e)Condensed Consolidated Statements of Cash Flows for the three months ended April 30,2023 and May 1,20227 f)Notes to Condensed Consolidated Financial Statements8Item 2.Managements Discussion and Analysis of Financial Condition and Results of Operations23Item 3.Quantitative and Qualitative Disclosures About Market Risk31Item 4.Controls and Procedures31 PART II:OTHER INFORMATION Item 1.Legal Proceedings32Item 1A.Risk Factors32Item 2.Unregistered Sales of Equity Securities and Use of Proceeds43Item 6.Exhibits44Signature 45WHERE YOU CAN FIND MORE INFORMATIONInvestors and others should note that we announce material financial information to our investors using our investor relations website,pressreleases,SEC filings and public conference calls and webcasts.We also use the following social media channels as a means of disclosinginformation about the company,our products,our planned financial and other announcements and attendance at upcoming investor and industryconferences,and other matters,and for complying with our disclosure obligations under Regulation FD:NVIDIA Company Blog(http:/)NVIDIA LinkedIn Page(http:/ Facebook Page(https:/ Instagram Page(https:/ Twitter Account(https:/ addition,investors and others can view NVIDIA videos on YouTube(https:/www.YouT information we post through these social media channels may be deemed material.Accordingly,investors should monitor these accountsand the blog,in addition to following our press releases,SEC filings and public conference calls and webcasts.This list may be updated fromtime to time.The information we post through these channels is not a part of this Quarterly Report on Form 10-Q.These channels may beupdated from time to time on NVIDIAs investor relations website.2PART I.FINANCIAL INFORMATIONITEM 1.FINANCIAL STATEMENTS(UNAUDITED)NVIDIA CORPORATION AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF INCOME(In millions,except per share data)(Unaudited)Three Months Ended April 30,May 1,20232022Revenue$7,192$8,288 Cost of revenue2,544 2,857 Gross profit4,648 5,431 Operating expenses Research and development1,875 1,618 Sales,general and administrative633 592 Acquisition termination cost 1,353 Total operating expenses2,508 3,563 Income from operations2,140 1,868 Interest income150 18 Interest expense(66)(68)Other,net(15)(13)Other income(expense),net69(63)Income before income tax2,209 1,805 Income tax expense166 187 Net income$2,043$1,618 Net income per share:Basic$0.83$0.65 Diluted$0.82$0.64 Weighted average shares used in per share computation:Basic2,470 2,506 Diluted2,490 2,537 See accompanying Notes to Condensed Consolidated Financial Statements.3NVIDIA CORPORATION AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(In millions)(Unaudited)Three Months Ended April 30,May 1,20232022 Net income$2,043$1,618 Other comprehensive loss,net of taxAvailable-for-sale securities:Net change in unrealized gain(loss)17(22)Cash flow hedges:Net unrealized loss(13)(29)Reclassification adjustments for net realized loss included in net income(11)(2)Net change in unrealized loss(24)(31)Other comprehensive loss,net of tax(7)(53)Total comprehensive income$2,036$1,565 See accompanying Notes to Condensed Consolidated Financial Statements.4NVIDIA CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS(In millions)(Unaudited)April 30,January 29,20232023ASSETSCurrent assets:Cash and cash equivalents$5,079$3,389 Marketable securities10,241 9,907 Accounts receivable,net4,080 3,827 Inventories4,611 5,159 Prepaid expenses and other current assets872 791 Total current assets24,883 23,073 Property and equipment,net3,740 3,807 Operating lease assets1,094 1,038 Goodwill4,430 4,372 Intangible assets,net1,541 1,676 Deferred income tax assets4,568 3,396 Other assets4,204 3,820 Total assets$44,460$41,182 LIABILITIES AND SHAREHOLDERS EQUITY Current liabilities:Accounts payable$1,141$1,193 Accrued and other current liabilities4,869 4,120 Short-term debt1,250 1,250 Total current liabilities7,260 6,563 Long-term debt9,704 9,703 Long-term operating lease liabilities939 902 Other long-term liabilities2,037 1,913 Total liabilities19,940 19,081 Commitments and contingencies-see Note 13Shareholders equity:Preferred stock Common stock2 2 Additional paid-in capital12,453 11,971 Accumulated other comprehensive loss(50)(43)Retained earnings12,115 10,171 Total shareholders equity24,520 22,101 Total liabilities and shareholders equity$44,460$41,182 See accompanying Notes to Condensed Consolidated Financial Statements.5NVIDIA CORPORATION AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITYFOR THE THREE MONTHS ENDED APRIL 30,2023 AND MAY 1,2022(Unaudited)Common StockOutstandingAdditionalPaid-in CapitalAccumulated OtherComprehensive LossRetainedEarningsTotalShareholdersEquity(In millions,except per share data)SharesAmountBalances,January 29,20232,466$2$11,971$(43)$10,171$22,101 Net income 2,043 2,043 Other comprehensive loss (7)(7)Issuance of common stock from stock plans 9 246 246 Tax withholding related to vesting of restricted stock units(2)(507)(507)Cash dividends declared and paid($0.04 per common share)(99)(99)Stock-based compensation 743 743 Balances,April 30,20232,473$2$12,453$(50)$12,115$24,520 Balances,January 30,20222,506$3$10,385$(11)$16,235$26,612 Net income 1,618 1,618 Other comprehensive loss (53)(53)Issuance of common stock from stock plans 9 204 204 Tax withholding related to vesting of restricted stock units(2)(538)(538)Shares repurchased(9)(1)(1,995)(1,996)Cash dividends declared and paid($0.04 per common share)(100)(100)Stock-based compensation 573 573 Balances,May 1,20222,504$3$10,623$(64)$15,758$26,320 See accompanying Notes to Condensed Consolidated Financial Statements.6NVIDIA CORPORATION AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(In millions)(Unaudited)Three Months EndedApril 30,May 1,20232022Cash flows from operating activities:Net income$2,043$1,618 Adjustments to reconcile net income to net cash provided by operating activities:Stock-based compensation expense735 578 Depreciation and amortization384 334 Losses on investments in non-affiliates14 17 Deferred income taxes(1,135)(542)Acquisition termination cost 1,353 Other(34)23 Changes in operating assets and liabilities,net of acquisitions:Accounts receivable(252)(788)Inventories566(560)Prepaid expenses and other assets(215)(1,261)Accounts payable11 255 Accrued and other current liabilities689 634 Other long-term liabilities105 70 Net cash provided by operating activities2,911 1,731 Cash flows from investing activities:Proceeds from maturities of marketable securities2,512 5,947 Proceeds from sales of marketable securities 1,029 Purchases of marketable securities(2,801)(3,932)Purchases related to property and equipment and intangible assets(248)(361)Acquisitions,net of cash acquired(83)(36)Investments and other,net(221)(35)Net cash provided by(used in)investing activities(841)2,612 Cash flows from financing activities:Proceeds related to employee stock plans246 204 Payments related to tax on restricted stock units(507)(532)Dividends paid(99)(100)Principal payments on property and equipment and intangible assets(20)(22)Payments related to repurchases of common stock(1,996)Net cash used in financing activities(380)(2,446)Change in cash and cash equivalents1,690 1,897 Cash and cash equivalents at beginning of period3,389 1,990 Cash and cash equivalents at end of period$5,079$3,887 See accompanying Notes to Condensed Consolidated Financial Statements.7NVIDIA CORPORATION AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)Note 1-Summary of Significant Accounting PoliciesBasis of PresentationThe accompanying unaudited condensed consolidated financial statements were prepared in accordance with accounting principles generallyaccepted 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 ofSecurities and Exchange Commission,or SEC,Regulation S-X.The January 29,2023 consolidated balance sheet was derived from our auditedconsolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended January 29,2023,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 recurringadjustments considered necessary for a fair statement of results of operations and financial position,have been included.The results for theinterim periods presented are not necessarily indicative of the results expected for any future period.The following information should be read inconjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal yearended January 29,2023.Significant Accounting PoliciesThere have been no material changes to our significant accounting policies disclosed in Note 1-Organization and Summary of SignificantAccounting Policies,of the Notes to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year endedJanuary 29,2023.Fiscal YearWe operate on a 52-or 53-week year,ending on the last Sunday in January.Fiscal years 2024 and 2023 are both 52-week years.The firstquarters of fiscal years 2024 and 2023 were both 13-week quarters.ReclassificationsCertain prior fiscal year balances have been reclassified to conform to the current fiscal year presentation.Principles of ConsolidationOur condensed consolidated financial statements include the accounts of NVIDIA Corporation and our wholly-owned subsidiaries.Allintercompany balances and transactions have been eliminated in consolidation.Use of EstimatesThe preparation of financial statements in conformity with U.S.GAAP requires management to make estimates and assumptions that affect thereported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and thereported amounts of revenue and expenses during the reporting period.Actual results could differ materially from our estimates.On an on-goingbasis,we evaluate our estimates,including those related to revenue recognition,cash equivalents and marketable securities,accountsreceivable,inventories,income taxes,goodwill,stock-based compensation,litigation,investigation and settlement costs,restructuring and othercharges,property,plant,and equipment,and other contingencies.These estimates are based on historical facts and various other assumptionsthat we believe are reasonable.In February 2023,we completed an assessment of the useful lives of our property,plant,and equipment.Based on advances in technology andusage rate,we increased the estimated useful life of a majority of our server,storage,and network equipment from three to a range of four tofive years,and our assembly and test equipment from five to seven years.This change in accounting estimate became effective at the beginningof fiscal year 2024.Based on the carrying amounts of a majority of our server,storage,network,and assembly and test equipment,net,in useas of the end of fiscal year 2023,the effect of this change in estimate for the three months ended April 30,2023,was a benefit of$2 million and$31 million for cost of revenue and operating expenses,respectively.This resulted in an increase in operating income of$33 million and netincome of$28 million after tax,or$0.01 per both basic and diluted share.8NVIDIA CORPORATION AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)(Unaudited)Note 2-Business CombinationTermination of the Arm Share Purchase AgreementIn February 2022,NVIDIA and SoftBank Group Corp,or SoftBank,announced the termination of the Share Purchase Agreement wherebyNVIDIA would have acquired Arm Limited,or Arm,from SoftBank.The parties agreed to terminate due to significant regulatory challengespreventing the completion of the transaction.We recorded an acquisition termination cost of$1.35 billion in fiscal year 2023 reflecting the write-off of the prepayment provided at signing.Note 3-LeasesOur lease obligations primarily consist of operating leases for our headquarters complex,domestic and international office facilities,and datacenter space,with lease periods expiring between fiscal years 2024 and 2035.Future minimum lease payments under our non-cancelable operating leases as of April 30,2023 are as follows:Operating LeaseObligations(In millions)Fiscal Year:2024(excluding first quarter)$178 2025218 2026196 2027180 2028159 2029 and thereafter357 Total1,288 Less imputed interest162 Present value of net future minimum lease payments1,126 Less short-term operating lease liabilities187 Long-term operating lease liabilities$939 In addition,we have operating leases,primarily for our data centers,that are expected to commence between the second quarter of fiscal year2024 and fiscal year 2025 with lease terms of 2 to 8 years for$361 million.Operating lease expenses were$59 million and$44 million for the first quarter of fiscal years 2024 and 2023,respectively.Short-term andvariable lease expenses for the first quarter of fiscal years 2024 and 2023 were not significant.Other information related to leases was as follows:Three Months EndedApril 30,2023May 1,2022(In millions)Supplemental cash flows information Operating cash flows used for operating leases$61$45 Operating lease assets obtained in exchange for lease obligations$106$62 9As of April 30,2023,our operating leases had a weighted average remaining lease term of 6.6 years and a weighted average discount rate of3.33%.As of January 29,2023,our operating leases had a weighted average remaining lease term of 6.8 years and a weighted averagediscount rate of 3.21%.Note 4-Stock-Based CompensationOur stock-based compensation expense is associated with restricted stock units,or RSUs,performance stock units that are based on ourcorporate financial performance targets,or PSUs,performance stock units that are based on market conditions,or market-based PSUs,and ouremployee stock purchase plan,or ESPP.Our Condensed Consolidated Statements of Income include stock-based compensation expense,net of amounts allocated to inventory,asfollows:Three Months Ended April 30,2023May 1,2022(In millions)Cost of revenue$27$38 Research and development524 384 Sales,general and administrative184 156 Total$735$578 Equity Award ActivityThe following is a summary of our equity award transactions under our equity incentive plans:RSUs,PSUs,and Market-based PSUs Outstanding Number of SharesWeighted Average Grant-Date FairValue Per Share(In millions,except per share data)Balances,January 29,202345$158.45 Granted2$226.08 Vested restricted stock(6)$115.99 Canceled and forfeited(1)$199.37 Balances,April 30,202340$167.07 As of April 30,2023,there was$6.55 billion of aggregate unearned stock-based compensation expense.This amount is expected to berecognized over a weighted average period of 2.5 years for RSUs,PSUs,and market-based PSUs,and 1.1 years for ESPP.10Note 5 Net Income Per ShareThe following is a reconciliation of the denominator of the basic and diluted net income per share computations for the periods presented:Three Months EndedApril 30,May 1,20232022(In millions,except per share data)Numerator:Net income$2,043$1,618 Denominator:Basic weighted average shares2,470 2,506 Dilutive impact of outstanding equity awards20 31 Diluted weighted average shares2,490 2,537 Net income per share:Basic(1)$0.83$0.65 Diluted(2)$0.82$0.64 Equity awards excluded from diluted net income per share because their effect would havebeen anti-dilutive4 3(1)Calculated as net income divided by basic weighted average shares.(2)Calculated as net income divided by diluted weighted average shares.Note 6 Income TaxesIncome tax expense was$166 million and$187 million for the first quarter of fiscal years 2024 and 2023,respectively.The income tax expenseas a percentage of income before income tax was 7.5%and 10.3%for the first quarter of fiscal years 2024 and 2023,respectively.The decrease in the effective tax rate was primarily due to the tax impact of the Arm acquisition termination cost recorded in the first quarter offiscal year 2023,which did not result in a tax benefit,and the increased impact of tax benefits from stock-based compensation,partially offset bydecreased tax benefits impact from the foreign-derived intangible income deduction and the U.S.federal research tax credit.Our effective tax rates for the first quarter of fiscal years 2024 and 2023 were lower than the U.S.federal statutory rate of 21%due to taxbenefits from the foreign-derived intangible income deduction,stock-based compensation and the U.S.federal research tax credit.For the first quarter of fiscal year 2024,there were no material changes to our tax years that remain subject to examination by major taxjurisdictions.We are currently under examination by the Internal Revenue Service for our fiscal years 2018 and 2019.Additionally,there havebeen no material changes to our unrecognized tax benefits and any related interest or penalties since the fiscal year ended January 29,2023.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-notthat 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 aremade or the underlying matters are settled or otherwise resolved with the respective tax authorities.As of April 30,2023,we do not believe thatour estimates,as otherwise provided for,on such tax positions will significantly increase or decrease within the next 12 months.11Note 7-Cash Equivalents and Marketable Securities Our cash equivalents and marketable securities related to debt securities are classified as“available-for-sale”debt securities.The following is a summary of cash equivalents and marketable securities:April 30,2023AmortizedCostUnrealizedGainUnrealizedLossEstimatedFair ValueReported as CashEquivalentsMarketableSecurities(In millions)Corporate debt securities$6,723$4$(11)$6,716$2,535$4,181 Debt securities issued by the U.S.Treasury3,996 2(31)3,967 421 3,546 Debt securities issued by U.S.government agencies2,442 1(1)2,442 199 2,243 Money market funds1,502 1,502 1,502 Certificates of deposit395 395 173 222 Foreign government bonds49 49 49 Total$15,107$7$(43)$15,071$4,830$10,241 January 29,2023AmortizedCostUnrealizedGainUnrealizedLossEstimatedFair ValueReported as CashEquivalentsMarketableSecurities(In millions)Corporate debt securities$4,809$(12)$4,797$1,087$3,710 Debt securities issued by the U.S.Treasury4,185 1(44)4,142 4,142 Debt securities issued by U.S.government agencies1,836 (2)1,834 50 1,784 Money market funds1,777 1,777 1,777 Certificates of deposit365 365 134 231 Foreign government bonds140 140 100 40 Total$13,112$1$(58)$13,055$3,148$9,907 12The following tables provide the breakdown of unrealized losses,aggregated by investment category and length of time that individual securitieshave been in a continuous loss position:April 30,2023 Less than 12 Months12 Months or GreaterTotal Estimated FairValueGrossUnrealizedLossEstimated FairValueGrossUnrealizedLossEstimated FairValueGrossUnrealizedLoss(In millions)Debt securities issued by the U.S.Treasury$1,601$(11)$1,106$(20)$2,707$(31)Debt securities issued by U.S.government agencies1,259(1)1,259(1)Corporate debt securities945(4)838(7)1,783(11)Total$3,805$(16)$1,944$(27)$5,749$(43)January 29,2023 Less than 12 Months12 Months or GreaterTotal Estimated FairValueGrossUnrealizedLossEstimated FairValueGrossUnrealizedLossEstimated FairValueGrossUnrealizedLoss(In millions)Debt securities issued by the U.S.Treasury$2,444$(21)$1,172$(23)$3,616$(44)Corporate debt securities1,188(7)696(5)1,884(12)Debt securities issued by U.S.government agencies1,307(2)1,307(2)Total$4,939$(30)$1,868$(28)$6,807$(58)The gross unrealized losses are related to fixed income securities,driven primarily by changes in interest rates.Net realized gains and losseswere not significant for all periods presented.The amortized cost and estimated fair value of cash equivalents and marketable securities are shown below by contractual maturity.April 30,2023January 29,2023Amortized CostEstimated FairValueAmortized CostEstimated FairValue(In millions)Less than one year$12,654$12,625$9,738$9,708 Due in 1-5 years2,453 2,446 3,374 3,347 Total$15,107$15,071$13,112$13,055 13Note 8 Fair Value of Financial Assets and LiabilitiesThe fair values of our financial assets and liabilities are determined using quoted market prices of identical assets or quoted market prices ofsimilar assets from active markets.We review fair value hierarchy classification on a quarterly basis.Fair Value atPricingCategoryApril 30,2023January 29,2023(In millions)AssetsCash equivalents and marketable securities:Money market fundsLevel 1$1,502$1,777 Corporate debt securitiesLevel 2$6,716$4,797 Debt securities issued by the U.S.TreasuryLevel 2$3,967$4,142 Debt securities issued by U.S.government agenciesLevel 2$2,442$1,834 Certificates of depositLevel 2$395$365 Foreign government bondsLevel 2$49$140 Other assets(Investment in non-affiliated entities):Publicly-held equity securities(1)Level 1$9$11 Privately-held equity securitiesLevel 3$496$288 Liabilities(2)0.309%Notes Due 2023Level 2$1,243$1,230 0.584%Notes Due 2024Level 2$1,197$1,185 3.20%Notes Due 2026Level 2$976$966 1.55%Notes Due 2028Level 2$1,112$1,099 2.85%Notes Due 2030Level 2$1,375$1,364 2.00%Notes Due 2031Level 2$1,062$1,044 3.50%Notes Due 2040Level 2$862$870 3.50%Notes Due 2050Level 2$1,633$1,637 3.70%Notes Due 2060Level 2$403$410(1)Unrealized losses of$14 million and$24 million from investments in publicly-traded equity securities were recorded in other income(expense),net,in the first quarter of fiscalyears 2024 and 2023,respectively.(2)These liabilities are carried on our Condensed Consolidated Balance Sheets at their original issuance value,net of unamortized debt discount and issuance costs.14Note 9-Amortizable Intangible Assets and GoodwillThe components of our amortizable intangible assets are as follows:April 30,2023January 29,2023 GrossCarryingAmountAccumulatedAmortizationNet CarryingAmountGrossCarryingAmountAccumulatedAmortizationNet CarryingAmount(In millions)Acquisition-relatedintangible assets$3,112$(1,780)$1,332$3,093$(1,614)$1,479 Patents and licensedtechnology460(251)209 446(249)197 Total intangible assets$3,572$(2,031)$1,541$3,539$(1,863)$1,676 Amortization expense associated with intangible assets was$181 million and$155 million for the first quarter of fiscal years 2024 and 2023,respectively.The following table outlines the estimated future amortization expense related to the net carrying amount of intangible assets as of April 30,2023:Future Amortization Expense(In millions)Fiscal Year:2024(excluding first quarter)$433 2025554 2026259 2027149 202837 2029 and thereafter109 Total$1,541 In the first quarter of fiscal year 2024,goodwill increased by$58 million from an acquisition,and was assigned to our Compute&Networkingsegment.Note 10-Balance Sheet Components Certain balance sheet components are as follows:April 30,January 29,20232023Inventories:(In millions)Raw materials$1,809$2,430 Work in-process930 466 Finished goods1,872 2,263 Total inventories$4,611$5,159 15April 30,January 29,20232023Other Assets:(In millions)Prepaid supply and capacity agreements$3,002$2,989 Investment in non-affiliated entities505 299 Prepaid royalties381 387 Prepaid cloud services171 23 Other145 122 Total other assets$4,204$3,820 April 30,January 29,20232023Accrued and Other Current Liabilities:(In millions)Taxes payable$1,544$467 Customer program accruals1,245 1,196 Excess inventory purchase obligations786 954 Deferred revenue(1)367 354 Accrued payroll and related expenses320 530 Operating leases187 176 Licenses and royalties143 149 Product warranty and return provisions112 108 Other165 186 Total accrued and other current liabilities$4,869$4,120(1)Deferred revenue primarily includes customer advances and deferrals related to license and development arrangements,support for hardware and software,and cloudservices.April 30,January 29,20232023Other Long-Term Liabilities:(In millions)Income tax payable(1)$1,300$1,204 Deferred income tax290 247 Deferred revenue(2)230 218 Licenses payable155 181 Other62 63 Total other long-term liabilities$2,037$1,913(1)Income tax payable is comprised of the long-term portion of the one-time transition tax payable,unrecognized tax benefits,and related interest and penalties.(2)Deferred revenue primarily includes deferrals related to support for hardware and software.16Deferred RevenueThe following table shows the changes in deferred revenue during the first quarter of fiscal years 2024 and 2023:April 30,May 1,20232022(In millions)Balance at beginning of period$572$502 Deferred revenue additions during the period287 212 Revenue recognized during the period(262)(177)Balance at end of period$597$537 Revenue allocated to remaining performance obligations,which includes deferred revenue and amounts that will be invoiced and recognized asrevenue in future periods,was$639 million as of April 30,2023.We expect to recognize approximately 46%of this revenue over the next twelvemonths and the remainder thereafter.This excludes revenue related to performance obligations for contracts with a length of one year or less.Note 11-Derivative Financial InstrumentsWe enter into foreign currency forward contracts to mitigate the impact of foreign currency exchange rate movements on our operatingexpenses.These contracts are designated as cash flow hedges for hedge accounting treatment.Gains or losses on the contracts are recordedin accumulated other comprehensive income or loss and reclassified to operating expense when the related operating expenses are recognizedin earnings or ineffectiveness should occur.We also enter into foreign currency forward contracts to mitigate the impact of foreign currency movements on monetary assets and liabilitiesthat are denominated in currencies other than the U.S.dollar.These forward contracts were not designated for hedge accounting treatment.Therefore,the change in fair value of these contracts is recorded in other income or expense and offsets the change in fair value of the hedgedforeign currency denominated monetary assets and liabilities,which is also recorded in other income or expense.The table below presents the notional value of our foreign currency forward contracts outstanding:April 30,2023January 29,2023(In millions)Designated as cash flow hedges$1,142$1,128 Non-designated hedges$350$366 The unrealized gains and losses or fair value of our foreign currency forward contracts was not significant as of April 30,2023 and January 29,2023.As of April 30,2023,all designated foreign currency forward contracts mature within 18 months.The expected realized gains and lossesdeferred into accumulated other comprehensive income or loss related to foreign currency forward contracts within the next twelve months wasnot significant.During the first quarter of fiscal years 2024 and 2023,the impact of derivative financial instruments designated for hedge accounting treatmenton other comprehensive income or loss was not significant and all such instruments were determined to be highly effective.17Note 12-DebtLong-Term DebtThe carrying value of our outstanding notes,the calendar year of maturity,and the associated interest rates were as follows:Carrying Value atExpectedRemaining Term(years)EffectiveInterest RateApril 30,2023January 29,2023(In millions)0.309%Notes Due 20230.10.41%$1,250$1,250 0.584%Notes Due 20241.10.66%1,250 1,250 3.20%Notes Due 20263.43.31%1,000 1,000 1.55%Notes Due 20285.11.64%1,250 1,250 2.85%Notes Due 20306.92.93%1,500 1,500 2.00%Notes Due 20318.12.09%1,250 1,250 3.50%Notes Due 204016.93.54%1,000 1,000 3.50%Notes Due 205026.93.54%2,000 2,000 3.70%Notes Due 206036.93.73P0 500 Unamortized debt discount and issuance costs(46)(47)Net carrying amount10,954 10,953 Less short-term portion(1,250)(1,250)Total long-term portion$9,704$9,703 All our notes are unsecured senior obligations.All existing and future liabilities of our subsidiaries will be effectively senior to the notes.Ournotes pay interest semi-annually.We may redeem each of our notes prior to maturity,subject to a make-whole premium as defined in theapplicable form of note.As of April 30,2023,we were in compliance with the required covenants,which are non-financial in nature,under the outstanding notes.Commercial PaperWe have a$575 million commercial paper program to support general corporate purposes.As of April 30,2023,we had not issued anycommercial paper.Note 13-Commitments and ContingenciesPurchase ObligationsOur purchase obligations reflect our commitments to purchase components used to manufacture our products,including long-term supply andcapacity agreements,certain software and technology licenses,other goods and services and long-lived assets.As of April 30,2023,we had outstanding inventory purchase and long-term supply and capacity obligations totaling$7.27 billion.During thenormal course of business,to manage manufacturing lead times and help ensure adequate supply,we enter into agreements with contractmanufacturers that allow them to procure inventory based upon criteria as defined by us,and in certain instances,these agreements allow usthe option to cancel,reschedule,and adjust our requirements based on our business needs prior to firm orders being placed,but these changesmay result in the payment of costs incurred through the date of cancellation.18Other non-inventory purchase obligations of$3.26 billion include$2.43 billion of multi-year cloud service agreements.Total future purchase commitments as of April 30,2023 are as follows:Commitments(In millions)Fiscal Year:2024(excluding first quarter)$6,667 20251,816 2026753 2027704 2028332 2029 and thereafter255 Total$10,527 Accrual for Product Warranty LiabilitiesThe estimated amount of product warranty liabilities was$77 million and$82 million as of April 30,2023 and January 29,2023,respectively.Theestimated product returns and estimated product warranty activity consisted of the following:Three Months EndedApril 30,2023May 1,2022(In millions)Balance at beginning of period$82$46 Additions1316Utilization(18)(7)Balance at end of period$77$55 In connection with certain agreements that we have entered in the past,we have provided indemnities for matters such as tax,product,andemployee 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 havenot recorded any liability in our Condensed Consolidated Financial Statements for such indemnifications.LitigationSecurities Class Action and Derivative LawsuitsThe plaintiffs in the putative securities class action lawsuit,captioned 4:18-cv-07669-HSG,initially filed on December 21,2018 in the UnitedStates District Court for the Northern District of California,and titled In Re NVIDIA Corporation Securities Litigation,filed an amended complainton May 13,2020.The amended complaint asserted that NVIDIA and certain NVIDIA executives violated Section 10(b)of the SecuritiesExchange Act of 1934,as amended,or the Exchange Act,and SEC Rule 10b-5,by making materially false or misleading statements related tochannel inventory and the impact of cryptocurrency mining on GPU demand between May 10,2017 and November 14,2018.Plaintiffs alsoalleged that the NVIDIA executives who they named as defendants violated Section 20(a)of the Exchange Act.Plaintiffs sought classcertification,an award of unspecified compensatory damages,an award of reasonable costs and expenses,including attorneys fees and expertfees,and further relief as the Court may deem just and proper.On March 2,2021,the district court granted NVIDIAs motion to dismiss thecomplaint without leave to amend,entered judgment in favor of NVIDIA and closed the case.On March 30,2021,plaintiffs filed an appeal fromjudgment19in the United States Court of Appeals for the Ninth Circuit,case number 21-15604.Oral argument on the appeal was held on May 10,2022.The putative derivative lawsuit pending in the United States District Court for the Northern District of California,captioned 4:19-cv-00341-HSG,initially filed January 18,2019 and titled In re NVIDIA Corporation Consolidated Derivative Litigation,was stayed pending resolution of theplaintiffs appeal in the In Re NVIDIA Corporation Securities Litigation action.On February 22,2022,the court administratively closed the case,but stated that it would reopen the case once the appeal in the In Re NVIDIA Corporation Securities Litigation action is resolved.The lawsuitasserts claims,purportedly on behalf of us,against certain officers and directors of the Company for breach of fiduciary duty,unjust enrichment,waste of corporate assets,and violations of Sections 14(a),10(b),and 20(a)of the Exchange Act based on the dissemination of allegedly falseand misleading statements related to channel inventory and the impact of cryptocurrency mining on GPU demand.The plaintiffs are seekingunspecified damages and other relief,including reforms and improvements to NVIDIAs corporate governance and internal procedures.The putative derivative actions initially filed September 24,2019 and pending in the United States District Court for the District of Delaware,Lipchitz v.Huang,et al.(Case No.1:19-cv-01795-UNA)and Nelson v.Huang,et.al.(Case No.1:19-cv-01798-UNA),remain stayed pendingresolution of the plaintiffs appeal in the In Re NVIDIA Corporation Securities Litigation action.The lawsuits assert claims,purportedly on behalfof us,against certain officers and directors of the Company for breach of fiduciary duty,unjust enrichment,insider trading,misappropriation ofinformation,corporate waste and violations of Sections 14(a),10(b),and 20(a)of the Exchange Act based on the dissemination of allegedlyfalse,and misleading statements related to channel inventory and the impact of cryptocurrency mining on GPU demand.The plaintiffs seekunspecified damages and other relief,including disgorgement of profits from the sale of NVIDIA stock and unspecified corporate governancemeasures.Accounting for Loss ContingenciesAs of April 30,2023,we have not recorded any accrual for contingent liabilities associated with the legal proceedings described above based onour belief that liabilities,while possible,are not probable.Further,except as specifically described above,any possible loss or range of loss inthese matters cannot be reasonably estimated at this time.We are engaged in legal actions not described above arising in the ordinary course ofbusiness and,while there can be no assurance of favorable outcomes,we believe that the ultimate outcome of these actions will not have amaterial adverse effect on our operating results,liquidity or financial position.Note 14-Shareholders Equity Capital Return Program Since the inception of our share repurchase program through April 30,2023,we have repurchased an aggregate of 1.10 billion shares for a totalcost of$17.12 billion.As of April 30,2023,we were authorized,subject to certain specifications,to repurchase an additional$7.23 billion ofshares through December 2023.We did not repurchase any shares during the first quarter of fiscal year 2024.During the first quarter of fiscal years 2024 and 2023,we paid$99 million and$100 million in cash dividends to our shareholders,respectively.Our cash dividend program and the payment of future cash dividends under that program are subject to our Board of Directors continuingdetermination that the dividend program and the declaration of dividends thereunder are in the best interests of our shareholders.Note 15-Segment InformationOur Chief Executive Officer,who is considered to be our chief operating decision maker,or CODM,reviews financial information presented onan operating segment basis for purposes of making decisions and assessing financial performance.The Compute&Networking segment includes our Data Center accelerated computing platform;networking;automotive artificial intelligence,orAI,Cockpit,autonomous driving development agreements,and20autonomous vehicle solutions;electric vehicle computing platforms;Jetson for robotics and other embedded platforms;NVIDIA AI Enterprise andother software;and cryptocurrency mining processors,or CMP.The Graphics segment includes GeForce GPUs for gaming and PCs,the GeForce NOW game streaming service and related infrastructure,andsolutions for gaming platforms;Quadro/NVIDIA RTX GPUs for enterprise workstation graphics;virtual GPU software for cloud-based visual andvirtual computing;automotive platforms for infotainment systems;and Omniverse Enterprise software for building and operating metaverse and3D internet applications.Operating results by segment include costs or expenses that are directly attributable to each segment,and costs or expenses that are leveragedacross our unified architecture and therefore allocated between our two segments.The“All Other”category includes the expenses that our CODM does not assign to either Compute&Networking or Graphics for purposes ofmaking operating decisions or assessing financial performance.The expenses include stock-based compensation expense,acquisition-relatedand other costs,corporate infrastructure and support costs,acquisition termination cost,intellectual property related,or IP-related and legalsettlement costs,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.Depreciation and amortization expensedirectly attributable to each reportable segment is included in operating results for each segment.However,the CODM does not evaluatedepreciation and amortization expense by operating segment and,therefore,it is not separately presented.There is no intersegment revenue.The accounting policies for segment reporting are the same as for our consolidated financial statements.The table below presents details of ourreportable segments and the“All Other”category.Compute&NetworkingGraphicsAll OtherConsolidated(In millions)Three Months Ended April 30,2023 Revenue$4,460$2,732$7,192 Operating income(loss)$2,160$1,046$(1,066)$2,140 Three Months Ended May 1,2022 Revenue$3,672$4,616$8,288 Operating income(loss)$1,606$2,476$(2,214)$1,868 Three Months EndedApril 30,2023May 1,2022(In millions)Reconciling items included in All Other category:Stock-based compensation expense$(735)$(578)Acquisition-related and other costs(173)(149)Unallocated cost of revenue and operating expenses(154)(127)IP-related and legal settlement costs(8)(7)Acquisition termination cost(1,353)Other4 Total$(1,066)$(2,214)21Revenue by geographic region is allocated to individual countries based on the billing location of the customer.End customer location may bedifferent than our customers billing location.The following table summarizes information pertaining to our revenue from customers based on theinvoicing address by geographic regions:Three Months EndedApril 30,May 1,20232022(In millions)Revenue:United States$2,385$1,932 Taiwan1,796 2,777 China(including Hong Kong)1,590 2,081 Singapore762454Other countries659 1,044 Total revenue$7,192$8,288 No customer represented 10%or more of total revenue for the first quarter of fiscal years 2024 and 2023.Two customers accounted for 12%and 10%of our accounts receivable balance as of April 30,2023.Two customers accounted for 14%and11%of our accounts receivable balance as of January 29,2023.The following table summarizes information pertaining to our revenue by each of the specialized markets we serve:Three Months EndedApril 30,May 1,20232022(In millions)Revenue:Data Center$4,284$3,750 Gaming2,240 3,620 Professional Visualization295 622 Automotive296 138 OEM and Other77 158 Total revenue$7,192$8,288 22ITEM 2.MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSForward-Looking Statements This Quarterly Report on Form 10-Q contains forward-looking statements which are based on our managements beliefs and assumptions andon 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 expressionsintended to identify forward-looking statements.These statements involve known and unknown risks,uncertainties and other factors,which maycause our actual results,performance,time frames or achievements to be materially different from any future results,performance,time framesor achievements expressed or implied by the forward-looking statements.We discuss many of these risks,uncertainties and other factors in thisQuarterly Report on Form 10-Q and our Annual Report on Form 10-K for the fiscal year ended January 29,2023 in greater detail under theheading“Risk Factors”of such reports.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 shouldread this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results may be materially different fromwhat we expect.We hereby qualify our forward-looking statements by these cautionary statements.Except as required by law,we assume noobligation to update these forward-looking statements publicly,or to update the reasons actual results could differ materially from thoseanticipated 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.2023 NVIDIA Corporation.All rights reserved.The following discussion and analysis of our financial condition and results of operations shouldbe read in conjunction with the risk factors set forth in Item 1A.“Risk Factors”of our Annual Report on Form 10-K for the fiscal year endedJanuary 29,2023 and Part II,Item 1A.“Risk Factors”of this Quarterly Report on Form 10-Q and our Condensed Consolidated FinancialStatements and related Notes thereto,as well as other cautionary statements and risks described elsewhere in this Quarterly Report on Form10-Q and our other filings with the SEC,before deciding to purchase or sell shares of our common stock.OverviewOur Company and Our BusinessesNVIDIA pioneered accelerated computing to help solve the most challenging computational problems.Since our original focus on PC graphics,we have expanded to several other large and important computationally intensive fields.Fueled by the sustained demand for exceptional 3Dgraphics and the scale of the gaming market,NVIDIA has leveraged its GPU architecture to create platforms for scientific computing,AI,datascience,autonomous vehicles,robotics,metaverse and 3D internet applications.Our two operating segments are Compute&Networking and Graphics,as described in Note 15 of the Notes to Condensed ConsolidatedFinancial Statements.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 ChallengesSupply,Products Transitions,and New Products and Business ModelsOur supply,which includes inventory on hand,purchase obligations and prepaid supply and capacity agreements,has grown significantly due torecent supply chain conditions and long lead times,complexity of our products,and changes in demand.We have entered and expect tocontinue to enter into supplier and capacity prepayment arrangements.We have procured substantially higher Data Center supply for thesecond half compared to the first half of fiscal year 2024.We may incur inventory provisions or impairments if our inventory or supply or capacitycommitments are misaligned with demand for our products.Product transitions are complex as we often ship both new and prior architecture products simultaneously and we and our channel partnersprepare to ship and support new products.We are currently transitioning the architecture of our Data Center,Professional Visualization,andGaming products.Qualification time for23new products,customers anticipating product transitions and channel partners reducing channel inventory of prior architectures ahead of newproduct introductions can create reductions or volatility in our revenue.In addition,the bring up of new product architectures is complex due tofunctionality challenges and quality concerns not identified in manufacturing testing.These product quality issues may incur costs,increase ourwarranty costs,and delay further production of our architecture.While we have managed prior product transitions and have previously soldmultiple product architectures at the same time,these transitions are difficult,may impair our ability to predict demand and impact our supplymix,and we may incur additional costs.We build technology and products for use cases and applications that may be new or may not yet exist such as our Omniverse platform,third-party large language models and generative AI models.Our demand estimates for these use cases and applications can be incorrect and createvolatility in our revenue or supply levels,and we may not be able to generate significant revenue from these use cases and applications.Newtechnologies such as generative AI models have emerged,and while they have driven increased demand for compute infrastructure,the long-term trajectory is unknown.NVIDIA AI Cloud Service OfferingsWe offer enterprise customers NVIDIA AI cloud services directly and through our network of partners.Examples of these services includeNVIDIA DGX Cloud,which includes cloud-based infrastructure and software for training and deploying AI models,and NVIDIA AI Foundations forcustomizable pretrained AI models.We have partnered with cloud service providers to host these services in their data centers.We entered and may continue to enter into multi-year cloud service agreements to support these offerings and our research and developmentactivities.The timing and availability of these cloud services has changed and may continue to change,impacting revenue,expenses anddevelopment timelines.We also offer or plan to offer standalone software solutions including NVIDIA AI Enterprise,NVIDIA Omniverse,NVIDIADRIVE,and several other software solutions.Global TradeDuring the third quarter of fiscal year 2023,the U.S.government,or the USG,announced license requirements that,with certain exceptions,impact exports to China(including Hong Kong and Macau)and Russia of our A100 and H100 integrated circuits,DGX or any other systems orboards which incorporate A100 or H100 integrated circuits.Following the 2022 export controls,we transitioned some operations,includingcertain testing,validation,and supply and distribution operations out of China and Hong Kong.We have sold alternative products in China notsubject to the license requirements,such as our A800 or H800 offerings.Management of these new license and other requirements is complicated and time consuming.Our results and competitive position may beharmed and we may be effectively excluded from all or part of the China market if there are further changes in the USGs export controls,ifcustomers in China do not want to purchase our alternative product offerings,if customers purchase product from competitors,if customersdevelop their own internal solution,if the USG does not grant licenses in a timely manner or denies licenses to significant customers,or if weincur significant transition costs.Any new control that impacts a wide range of our products would likely have a disproportionate impact onNVIDIA and may disadvantage us against certain of our competitors that sell chips that are outside the scope of such control.In addition to USGexport controls,the Chinese government may also impose restrictions that impact our ability to sell our products.New export controls or changes to existing controls could negatively impact our business,revenue or supply chain.While we work through theresiliency and redundancy of our supply chain,it is currently concentrated in the Asia-Pacific,including China,Hong Kong,Korea and Taiwan,and changes to trade requirements may negatively impact our business.24First Quarter of Fiscal Year 2024 SummaryThree Months Ended April 30,2023January 29,2023May 1,2022Quarter-over-QuarterChangeYear-over-YearChange($in millions,except per share data)Revenue$7,192$6,051$8,288 19%(13)%Gross margin64.6c.3e.5%1.3 pts(0.9)ptsOperating expenses$2,508$2,576$3,563(3)%(30)%Income from operations$2,140$1,257$1,868 70%Net income$2,043$1,414$1,618 44&%Net income per diluted share$0.82$0.57$0.64 44(%We specialize in markets where our computing platforms can provide tremendous acceleration for applications.These platforms incorporateprocessors,interconnects,software,algorithms,systems,and services to deliver unique value.Our platforms address four large markets whereour expertise is critical:Data Center,Gaming,Professional Visualization,and Automotive.Revenue for the first quarter of fiscal year 2024 was$7.19 billion,down 13%from a year ago and up 19%sequentially.Data Center revenue was up 14%from a year ago and up 18%sequentially,led by growing demand for generative AI and large languagemodels using GPUs based on our NVIDIA Hopper and Ampere architectures.The revenue growth reflects strong demand from large consumerinternet companies and cloud service providers.Enterprise demand for GPU platforms was strong,although general purpose networkingsolutions declined both sequentially and from a year ago.Gaming revenue was down 38%from a year ago and up 22%sequentially.The year-on-year decrease reflects weaker demand due to themacroeconomic slowdown and lower shipments to normalize channel inventory levels.The sequential increase was driven by the ramp of ournew GeForce RTX 40 Series GPUs for desktops and laptops based on the Ada Lovelace architecture.Professional Visualization revenue was down 53%from a year ago and up 31%sequentially.The year-on-year decrease reflects lower sell-in topartners to help reduce channel inventory levels.The sequential increase was driven by higher demand for desktop and mobile workstationGPUs.Automotive revenue was up 114%from a year ago and up 1%sequentially.The year-on-year increase reflects growth in sales of self-drivingplatforms and AI cockpit solutions.OEM and Other revenue was down 51%from a year ago and down 8%sequentially.These decreases were primarily driven by lower entry levelnotebook GPU sales.Gross margin declined from a year earlier and increased sequentially.The year-on-year decline reflects lower Gaming margins and a highercontribution from Automotive,partially offset by higher Data Center margins.The sequential increase reflects lower costs in Gaming and higherData Center margins as we ramp our Hopper architecture.Operating expenses were down 30%from a year ago and down 3%sequentially.The prior year included a termination charge of$1.35 billion forthe proposed Arm acquisition,and the prior quarter included fixed asset write-downs.Cash,cash equivalents and marketable securities were$15.32 billion,down from$20.34 billion a year ago and up from$13.30 billion a quarterago.The year-on-year decrease reflects$8.04 billion in stock repurchases,partially offset by operating cash flow generation.The sequentialincrease reflects operating cash flow generation.During the first quarter of fiscal year 2024,we returned$99 million to shareholders in the form of cash dividends.As of the end of the first quarterof fiscal year 2024,we had$7.23 billion remaining under our share repurchase authorization through December 2023.25Market Platform HighlightsData Center revenue for the first quarter of fiscal year 2024 was$4.28 billion,up 14%from a year ago,led by growing demand for generative AIand large language models using GPUs based on our NVIDIA Hopper and Ampere architectures.The year-on-year increase reflects strongdemand from large consumer internet customers and cloud service providers.We launched four AI inference platforms that combine our full-stack inference software with NVIDIA Ada,NVIDIA Hopper and NVIDIA Grace Hopper processors optimized for generative AI,large languagemodel and other AI workloads.We announced that Google Cloud is the first cloud provider to offer the new NVIDIA L4 Tensor Core GPU toaccelerate generative AI application.We introduced NVIDIA AI Foundations to help businesses create and operate custom large languagemodels and generative AI models.We also partnered with ServiceNow,Inc.to build generative AI across enterprise IT;joined with DellTechnologies in Project Helix to deliver full-stack generative AI solutions to enterprises;announced a collaboration with Medtronic on an AIplatform for medical devices;and unveiled the NVIDIA cuLitho software library for computational lithography.Gaming revenue for the first quarter of fiscal year 2024 was$2.24 billion,down 38%from a year ago.The year-on-year decrease reflectsweaker demand due to the macroeconomic slowdown and lower shipments to normalize channel inventory levels.We launched the GeForceRTX 4070 GPU based on the NVIDIA Ada Lovelace architecture.Professional Visualization revenue for the first quarter of fiscal year 2024 was$295 million,down 53%from a year ago,on lower sell-in topartners to help reduce channel inventory levels.We announced six new GPUs based on the NVIDIA RTX Ada Lovelace architecture.Weannounced NVIDIA Omniverse Cloud,a fully managed service running in Microsoft Azure,for the development and deployment of industrialmetaverse applications,and expanded our collaboration with Microsoft to connect Microsoft 365 applications with NVIDIA Omniverse.Automotive revenue for the first quarter of fiscal year 2024 was$296 million,up 114%from a year ago on growth in sales of self-drivingplatforms and AI cockpit solutions.We announced that electric vehicle maker BYD Auto Co.Ltd.will extend its use of the NVIDIA DRIVE Orincentralized compute platform across more of its fleet.Financial Information by Business Segment and Geographic DataRefer to Note 15 of the Notes to Condensed Consolidated Financial Statements for disclosure regarding segment information.Critical Accounting Policies and EstimatesRefer to Part II,Item 7,Critical Accounting Policies and Estimates of our Annual Report on Form 10-K for the fiscal year ended January 29,2023.There have been no material changes to our Critical Accounting Policies and Estimates.26Results of OperationsThe following table sets forth,for the periods indicated,certain items in our Condensed Consolidated Statements of Income expressed as apercentage of revenue.Three Months Ended April 30,2023May 1,2022Revenue100.00.0%Cost of revenue35.4 34.5 Gross profit64.6 65.5 Operating expenses Research and development26.1 19.5 Sales,general and administrative8.8 7.1 Acquisition termination cost 16.3 Total operating expenses34.9 42.9 Income from operations29.7 22.6 Interest income2.1 0.2 Interest expense(0.9)(0.8)Other,net(0.2)(0.2)Other income(expense),net1.0(0.8)Income before income tax30.7 21.8 Income tax expense2.3 2.3 Net income28.4.5%RevenueRevenue by Reportable SegmentsThree Months Ended April 30,2023May 1,2022$Change%Change($in millions)Compute&Networking$4,460$3,672$788 21%Graphics2,732 4,616(1,884)(41)%Total$7,192$8,288$(1,096)(13)%Compute&Networking-The year-on-year increase was led by growing demand for generative AI and large language models using GPUsbased on our Hopper and Ampere architectures.The revenue growth reflects strong demand from large consumer internet companies and cloudservice providers.Enterprise demand for GPU platforms was strong,although general purpose networking solutions declined from a year ago.Self-driving platforms and AI cockpit solutions revenue also increased from a year ago.Graphics-The year-on-year decrease primarily reflects weaker Gaming demand due to the macroeconomic slowdown and lower shipments tonormalize channel inventory levels,and lower Professional Visualization sell-in to partners to help reduce channel inventory levels.Concentration of Revenue Revenue from sales to customers outside of the United States accounted for 67%and 77%of total revenue for the first quarter of fiscal years2024 and 2023,respectively.Revenue by geographic region is allocated to countries based on the billed location even if the revenue may beattributable to end customers in a different location.27No direct customer represented 10%or more of total revenue for the first quarter of fiscal years 2024 and 2023.However,our estimatedCompute&Networking end customer demand is concentrated among a few large cloud service providers and consumer internet companies.Some of these large companies do not purchase directly from us but often purchase through several system builders and channel partners.Weexpect this trend will continue.Gross MarginOur overall gross margin decreased to 64.6%for the first quarter of fiscal year 2024 from 65.5%for the first quarter of fiscal year 2023,reflectinglower margins of GeForce GPUs within our Graphics segment partially offset by higher margins and increased contribution from computeproducts within our Compute&Networking segment.Reserves for inventory and excess inventory purchase obligations totaled$134 million and$90 million for the first quarter of fiscal years 2024and 2023,respectively.Sales of inventory that was previously written-off or down,or settlements of excess inventory purchase obligations,totaled$50 million and$15 million for the first quarter of fiscal years 2024 and 2023,respectively.As a result,the overall net effect on our grossmargin was an unfavorable impact of 1.2%and 0.9%in the first quarter of fiscal years 2024 and 2023,respectively.Compute&Networking-Segment gross margin increased during the first quarter of fiscal year 2024 compared to the first quarter of fiscal year2023,primarily due to higher margins and increased contribution from compute products.Graphics-Segment gross margin decreased during the first quarter of fiscal year 2024 compared to the first quarter of fiscal year 2023 primarilydue to lower margins of GeForce GPUs.Operating Expenses Three Months Ended April 30,2023May 1,2022$Change%Change($in millions)Research and development expenses$1,875$1,618$257 16%of net revenue26 %Sales,general and administrative expenses633 592 41 7%of net revenue9%7quisition termination cost 1,353(1,353)%of net revenue%Total operating expenses$2,508$3,563$(1,055)(30)%of net revenue34.9B.9%The increases in research and development expense and sales,general and administrative expense for the first quarter of fiscal year 2024 wereprimarily driven by employee growth and associated compensation and benefits.We recorded an acquisition termination cost related to the Arm transaction of$1.35 billion in fiscal year 2023 reflecting the write-off of theprepayment provided at signing.28Other Income(Expense),NetThree Months Ended April 30,2023May 1,2022$Change%Change($in millions)Interest income$150$18$132 733%Interest expense(66)(68)2(3)%Other,net(15)(13)(2)15%Other income(expense),net$69$(63)$132(210)%Interest income consists of interest earned on cash,cash equivalents and marketable securities.The increase in interest income was primarilydue to higher yields earned on our investments.Interest expense is primarily comprised of coupon interest and debt discount amortization related to our notes.Other,net,consists primarily of realized or unrealized gains and losses from investments in non-affiliated entities and the impact of changes inforeign currency rates.Income TaxesIncome tax expense was$166 million and$187 million for the first quarter of fiscal years 2024 and 2023,respectively.The income tax expenseas a percentage of income before income tax was 7.5%and 10.3%for the first quarter of fiscal years 2024 and 2023,respectively.The decrease in the effective tax rate was primarily due to the tax impact of the Arm acquisition termination cost recorded in the first quarter offiscal year 2023,which did not result in a tax benefit,and the increased impact of tax benefits from stock-based compensation,partially offset bydecreased tax benefits impact from the foreign-derived intangible income deduction and the U.S.federal research tax credit.Liquidity and Capital Resources April 30,2023January 29,2023(In millions)Cash and cash equivalents$5,079$3,389 Marketable securities10,241 9,907 Cash,cash equivalents and marketable securities$15,320$13,296 Three Months EndedApril 30,2023May 1,2022(In millions)Net cash provided by operating activities$2,911$1,731 Net cash provided by(used in)investing activities$(841)$2,612 Net cash used in financing activities$(380)$(2,446)As of April 30,2023,we had$15.32 billion in cash,cash equivalents and marketable securities,an increase of$2.02 billion from the end of fiscalyear 2023.Our investment policy requires the purchase of highly rated fixed income securities,the diversification of investment types and creditexposures,and certain maturity limits on our portfolio.Cash provided by operating activities increased in the first quarter of fiscal year 2024 compared to the first quarter of fiscal year 2023,primarilydue to lower inventory prepayments and changes in inventory,partially offset by lower revenue.29Cash used in investing activities increased in the first quarter of fiscal year 2024 compared to the first quarter of fiscal year 2023,primarily drivenby lower marketable securities sales and maturities,partially offset by lower purchases of marketable securities.Cash used in financing activities decreased in the first quarter of fiscal year 2024 compared to the first quarter of fiscal year 2023,whichprimarily reflects share repurchases in the first quarter of fiscal year 2023.LiquidityOur primary sources of liquidity are our cash and cash equivalents,our marketable securities,and the cash generated by our operations.As ofApril 30,2023,we had$15.32 billion in cash,cash equivalents,and marketable securities.Our marketable securities consist of debt securitiesissued by the USG and its agencies,highly rated corporations and financial institutions,and foreign government entities,as well as certificates ofdeposit issued by highly rated financial institutions.These marketable securities are primarily denominated in U.S.dollars.Refer to Note 7 of theNotes to Condensed Consolidated Financial Statements for additional information.We believe that we have sufficient liquidity to meet ouroperating requirements for at least the next twelve months,and for the foreseeable future,including our future supply obligations and potentialsupplier and service provider prepayments.We continuously evaluate our liquidity and capital resources,including our access to external capital,to ensure we can finance future capital requirements.Except for approximately$1.38 billion of cash,cash equivalents,and marketable securities held outside the U.S.for which we have not accruedany related foreign or state taxes if we repatriate these amounts to the U.S.,substantially all of our cash,cash equivalents and marketablesecurities held outside of the U.S.as of April 30,2023 are available for use in the U.S.without incurring additional U.S.federal income taxes.Wehave deferred our federal income tax payments until October 2023 due to the disaster relief made available by the Internal Revenue Service.During the first quarter of fiscal year 2024,we filed a Form S-3 shelf registration statement to replace the existing shelf that was expiring.We donot have any immediate plans to utilize this shelf once effective.Capital Return to ShareholdersDuring the first quarter of fiscal year 2024,we returned$99 million in cash dividends.Our cash dividend program and the payment of future cashdividends under that program are subject to the continuing determination by our Board of Directors that the dividend program and the declarationof dividends thereunder are in the best interests of our shareholders.We did not repurchase any shares during the first quarter of fiscal year 2024.As of April 30,2023,we were authorized,subject to certainspecifications,to repurchase additional shares of our common stock up to$7.23 billion through December 2023.Outstanding Indebtedness and Commercial PaperOur aggregate debt maturities as of April 30,2023,by year payable,are as follows:April 30,2023(In millions)Due in one year$1,250 Due in one to five years2,250 Due in five to ten years4,000 Due in greater than ten years3,500 Unamortized debt discount and issuance costs(46)Net carrying amount10,954 Less short-term portion(1,250)Total long-term portion$9,704 We expect to repay$1.25 billion of debt due in the second quarter of fiscal year 2024.We have a$575 million commercial paper program to support general corporate purposes.As of April 30,2023,we had not issued anycommercial paper.30Material Cash Requirements and Other ObligationsWe have unrecognized tax benefits of$1.11 billion,which includes related interest and penalties of$109 million recorded in non-current incometax payable as of April 30,2023.We are unable to reasonably estimate the timing of any potential tax liability,interest payments,or penalties inindividual years due to uncertainties in the underlying income tax positions and the timing of the effective settlement of such tax positions.Weare currently under examination by the Internal Revenue Service for our fiscal years 2018 and 2019.Refer to Note 6 of the Notes to CondensedConsolidated Financial Statements for further information.Other than the contractual obligations described above,there were no material changes outside the ordinary course of business in ourcontractual obligations from those disclosed in our Annual Report on Form 10-K for the fiscal year ended January 29,2023.Refer to Item 7,“Managements Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources”in our AnnualReport on Form 10-K for the fiscal year ended January 29,2023 for a description of our contractual obligations.For a description of ouroperating lease obligations,long-term debt,and purchase obligations,refer to Note 3,Note 12,and Note 13 of the Notes to CondensedConsolidated Financial Statements,respectively.Climate ChangeTo date,there has been no material impact to our results of operations associated with global sustainability regulations,compliance,costs fromsourcing renewable energy or climate-related business trends.Adoption of New and Recently Issued Accounting PronouncementsThere has been no adoption of any new and recently issued accounting pronouncements.ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKInvestment and Interest Rate RiskFinancial market risks related to investment and interest rate risk are described in Part II,Item 7A,“Quantitative and Qualitative DisclosuresAbout Market Risk”in our Annual Report on Form 10-K for the fiscal year ended January 29,2023.As of April 30,2023,there have been nomaterial changes to the financial market risks described as of January 29,2023.Foreign Exchange Rate RiskThe impact of foreign currency transactions related to foreign exchange rate risk is described in Part II,Item 7A,“Quantitative and QualitativeDisclosures About Market Risk”in our Annual Report on Form 10-K for the fiscal year ended January 29,2023.As of April 30,2023,there havebeen no material changes to the foreign exchange rate risks described as of January 29,2023.ITEM 4.CONTROLS AND PROCEDURESControls and ProceduresDisclosure Controls and ProceduresBased on their evaluation as of April 30,2023,our management,including our Chief Executive Officer and Chief Financial Officer,has concludedthat our disclosure controls and procedures(as defined in Exchange Act Rule 13a-15(e)and 15d-15(e)were effective to provide reasonableassurance.Changes in Internal Control Over Financial ReportingThere were no changes that occurred during the first quarter of fiscal year 2024 that have materially affected,or are reasonably likely tomaterially affect,our internal control over financial reporting.In fiscal year 2022,we began an upgrade of our enterprise resource planning,orERP,system,which will update much of our existing core financial systems.The ERP system is designed to accurately maintain our financialrecords used to report operating results.The upgrade will occur in phases.We will continue to evaluate each quarter whether there are changesthat materially affect our internal control over financial reporting.31Inherent Limitations on Effectiveness of ControlsOur management,including our Chief Executive Officer and Chief Financial Officer,does not expect that our disclosure controls and proceduresor our internal controls,will prevent all error and all fraud.A control system,no matter how well conceived and operated,can provide onlyreasonable,not absolute,assurance that the objectives of the control system are met.Further,the design of a control system must reflect thefact that there are resource constraints,and the benefits of controls must be considered relative to their costs.Because of the inherent limitationsin all control systems,no evaluation of controls can provide absolute assurance that all control issues and instances of fraud,if any,withinNVIDIA have been detected.PART II.OTHER INFORMATIONITEM 1.LEGAL PROCEEDINGSRefer to Part I,Item 1,Note 13 of the Notes to Condensed Consolidated Financial Statements for a discussion of significant developments in ourlegal proceedings since January 29,2023.Also refer to Item 3,“Legal Proceedings”in our Annual Report on Form 10-K for the fiscal year endedJanuary 29,2023 for a prior discussion of our legal proceedings.ITEM 1A.RISK FACTORSOther than the risk factors listed below,there have been no material changes from the risk factors previously described under Item 1A of ourAnnual Report on Form 10-K for the fiscal year ended January 29,2023.Purchasing or owning NVIDIA common stock involves investment risks including,but not limited to,the risks described in Item 1A of our AnnualReport on Form 10-K for the fiscal year ended January 29,2023,and below.Additionally,any one of those risks could harm our business,financial condition and results of operations or reputation,which could cause our stock price to decline.Additional risks,trends and uncertaintiesnot presently known to us or that we currently believe are immaterial may also harm our business,financial condition,results of operations orreputation.Failure to meet the evolving needs of our industry and markets may adversely impact our financial results.Our accelerated computing platforms experience rapid changes in technology,customer requirements,competitive products,and industrystandards.Our success depends on our ability to:timely identify industry changes,adapt our strategies,and develop new or enhance and maintain existing products and technologies thatmeet the evolving needs of these markets,including due to unexpected changes in industry standards or disruptive technologicalinnovation that could render our products incompatible with products developed by other companies;develop or acquire new products and technologies through investments in research and development;launch new offerings with new business models including standalone software,cloud solutions,and software-,infrastructure-,orplatform-as-a-service solutions;expand the ecosystem for our products and technologies;meet evolving and prevailing customer and industry safety,security,reliability expectations,and compliance standards;manage product and software lifecycles to maintain customer and end user satisfaction;develop,acquire,and maintain the internal and external infrastructure needed to scale our business,including our acquisitionsintegrations,customer support,e-commerce,IP licensing capabilities and cloud service capacity;andcomplete technical,financial,operational,compliance,sales and marketing investments for the above activities.32We have invested in research and development in markets where we have a limited operating history,which may not produce meaningfulrevenue for several years,if at all.If we fail to develop or monetize new products and technologies,or if they do not become widely adopted,ourfinancial results could be adversely affected.Obtaining design wins may involve a lengthy process and depend on our ability to anticipate andprovide features and functionality that customers will demand.They also do not guarantee revenue.Failure to obtain a design win may preventus from obtaining future design wins in subsequent generations.We cannot ensure that the products and technologies we bring to market willprovide value to our customers and partners.If we fail any of these key success criteria,our financial results may be harmed.We offer enterprise customers NVIDIA AI cloud services directly and through our network of partners.Examples of these services includeNVIDIA DGX Cloud,which includes cloud-based infrastructure and software for training and deploying AI models,and NVIDIA AI Foundations forcustomizable pretrained AI models.We have partnered with cloud service providers to host these services in their data centers,and we enteredand may continue to enter into multi-year cloud service agreements to support these offerings and our research and development activities.Thetiming and availability of these cloud services has changed and may continue to change,impacting revenue,expenses and developmenttimelines.NVIDIA AI cloud services may not be successful and will take time,resources and investment.We also offer or plan to offer standalonesoftware solutions including NVIDIA AI Enterprise,NVIDIA Omniverse,NVIDIA DRIVE,and several other software solutions.These newbusiness models or strategies may not be successful and we may fail to sell any meaningful standalone software or services.We may incursignificant costs and may not achieve any significant revenue from these offerings.Failure to estimate customer demand properly has led and could lead to mismatches between supply and demand.We use third parties to manufacture and assemble our products,and we have had and may in the future have long manufacturing lead times.We are not provided guaranteed wafer,component and capacity supply,and our supply deliveries and production may be non-linear within aquarter or year.If our estimates of customer demand are ultimately inaccurate,as we have experienced from time to time,there could be asignificant mismatch between supply and demand.This mismatch has resulted in both product shortages and excess inventory,has variedacross our market platforms,and has significantly harmed our financial results.We build finished products and maintain inventory in advance of anticipated demand.While we have in the past entered and may in the futureenter into long-term supply and capacity commitments,we may not be able to secure sufficient commitments for capacity to address ourbusiness needs or our long-term demand expectations may change.Additionally,our ability to sell certain products has been and could beimpeded if components from third parties that are necessary for the finished product are not available.In periods of shortages impacting thesemiconductor industry and/or limited supply or capacity in our supply chain,the lead times on our orders may be extended.We have previouslyexperienced extended lead times of more than 12 months.We have paid premiums and provided deposits to secure future supply and capacity,which have increased our product costs and may continue to do so.We may not have the ability to reduce our supply commitments at the samerate or at all if our revenue declines.Many additional factors have caused and/or could in the future cause us to either underestimate or overestimate our customers future demandfor our products,or otherwise cause a mismatch between supply and demand for our products and impact the timing and volume of our revenue,including:competing technologies and competitor product releases and announcements;changes in business and economic conditions resulting in decreased end demand;sudden or sustained government lockdowns or actions to control case spread of global or local health issues;rapidly changing technology or customer requirements;time to market;new product introductions and transitions resulting in less demand for existing products;new or unexpected end use cases;33increase in demand for competitive products,including competitive actions;business decisions made by third parties;the demand for accelerated or AI-related cloud services,including our own software and AI cloud service offerings;changes that impact the ecosystem for the architectures underlying our products and technologies;the demand for our products relating to cryptocurrency mining;orgovernment actions or changes in governmental policies,such as increased restrictions on gaming usage.Our supply,which includes inventory on hand,purchase obligations and prepaid supply and capacity agreements,has grown significantly due torecent supply chain conditions and long lead times,complexity of our products,and changes in demand.We have entered and expect tocontinue to enter into supplier and capacity prepayment arrangements.We have procured substantially higher Data Center supply for thesecond half compared to the first half of fiscal year 2024.We may incur inventory provisions or impairments if our inventory or supply andcapacity commitments are misaligned with demand for our products.Our demand predictions may not be correct,as we have experienced from time to time.Product transitions are complex and can negativelyimpact our revenue as we often ship both new and prior architecture products simultaneously and we and our channel partners prepare to shipand support new products.Our architecture transitions of Data Center,Professional Visualization,and Gaming products may impair our ability topredict demand and impact our supply mix.Qualification time for new products,customers anticipating product transitions and channel partnersreducing channel inventory of prior architectures ahead of new product introductions can create reductions or volatility in our revenue.We haveexperienced and may in the future experience reduced demand for current generation architectures when customers anticipate transitions,andwe may be unable to sell multiple product architectures at the same time for current and future architecture transitions.If we are unable toexecute our architectural transitions as planned for any reason,our financial results may be negatively impacted.In addition,the bring up of newproduct architectures is complex due to functionality challenges and quality concerns not identified in manufacturing testing.These productquality issues may incur costs,increase our warranty costs,and delay further production of our architecture.While we have managed priorproduct transitions and have previously sold multiple product architectures at the same time,these transitions are difficult,and we may incuradditional costs.We sell most of our products through channel partners,who sell to distributors,retailers,and/or end customers.As a result,the decisions madeby our channel partners,distributors,retailers,and in response to changing market conditions and changes in end user demand for our productshave impacted and could in the future continue to impact our ability to properly forecast demand,particularly as they are based on estimatesprovided by various downstream parties.If we underestimate our customers future demand for our products,our foundry partners may not have adequate lead-time or capacity toincrease production and we may not be able to obtain sufficient inventory to fill orders on a timely basis.Even if we are able to increaseproduction levels to meet customer demand,we may not be able to do so in a cost-effective or timely manner,or our contract manufacturersmay experience supply constraints.If we fail to fulfill our customers orders on a timely basis,or at all,our customer relationships could bedamaged,we could lose revenue and market share and our reputation could be harmed.Additionally,since some of our products are part of acomplex data center buildout,supply constraints or availability issues with respect to any one component have had and may have a broaderrevenue impact.If we overestimate our customers future demand for our products,or if customers cancel or defer orders or choose to purchase from ourcompetitors,we may not be able to reduce our inventory or other contractual purchase commitments.In the past,we have experienced areduction in average selling prices,including due to channel pricing programs that we have implemented and may continue to implement,as aresult of our overestimation of future demand,and we may need to continue these reductions.We have had to increase prices for certain of ourproducts as a result of our suppliers increase in prices,and we may need to continue to do so for other products in the future.We have alsowritten-down our inventory,incurred cancellation34penalties,and recorded impairments.These impacts were amplified by our placement of non-cancellable and non-returnable purchasing terms,well in advance of our historical lead times and could be exacerbated if we need to make changes to the design of future products.The risk ofthese impacts has increased as our purchase obligations and prepaids have grown and become a greater portion of our total supply.All of thesefactors may negatively impact our gross margins and financial results.We build technology and products for use cases and applications that may be new or may not yet exist,such as our Omniverse platform,third-party large language models and generative AI models.Our demand estimates for these use cases and applications can be incorrect and createvolatility in our revenue or supply levels,and we may not be able to generate significant revenue from these use cases and applications.Newtechnologies such as generative AI models have emerged,and while they have driven increased demand for compute infrastructure,the long-term trajectory is unknown.Because our products may be used in multiple use cases and applications,it is difficult for us to estimate with anyreasonable degree of precision the impact of generative AI models on our reported revenue or forecasted demand.Challenges in estimating demand could become more pronounced or volatile in the future on both a global and regional basis.Extended leadtimes may occur if we experience other supply constraints caused by natural disasters,pandemics or other events.In addition,geopoliticaltensions,such as those involving Taiwan and China,which comprise a significant portion of our revenue and where we have suppliers,contractmanufacturers,and assembly partners who are critical to our supply continuity,could have a material adverse impact on us.The use of our GPUs other than that for which they were designed and marketed,including new and unexpected use cases,has impacted andcan in the future impact demand for our products,including by leading to inconsistent spikes and drops in demand.For example,several yearsago,our Gaming GPUs began to be used for mining digital currencies such as Ethereum.It is difficult for us to estimate with any reasonabledegree of precision the past or current impact of cryptocurrency mining,or forecast the future impact of cryptocurrency mining,on demand forour products.Volatility in the cryptocurrency market,including new compute technologies,price changes in cryptocurrencies,governmentcryptocurrency policies and regulations,new cryptocurrency standards,and changes in the method of verifying blockchain transactions,hasimpacted and can in the future impact cryptocurrency mining and demand for our products and can further impact our ability to estimate demandfor our products.Changes to cryptocurrency standards and processes including,but not limited to,the Ethereum 2.0 merge in 2022,havereduced and may in the future decrease the usage of GPUs for Ethereum mining.This has created and may in the future create increasedaftermarket sales of our GPUs,which could negatively impact retail prices for our GPUs and reduce demand for our new GPUs.We previouslyintroduced Lite Hash Rate,or LHR,GeForce GPUs with limited Ethereum mining capability and provided CMP products in an effort to addressdemand from gamers and direct miners to CMP.Following the Ethereum 2.0 merge,NVIDIA Ampere and Ada Lovelace GPU architectures nolonger include LHR.In general,our new products or previously sold products may be resold online or on the unauthorized“gray market,”whichalso makes demand forecasting difficult.Gray market products and reseller marketplaces compete with our new products and distributionchannels.Additionally,we depend on developers,customers,and other third parties to build,enhance,and maintain accelerated computing applicationsthat leverage our platforms.We also rely on third-party content providers and publishers to make their content available on our platforms such asGeForce NOW.Failure by developers,customers,and other third parties to build,enhance,and maintain applications that leverage ourplatforms,or failure by third-party content providers or publishers to make their content available on reasonable terms or at all for use by ourcustomers or end users on our platforms,could adversely affect customer demand.Adverse economic conditions may harm our business.Economic and industry uncertainty or changes,including recession or slowing growth,inflation,changes or uncertainty in fiscal,monetary,ortrade policy,disruptions to capital markets and the banking system,currency fluctuations,higher interest rates,tighter credit,lower capitalexpenditures by businesses,including on IT infrastructure,increases in unemployment,labor shortages,and lower consumer confidence andspending,have in the past and/or could in the future have adverse,wide-ranging effects on our business and financial results,including:35increased costs for wafers,components,logistics,and other supply chain expenses,which have negatively impacted our gross marginand may continue to do so;increased supply,employee,facilities and infrastructure costs and volatility in the financial markets,which have reduced and may in thefuture reduce our margins;decrease in demand for our products,services and technologies and those of our customers,partners or licensees;the inability of our suppliers to deliver on their supply commitments to us and our customers or our licensees inability to supply productsto customers and/or end users;limits on our ability to forecast operating results and make business decisions;the insolvency of key suppliers,distributors,customers,cloud service providers,data center providers,licensing parties,or other thirdparties we rely on;reduced profitability may also cause some customers to scale back operations,exit businesses,or file for bankruptcyprotection and potentially cease operations;lead to mergers,consolidations or strategic alliances among other companies,which couldadversely affect our ability to compete effectively;andincreased credit and collectability risks,higher borrowing costs or reduced availability of capital markets,reduced liquidity,adverseimpacts on our suppliers,failures of counterparties including financial institutions and insurers,asset impairments,and declines in thevalue of our financial instruments.Adverse developments affecting financial institutions,such as bank failures,or concerns orspeculation about similar events or risks,could lead to market-wide liquidity problems and other disruptions,which could impact ourcustomers ability to fulfill their payment obligations to us,our vendors ability to fulfill their contractual obligations to us,or our ability tofulfill our own obligations.Additionally,we maintain an investment portfolio of various holdings,types,and maturities.These investments are subject to general credit,liquidity,market,and interest rate risks,which may be exacerbated by market downturns or events that affect global financial markets asdescribed above.A majority of our investment portfolio comprises U.S.government securities.A decline in global financial markets for longperiods or a downgrade of the U.S.government credit rating due to an actual or threatened default on government debt could result in higherinterest rates,a decline in the value of the U.S.dollar,reduced market liquidity,or other adverse conditions.These factors could cause anunrealized or realized loss position in our investments or require us to record impairment charges.Product,system security,and data protection breaches,as well as cyber-attacks,have the potential to disrupt our operations,reduceour expected revenue,increase our expenses,and significantly harm our business and reputation.Security breaches,computer malware,social-engineering attacks,denial-of-service attacks,software bugs,server malfunctions,software orhardware failures,loss of data or other information technology assets,and other cyber-attacks are increasingly sophisticated,making it moredifficult to successfully detect,defend against them or implement adequate preventative measures.Cyber-attacks,including ransomware attacks by organized criminal threat actors,nation-states,and nation-state-supported actors,may becomemore prevalent and severe.Our ability to recover from ransomware attacks may be limited if our backups have been affected by the attack,or ifrestoring from backups is delayed or not feasible.Individuals,groups of hackers and sophisticated organizations,including nation-states and nation-state-supported actors,and other threat actorsnow engage and are expected to continue to engage in cyber-attacks.Additionally,some actors are using AI technology to launch moreautomated,targeted and coordinated attacks.Due to geopolitical conflicts and during times of war or other major conflicts,we and the thirdparties upon which we rely may be vulnerable to a heightened risk of cyber-attacks that could materially disrupt our ability to provide servicesand products.We may also face cybersecurity threats due to error or intentional misconduct by employees,contractors,or other third-partyservice providers.Furthermore,we rely on products and services provided by third-party suppliers to operate certain critical business systems,including without limitation,cloud-based infrastructure,encryption and authentication technology,employee email,and other functions,whichexposes us to supply-chain attacks or other business36disruptions.We cannot guarantee that third parties and infrastructure in our supply chain or our partners supply chains have not beencompromised or that they do not contain exploitable defects or bugs that could result in a breach of or disruption to our information technologysystems,including our products and services,or the third-party information technology systems that support our services.We may alsoincorporate third party data into our AI algorithms or use open-source datasets to train our algorithms;these datasets may be flawed,insufficient,or contain certain biased information.We may have limited insight into the data privacy or security practices of third-party data suppliers for ourAI algorithms.Our ability to monitor these third parties information security practices is limited,and they may not have adequate informationsecurity measures in place.In addition,if one of our third-party suppliers suffers a security breach,our response may be limited or more difficultbecause we may not have direct access to their systems,logs and other information related to the security breach.Additionally,we areincorporated into the supply chain of a large number of entities worldwide and,as a result,if our products or services are compromised,asignificant number of our customers and their data could be affected,which could result in potential liability and harm our business.To defend against cyber-attacks,we must continuously engineer more secure products and enhance security and reliability features,which isexpected to result in increased expenses.We must also continue to develop our security measures,including training programs and securityawareness initiatives,to ensure our suppliers have appropriate security measures in place,and continue to meet the evolving securityrequirements of our customers,applicable industry standards,and government regulations.While we invest in training programs and securityawareness initiatives and take steps to detect and remediate certain vulnerabilities that we have identified,we may not always be able to preventthreats or detect all vulnerabilities in our security controls,systems or software,including third-party software we have installed,as such threatsand techniques change frequently and may not be detected until after a security incident has occurred.Further,we may experience delays indeveloping and deploying remedial measures designed to address identified vulnerabilities.These vulnerabilities could result in reputational andfinancial harm.We hold confidential,sensitive,personal,and proprietary information,including information from partners and customers.Breaches of oursecurity measures,along with reported or perceived vulnerabilities or unapproved dissemination of proprietary information or sensitive orconfidential data about us or third parties could expose us and the parties affected to a risk of loss or misuse of this information,potentiallyresulting in litigation and subsequent liability,regulatory inquiries or actions,damage to our brand and reputation or other harm,includingfinancial,to our business.For example,we hold proprietary game source code from third-party partners in our GFN service.Breaches of ourGFN security measures,which have happened in the past,could expose our partners to a risk of loss or misuse of this source code,damageboth us and our partners,and expose NVIDIA to potential litigation and liability.If we or a third party we rely on experience a security incident,which has occurred in the past,or are perceived to have experienced a security incident,we may experience adverse consequences,includinggovernment enforcement actions,additional reporting requirements and/or oversight,restrictions on processing data,litigation,indemnificationobligations,reputational harm,diversion of funds,financial loss,loss of data,material disruptions in our systems and operations,supply chain,and ability to produce,sell and distribute our goods and services,and other similar harms.Inability to fulfill orders,delayed sales,lower marginsor lost customers as a result of these disruptions could adversely affect our financial results,stock price and reputation.In addition toexperiencing a security incident,third parties may gather,collect,or infer sensitive information about us from public sources,data brokers,orother means that reveals competitively sensitive details about our organization and could be used to harm our business.Business disruptions could harm our operations,lead to a decline in revenue and increase our costs.Our worldwide operations could be disrupted by natural disasters and extreme weather conditions,power or water shortages,telecommunications failures,supplier disruptions,terrorist attacks,or acts of violence,political and/or civil unrest,acts of war or other militaryactions,epidemics or pandemics,abrupt regulatory deterioration,and other natural or man-made disasters and catastrophic events.Ourcorporate headquarters,a large portion of our current data center capacity,and a portion of our research and development activities are locatedin California,and other critical business operations,finished goods inventory,and some of our suppliers are located in Asia,making ouroperations vulnerable to natural disasters such as earthquakes,wildfires,or other business disruptions occurring in these geographical areas.Catastrophic events can also have an impact on third-party vendors who provide us critical infrastructure services for IT and research anddevelopment systems and personnel.Geopolitical and domestic political developments and other events beyond our control,can increaseeco

0人已浏览 2023-12-07 49页 5星级

Table of ContentsUNITED STATES SECURITIES AND EXCHANGE COMMISSIONWashington,DC 20549Form 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the Fiscal Year Ended October 1,2023or TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from to .Commission File Number:000-20322Starbucks Corporation(Exact Name of Registrant as Specified in its Charter)Washington91-1325671(State of Incorporation)(IRS Employer ID)2401 Utah Avenue South,Seattle,Washington 98134(206)447-1575(Address of principal executive office,zip code,telephone number)Securities Registered Pursuant to Section 12(b)of the Act:Title of Each ClassTrading SymbolName of Each Exchange on Which RegisteredCommon Stock,$0.001 par value per shareSBUXNasdaq Global Select MarketSecurities Registered Pursuant to Section 12(g)of the Act:NoneIndicate by check mark if the registrant is a well-known seasoned issuer,as defined in Rule 405 of the Securities Act.Yes x No Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d)of the Act.Yes No xIndicate 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 duringthe 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 forthe past 90 days.Yes x No Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 ofRegulation S-T(232.405 of this chapter)during the preceding 12 months(or for such shorter period that the registrant was required to submit suchfiles).Yes x No Indicate by check mark whether the registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,a smaller reporting company,or anemerging growth company.See the definitions of“large accelerated filer,”“accelerated filer,”“smaller reporting company”and“emerging growth company”in Rule 12b-2 of the Exchange Act.Large accelerated filerxAccelerated filerNon-accelerated filerSmaller reporting companyEmerging growth companyIf 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 orrevised financial accounting standards provided pursuant to Section 13(a)of the Exchange Act.Indicate by check mark whether the registrant has filed a report on and attestation to its managements assessment of the effectiveness of its internal controlover financial reporting under Section 404(b)of the Sarbanes-Oxley Act(15 U.S.C.7262(b)by the registered public accounting firm that prepared or issuedits audit report.xIf securities are registered pursuant to Section 12(b)of the Act,indicate by check mark whether the financial statements of the registrant included in the filingreflect the correction of an error to previously issued financial statements.Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received byany of the registrants executive officers during the relevant recovery period pursuant to 240.10D-1(b).Indicate by check mark whether the registrant is a shell company(as defined in Rule 12b-2 of the Act).Yes No xThe aggregate market value of the voting stock held by non-affiliates of the registrant as of the last business day of the registrants most recently completedsecond fiscal quarter,based upon the closing sale price of the registrants common stock on April 2,2023 as reported on the Nasdaq Global Select Market was$117.1 billion.As of November 10,2023,there were 1,136.7 million shares of the registrants Common Stock outstanding.Table of ContentsDOCUMENTS INCORPORATED BY REFERENCEPortions of the definitive Proxy Statement for the registrants Annual Meeting of Shareholders to be held on March 13,2024 have been incorporated byreference into Part III of this Annual Report on Form 10-K.Table of ContentsSTARBUCKS CORPORATIONForm 10-KFor the Fiscal Year Ended October 1,2023TABLE OF CONTENTSPART IItem 1Business3Item 1ARisk Factors11Item 1BUnresolved Staff Comments23Item 1CCybersecurity23Item 2Properties23Item 3Legal Proceedings24Item 4Mine Safety Disclosures24PART IIItem 5Market for the Registrants Common Equity,Related Shareholder Matters and Issuer Purchases of Equity Securities25Item 6Reserved27Item 7Managements Discussion and Analysis of Financial Condition and Results of Operations28Item 7AQuantitative and Qualitative Disclosures About Market Risk41Item 8Financial Statements and Supplementary Data42Index for Notes to Consolidated Financial Statements47Report of Independent Registered Public Accounting Firm81Item 9Changes in and Disagreements with Accountants on Accounting and Financial Disclosure83Item 9AControls and Procedures83Item 9BOther Information85Item 9CDisclosure Regarding Foreign Jurisdictions that Prevent Inspections85PART IIIItem 10Directors,Executive Officers and Corporate Governance86Item 11Executive Compensation86Item 12Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters86Item 13Certain Relationships and Related Transactions and Director Independence86Item 14Principal Accountant Fees and Services86PART IVItem 15Exhibits and Financial Statement Schedules87Item 16Form 10-K Summary93SIGNATURES94 Table of ContentsCAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTSThis Annual Report on Form 10-K includes“forward-looking”statements within the meaning of the Private Securities Litigation Reform Act of 1995 regardingfuture events and the future results of Starbucks Corporation(together with its subsidiaries)that are based on our current expectations,estimates,forecastsand projections about our business,our results of operations,the industry in which we operate,our economic and market outlook,and the beliefs andassumptions of our management.Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts.Theyoften include words such as“believes,”“expects,”“anticipates,”“estimates,”“intends,”“plans,”“seeks”or words of similar meaning,or future orconditional verbs,such as“will,”“should,”“could,”“may,”“aims,”“intends,”or“projects.”By their nature,forward-looking statements involve risks,uncertainties,and other factors(many beyond our control)that could cause our actual results to differ materially from our historical experience or from ourcurrent expectations or projections.Our forward-looking statements,and the risks and uncertainties related thereto,include,but are not limited to,thosedescribed under the“Risk Factors”and“Managements Discussion and Analysis of Financial Condition and Results of Operations”sections and in otherreports we file with the U.S.Securities and Exchange Commission(“SEC”),as well as:our ability to preserve,grow and leverage our brands;the acceptance of the companys products and changes in consumer preferences,consumption,or spending behavior and our ability to anticipate or react tothem;shifts in demographic or health and wellness trends;or unfavorable consumer reaction to new products,platforms,reformulations,or other innovations;our anticipated operating expenses,including our anticipated total capital expenditures;the costs associated with,and the successful execution and effects of,our existing and any future business opportunities,expansions,initiatives,strategies,investments and plans,including our Reinvention Plan;the impacts of partner investments and changes in the availability and cost of labor including any union organizing efforts and our responses to such efforts;the ability of our business partners,suppliers and third-party providers to fulfill their responsibilities and commitments;higher costs,lower quality,or unavailability of coffee,dairy,energy,water,raw materials,or product ingredients;the impact of significant increases in logistics costs;a worsening in the terms and conditions upon which we engage with our manufacturers and source suppliers,whether resulting from broader local or globalconditions,or dynamics specific to our relationships with such parties;unfavorable global or regional economic conditions and related economic slowdowns or recessions,low consumer confidence,high unemployment,weakcredit or capital markets,budget deficits,burdensome government debt,austerity measures,higher interest rates,higher taxes,political instability,higherinflation,or deflation;inherent risks of operating a global business including geopolitical instability;failure to attract or retain key executive or partner talent or successfully transition executives;the potential negative effects of incidents involving food or beverage-borne illnesses,tampering,adulteration,contamination or mislabeling;negative publicity related to our company,products,brands,marketing,executive leadership,partners,board of directors,founder,operations,businessperformance,or prospects;potential negative effects of a material breach,failure,or corruption of our information technology systems or those of our direct and indirect businesspartners,suppliers or third-party providers,or failure to comply with personal data protection laws;our environmental,social and governance(“ESG”)efforts and any reaction related thereto such as the rise in opposition to ESG and inclusion and diversityefforts;risks associated with acquisitions,dispositions,business partnerships,or investments such as acquisition integration,termination difficulties or costs orimpairment in recorded value;the impact of foreign currency translation,particularly a stronger U.S.dollar;the impact of substantial competition from new entrants,consolidations by competitors,and other competitive activities,such as pricing actions(includingprice reductions,promotions,discounting,couponing,or free goods),marketing,category expansion,product introductions,or entry or expansion in ourgeographic markets;the impact of changes in U.S.tax law and related guidance and regulations that may be implemented,including on tax rates and the Inflation Reduction Actof 2022;the impact of health epidemics,pandemics or other public health events on our business and financial results,and the risk of negative economic impacts andrelated regulatory measures or voluntary actions that may be put in place,including restrictions on business operations or social distancing requirements,andthe duration and efficacy of such restrictions;failure to comply with anti-corruption laws,trade sanctions and restrictions or similar laws or regulations;and the impact of significant legal disputes and proceedings,or government investigations.In addition,many of the foregoing risks and uncertainties are,or could be,exacerbated by any worsening of the global business and economic environment.Aforward-looking statement is neither a prediction nor a guarantee of future events or1Table of Contentscircumstances,and those future events or circumstances may not occur.You should not place undue reliance on the forward-looking statements,which speakonly as of the date of this report.We are under no obligation to update or alter any forward-looking statements,whether as a result of new information,futureevents or otherwise.2Table of ContentsPART IItem 1.BusinessGeneralIn this Annual Report on Form 10-K(“10-K”or“Report”)for the fiscal year ended October 1,2023(“fiscal 2023”),Starbucks Corporation(together with itssubsidiaries)is referred to as“Starbucks,”the“Company,”“we,”“us”or“our.”Starbucks is the premier roaster,marketer and retailer of specialty coffee in the world,operating in 86 markets.Formed in 1985,Starbucks Corporationscommon stock trades on the Nasdaq Global Select Market(“Nasdaq”)under the symbol“SBUX.”We purchase and roast high-quality coffees that we sell,along with handcrafted coffee,tea and other beverages and a variety of high-quality food items through company-operated stores.We also sell a variety ofcoffee and tea products and license our trademarks through other channels,such as licensed stores as well as grocery and foodservice through our GlobalCoffee Alliance with Nestl S.A.(“Nestl”).In addition to our flagship Starbucks Coffee brand,we sell goods and services under the following brands:Teavana,Ethos,Starbucks Reserve and Princi.Our primary objective is to maintain Starbucks standing as one of the most recognized and respected brands in the world.We believe the continuousinvestments in our brand and operations will deliver long-term targeted revenue and income growth.This includes expansion of our global store base,addingstores in both existing,developed markets such as the U.S.and in higher growth markets such as China,as well as optimizing the mix of company-operatedand licensed stores around the world.In addition,by leveraging experiences gained through our stores and elsewhere,we continue to drive beverage,equipment,process and technology innovation,including in our industry-leading digital platform.We strive to regularly offer consumers new,innovative coffeeand other products in a variety of forms,across new categories,diverse channels and alternative store formats.Starbucks has always been a different kind of company one deep with purpose,where we work together to create a positive impact in the world.With coffeeat our core,we pursue ambitious goals for our partners(employees),our communities and our planet,which we believe also contributes to the long-termsustainability of our business to create a thriving business powered by thriving people for a thriving planet and communities.Our work to uplift one anotherextends well beyond our partners to the communities where we do business around the world.We are committed to responsible and ethical sourcing led byCoffee and Farmer Equity Practices(C.A.F.E.Practices),the Companys third-party verification program and the cornerstone of our approach to ethicalsourcing of coffee with over 98%of our coffee having been historically verified through C.A.F.E.Practices as ethically sourced.Human Capital ManagementWe invest in the well-being the mental,physical and financial health of every partner through our practices,policies and benefits.This work is grounded inthe belief that we are at our best when we create inclusive,supportive and welcoming environments,where we uplift one another with dignity,respect andkindness.And we are hard at work uplifting our communities and building environments in our stores that are welcoming and safe.We believe the strength ofour workforce is one of the significant contributors to our success as a global brand that leads with purpose.Therefore,one of our core strategies is to invest inand support our partners to differentiate our brand,products and services in the competitive specialty coffee market,including the following areas of focus:Oversight and ManagementWe recognize the diversity of customers,partners and communities and believe in creating an inclusive and equitable environment that represents a broadspectrum of backgrounds and cultures.Working under these principles,our Partner Resources Organization is tasked with managing employment-relatedmatters,including recruiting and hiring,onboarding and training,compensation planning,performance management and professional development.Our Boardof Directors(the“Board”)and Board committees provide oversight on certain human capital matters,including our Inclusion and Diversity programs andinitiatives.As noted in its charter,our Compensation and Management Development Committee is responsible for periodically reviewing Starbucks partnerresource programs and initiatives,including healthcare and other benefits,as well as our management development and succession planning practices andstrategies.Our Audit and Compliance Committee works closely with the Risk Management Committee,led by Starbucks cfo and general counsel,to monitorand mitigate current and emerging labor and human capital management risks.Furthermore,our Nominating and Corporate Governance Committee,inconsultation with management,annually evaluates the effectiveness of our social responsibility policies,goals and programs,which also include partner-relatedissues.These reports and recommendations to the Board and its committees are part of the broader framework that guides how Starbucks should attract,retainand develop a skilled workforce that aligns with our values and strategies.We regularly conduct anonymous surveys to seek feedback from our partners on a variety of topics,including confidence in company leadership,competitiveness of our compensation and benefits package,career growth opportunities and3Table of Contentsrecommendations on how we can remain an employer of choice.The results are shared with our partners and reviewed by senior leadership,who analyze areasof progress or deterioration and prioritize actions and activities in response to this feedback to drive meaningful improvements in partner engagement.Ourmanagement and cross-functional teams also work closely to evaluate human capital management issues such as partner retention,workplace safety,harassment and bullying,as well as to implement measures to mitigate these risks.Diversity,Equity and InclusionWe are committed to creating a welcoming,supportive and inclusive environment.We are committed to advancing inclusion and racial and social equity,andwe seek to further that work with intention,transparency and accountability.We continue to welcome our partners,customers,civil rights and communityleaders,along with our senior vice president,talent and inclusion,to advise us along this journey.Starbucks has made specific equity commitments based on our principles of being intentional,transparent and accountable at all levels:Being intentional in cultivating a culture of inclusion,with a focus on partner retention and development.Expanding our mentorship program designed to prioritize our partners sense of belonging by creating an inclusive and supportiveenvironment.Mentors offer guidance,encouragement and a safe space for partners to share their experiences,challenges and aspirations.Asof 2023,the program has welcomed nearly 1,400 partners and was expanded to include U.S.based store and district managers in 2023.Being transparent in our approach to Inclusion and Diversity goal setting and progress.Publicly sharing workforce diversity data.Setting aspirational Inclusion and Diversity goals based on retention rates and progress towards achieving racial and ethnic diversity.Ourgoal is to achieve racial and ethnic diversity of at least 30%of all corporate roles and at least 40%of all retail and manufacturing roles in theU.S.by 2025,by setting broad recruiting parameters and through inclusive and legally compliant employment practices.Holding ourselves accountable at the highest levels of the organization.Incorporating our efforts to build and retain inclusive and diverse teams into our executive compensation programs.Joining the Board Diversity Action Alliance to act alongside other companies similarly committed to increasing diverse representation oncorporate boards.Publicizing self-identified race/ethnicity/gender of each member of our Board.Total RewardsWe have demonstrated a history of investing in our workforce by offering competitive salaries and wages by continuously assessing the current businessenvironment and labor market.We have consistently made enhancements in wages in order to attract talent to support our growth strategy and to elevate thecustomer experience.To foster a stronger sense of ownership and align the interests of partners with shareholders,restricted stock units are provided to eligiblenon-executive partners under our broad-based stock incentive programs.Furthermore,we offer comprehensive,locally relevant and innovative benefits to alleligible partners.In the U.S.,our largest and most mature market,these include:Comprehensive health insurance coverage is offered to partners working an average of 20 hours or more each week.100%upfront tuition coverage through the Starbucks College Achievement Plan for partners to earn a first-time bachelors degree online at ArizonaState University is offered to partners working an average of 20 hours or more each week.Our Future Roast 401(k)savings plan helps partners save for their financial goal through convenient payroll deductions.Partners can contribute pre-tax or Roth after-tax dollars,and Starbucks matches 5%of eligible contributions with immediate vesting in those matching contributions.100%paid parental leave is available to new parents that welcome a child through birth,adoption or foster placement and work an average of 20 hoursor more each week.A Partner and Family Sick Time program is provided and allows partners to accrue paid sick time based on hours worked and use that time forthemselves or family members in need of care.4Table of Contents We view mental health as a fundamental part of our humanity and provide a comprehensive suite of related programs and benefits.These include afree subscription to Headspace,an online application that enables guided meditation,and 20 free mental health therapy or coaching sessions annuallywith Lyra.Outside of the U.S.,we have provided other innovative benefits to help address market-specific needs,such as providing interest-free loans to our U.K.partners to help cover rental deposits,mental health services in Canada,and in China,an extra 14th Month Pay initiative,giving retail partners an additionalmonths salary as a bonus on top of the 13th month pay that is customary in China,as well as a monthly housing subsidy for full-time Starbucks baristas andshift supervisors,and comprehensive health insurance coverage for parents of partners.Role-based SupportTo help our partners succeed in their roles,we emphasize continuous training and development opportunities.These include,but are not limited to,safety andsecurity protocols,updates on new products and service offerings and deployment of technologies.Training provided through our Pour Over sessions,whichare a series of inspiring talks with thought leaders to help partners understand how to bring the Starbucks Experience to life,include a wide variety of topicssuch as achievable goal setting,giving and receiving constructive feedback,and effective engagement with customers and communities.To help furtherpromote an inclusive culture and to better serve our customers,we encourage U.S.-based partners to enroll in the To Be Welcoming courses we created inpartnership with Arizona State University to address different forms of bias and discrimination.Pay EquityTo be an employer of choice and maintain the strength of our workforce,we consistently assess the current business environment and labor market to refine ourcompensation and benefits programs and other resources available to our partners.We previously achieved and currently maintain 100 percent pay equity in the U.S.for women and men and people of all races for partners performing similarwork.We have made a commitment to achieve gender pay equity in all company-operated markets.Further,we have formulated pay-equity principles whichprovide equal footing,transparency and accountability as best practices that help address known,systemic barriers to global pay equity.As of October 1,2023,Starbucks employed approximately 381,000 people worldwide.In the U.S.,Starbucks employed approximately 228,000 people,withapproximately 219,000 in company-operated stores and the remainder in corporate support,store development,roasting,manufacturing,warehousing anddistribution operations.Approximately 153,000 employees were employed outside of the U.S.,with approximately 148,000 in company-operated stores and theremainder in regional support operations.Approximately 3.6%of Starbucks partners in U.S.company-operated stores are represented by unions.We believeour efforts in managing our workforce have been effective,evidenced by improved retention,lower turnover,and employee satisfaction during fiscal 2023.Information about our Executive OfficersNameAgePositionLaxman Narasimhan56chief executive officerMichael Conway57group president,International and Channel DevelopmentSara Kelly44executive vice president and chief partner officerBrad Lerman67executive vice president and general counselRachel Ruggeri54executive vice president and chief financial officerLaxman Narasimhan joined Starbucks as its chief executive officer-elect in 2022 and has served as chief executive officer and has been a Starbucks directorsince March 2023.Prior to joining Starbucks,Mr.Narasimhan served as Chief Executive Officer of Reckitt Benckiser Group Plc(“Reckitt”),a FTSE 12 listedBritish multinational consumer health,hygiene,and nutrition company,from 2019 to 2022.Prior to joining Reckitt,Mr.Narasimhan held various executiveroles at PepsiCo from 2012 to 2019 including as PepsiCos Group Chief Commercial Officer and as Chief Executive Officer-Latin America,Europe,and Sub-Saharan Africa,Chief Executive Officer-Latin America,and Chief Financial Officer of PepsiCo Americas Foods.Prior to joining PepsiCo,Mr.Narasimhanspent 19 years at McKinsey&Company,where he focused on its consumer,retail,and technology practices in the U.S.,Asia,and India.Mr.Narasimhancurrently serves on the Board of Directors of Verizon Communications,Inc.,a NYSE-listed telecommunications company.Mr.Narasimhan is a trustee of theBrookings Institution and a member of the Council on Foreign Relations.Michael Conway joined Starbucks in 2013 and was named group president,International and Channel Development in 2021,where he is responsible forleading Starbucks retail growth and operations in over 80 markets across Asia Pacific,Europe,Middle East and Africa,Latin America and the Caribbean andgrowth for the Global Channel Development business,which consists of consumer packaged goods,ready-to-drink businesses and strategic partnerships,including those with Nestl,5Table of ContentsPepsiCo,and other key business partners.Prior to this,he served as executive vice president and president,International Licensed Markets,from 2020 to 2021.He also served as executive vice president and president of Starbucks Canada from 2018 to 2020,president of Starbucks Licensed Stores Operations for theUnited States and Latin America from 2016 to 2018,and president of Starbucks Global Channel Development from 2013 to 2016.He currently serves on theBoard of Directors of McCormick&Company,Incorporated,a NYSE-listed a spice and extract manufacturing company.Sara Kelly joined Starbucks in 2001 and was named executive vice president and chief partner officer in 2022,where she is responsible for helping partnersrealize their career potential and building global partner capability to enable growth and deliver on the Companys strategic plan.Prior to her current role,Ms.Kelly was senior vice president,Talent&Partner Experience from 2021 to 2022,where she was responsible for advancing Starbucks talent and organizationalleadership agenda and was focused on amplifying the strategic work being led by the talent acquisition,talent management,partner experience,learning anddevelopment,and organization and leadership effectiveness teams.From 2014 to 2021,Ms.Kelly served as vice president,Partner Resources,supportingpartners in our global markets.Brad Lerman joined Starbucks in April 2023 as executive vice president and general counsel.In this role,he leads the Companys Legal and Corporate Affairsorganization.Prior to Starbucks,Mr.Lerman served as senior vice president,general counsel and corporate secretary of Medtronic plc from 2014 to 2022;andprior to that he was an executive vice president,general counsel and corporate secretary for the Federal National Mortgage Association(Fannie Mae)from2012 to 2014.Mr.Lerman has also served as chief litigation counsel for Pfizer and has worked in private practice as a partner at Winston&Strawn LLP inChicago.He also served as an Assistant United States Attorney in the Northern District of Illinois.Mr.Lerman currently serves on the Board of Directors ofMcKesson Corporation,a NYSE-listed health care,pharmaceutical,and medical supply company.Rachel Ruggeri joined Starbucks in 2001 as a member of the accounting team and was named executive vice president and chief financial officer in 2021.Inthis leadership role,Rachel is responsible for the global finance function for Starbucks,which includes developing and executing the financial strategies thatenable the long-term growth of the Company.Prior to her promotion in 2021,she served as senior vice president of Americas with responsibility for the retailportfolio across the segment,including company-operated and licensed stores from 2020 to 2021.From 2016 to 2020,she held various leadership roles infinance both internal and external to Starbucks,including Chief Financial Officer of Continental Mills from 2018 to 2020 and prior to that she was senior vicepresident of Finance at Starbucks in support of the Americas and Global Retail from 2016 to 2018.She also served as vice president of Finance from 2010 to2016 supporting Corporate Financial Planning&Analysis and the U.S.Retail business.Segment Financial InformationSegment information is prepared on the same basis that our management reviews financial information for operational decision-making purposes.We have three reportable operating segments:1)North America,which is inclusive of the U.S.and Canada;2)International,which is inclusive of China,Japan,Asia Pacific,Europe,Middle East and Africa,Latin America and Caribbean;and 3)Channel Development.Non-reportable operating segments andunallocated corporate expenses are reported within Corporate and Other.Revenues from our reportable operating segments as a percentage of total net revenuesfor fiscal 2023 were as follows:North America(74%),International(21%)and Channel Development(5%).Our North America and International segments include both company-operated and licensed stores.Our North America segment is our most mature businessand has achieved significant scale.Certain markets within our International operations are in various stages of development and may require more extensivesupport,relative to their current levels of revenue and operating income,than our North America operations.Our Channel Development segment includes roasted whole bean and ground coffees,Starbucks-and Teavana-branded single-serve products,a variety ofready-to-drink beverages,such as Frappuccino and Starbucks Doubleshot,foodservice products and other branded products sold worldwide outside of ourcompany-operated and licensed stores.A large portion of our Channel Development business operates under a licensed model of the Global Coffee Alliancewith Nestl,while our global ready-to-drink businesses operate under collaborative relationships with PepsiCo,Inc.,Tingyi-Ashi Beverages Holding Co.,Ltd.,Arla Foods amba,Nestl and others.6Table of ContentsRevenue ComponentsWe generate the majority of our revenues through company-operated stores and licensed stores.Company-operated and Licensed Store Summary as of October 1,2023:North AmericaAs a%of TotalNorth America StoresInternationalAs a%of TotalInternational StoresTotalAs a%ofTotal StoresCompany-operated stores10,628 60%8,964 44,592 52%Licensed stores7,182 40,264 56,446 48%Total17,810 100 ,228 1008,038 100%The mix of company-operated versus licensed stores in a given market generally varies based on several factors,including our ability to access desirable localretail space,the complexity,profitability and expected ultimate size of the market for Starbucks and our ability to leverage the support infrastructure within ageographic region.Company-operated StoresRevenue from company-operated stores accounted for 82%of total net revenues during fiscal 2023.Our retail objective is to be the leading retailer and brandof coffee and tea in each of our target markets by selling the finest quality coffee,tea and related products,as well as complementary food offerings,and byproviding each customer with a unique Starbucks Experience.The Starbucks Experience is built upon superior customer service,convenience and a seamlessdigital experience as well as safe,clean and well-maintained stores that reflect the personalities of the communities in which they operate,thereby building ahigh degree of customer loyalty.Our strategy for expanding our global retail business is to increase our category share in a disciplined manner,by selectively opening additional stores in newand existing markets,as well as increasing sales in existing stores,to support our long-term strategic objective to maintain Starbucks standing as one of themost recognized and respected brands in the world.Store growth in specific existing markets will vary due to many factors,including expected financialreturns,the maturity of the market,economic conditions,consumer behavior and the local business environment.Company-operated store data for the fiscal year-ended October 1,2023:Stores Openas ofStores Openas of Oct 2,2022OpenedClosedTransfersNetOct 1,2023North America:U.S.9,265 483(103)380 9,645 Canada946 43(12)31 977 Siren Retail5 1 1 6 Total North America10,216 527(115)412 10,628 International:China6,019 857(72)785 6,804 Japan1,630 110(8)1 103 1,733 U.K.318 42(5)37 355 All Other65 3(1)2 67 Siren Retail5 5 Total International8,037 1,012(86)1 927 8,964 Total company-operated18,253 1,539(201)1 1,339 19,592 Starbucks company-operated stores are typically located in high-traffic,high-visibility locations.Our ability to vary the size and format of our stores allows usto locate them in or near a variety of settings,including downtown and suburban retail centers,office buildings,university campuses and rural and off-highwaylocations.We are continuing the expansion of our stores,particularly drive-thru formats that provide a higher degree of access and convenience,and alternativestore formats,which are designed to provide a more streamlined customer experience in dense metropolitan areas.In fiscal 2022,we announced our plan in the U.S.market to increase efficiency while elevating the partner and customer experience(the“Reinvention Plan”).We believe the company-operated market investments in partner wages and trainings have7Table of Contentsincreased retention and productivity while the acceleration of purpose-built store concepts and innovations in technologies have provided additionalconvenience and connection with our customers.In our major international markets,we also continue to invest in technology and establish partnerships withthird parties with relevant expertise to increase digital adoption to provide convenience and elevate the customer experience.Additionally,as our business hasevolved,we have built an omni-channel business to meet more occasions as we serve a more diverse customer base through growth in online,e-commerce,delivery,mobile ordering and the in-store experience.In China,we leverage platforms such as Starbucks Now stores to enable a seamless integration ofphysical and digital customer touchpoints.Orders may be placed in advance through the Starbucks Mobile App or Starbucks Delivers and can beconveniently picked up by customers and delivery providers in these express retail format locations.These strategies align closely with rapidly evolvingcustomer preferences,including higher levels of mobile ordering,more contactless pick-up experiences and reduced in-store congestion.Our investments in adigital third place offer members access to new benefits,a digital community and immersive coffee experiences,giving our customers new ways to experienceand connect with Starbucks.We believe our continued efforts to transform our store portfolio and elevate technology will enhance the customer experience andposition Starbucks for long-term growth.Retail sales mix by product type for company-operated stores:Fiscal Year EndedOct 1,2023Oct 2,2022Oct 3,2021Beverages74tt%Food22!%Other4%4%5%Total10000%“Other”primarily consists of sales of serveware,packaged and single-serve coffees and teas and ready-to-drink beverages,among other items.Stored Value Cards and Loyalty ProgramThe Starbucks Card,our branded stored value card program,is designed to provide customers with a convenient payment method,support gifting and increasethe frequency of store visits by cardholders,in part through the related Starbucks Rewards loyalty program where available,as discussed below.Stored valuecards are issued to customers when they initially load them with an account balance.They can be obtained in our company-operated and most licensed stores inNorth America,China,Japan and many of our other markets in our International segment.Stored value cards can also be obtained online,via the StarbucksMobile App and through other U.S.and international retailers.Customers may access their card balances by utilizing their stored value card or the StarbucksMobile App in participating stores.In nearly all markets,including the U.S.and Canada,customers who register their Starbucks Cards are automaticallyenrolled in the Starbucks Rewards program.Registered members can receive various benefits depending on factors such as the number of reward points(“Stars”)earned.In addition to using their Starbucks Cards,Starbucks Rewards members can earn Stars by paying with cash,credit or debit cards,or selectedmobile wallets at all company-operated stores and a majority of licensed stores in North America.Using the Mobile Order and Pay functionality of theStarbucks Mobile App,customers can also place orders in advance for pick-up at certain participating locations in several markets.Refer to Note 1,Summaryof Significant Accounting Policies and Estimates,included in Item 8 of Part II of this 10-K,for further discussion of our stored value cards and loyaltyprogram.Licensed StoresRevenues from our licensed stores accounted for 13%of total net revenues in fiscal 2023.Licensed stores generally have a lower gross margin and a higheroperating margin than company-operated stores.Under the licensed model,Starbucks receives a margin on branded products and supplies sold to the licensedstore operator along with a royalty on retail sales.Licensees are responsible for operating costs and capital investments,which more than offset the lowerrevenues we receive under the licensed store model.In our licensed store operations,we seek to leverage the expertise of our local partners and share our operating and store development experience.Licenseesprovide improved,and at times the only,access to desirable retail space.Most licensees are prominent retailers with in-depth market knowledge and access.Aspart of these arrangements,we sell coffee,tea,food and related products to licensees for resale to customers and receive royalties and license fees from thelicensees.We also sell certain equipment,such as coffee brewers and espresso machines,to our licensees for use in their operations.Licensee employeesworking in licensed retail locations are required to follow our detailed store operating procedures and attend training classes similar to those given toemployees in company-operated stores.In a limited number of international markets,we also use traditional franchising and include these stores in the resultsof operations from our other licensed stores.TMTM(1)(1)8Table of ContentsLicensed store data for the fiscal year-ended October 1,2023:Stores Openas ofStores Openas of Oct 2,2022OpenedClosedTransfersNetOct 1,2023North America:U.S.6,608 206(113)93 6,701 Canada471 17(7)10 481 Total North America7,079 223(120)103 7,182 International:Korea1,750 153(33)120 1,870 Latin America1,549 108(8)100 1,649 U.K.838 77(4)73 911 Turkey604 81(9)72 676 Taiwan544 30(11)19 563 Indonesia523 58 58 581 Thailand446 29(1)28 474 Philippines418 29 29 447 All Other3,707 469(82)(1)386 4,093 Total International10,379 1,034(148)(1)885 11,264 Total licensed17,458 1,257(268)(1)988 18,446 Other RevenuesOther revenues primarily are recorded in our Channel Development segment and include sales of packaged coffee,tea and ready-to-drink beverages tocustomers outside of our company-operated and licensed stores,as well as royalties received from Nestl under the Global Coffee Alliance and othercollaborative partnerships.Product SupplyStarbucks is committed to selling the finest whole bean coffees and coffee beverages.To help ensure compliance with our rigorous coffee standards,wegenerally control substantially all coffee purchasing,roasting and packaging and the global distribution of coffee used in our operations.Nestl controlsdistribution of Starbucks packaged coffee products outside of Starbucks stores through the Global Coffee Alliance,and in some cases,also roasts and packagesthese products.We purchase green coffee beans from multiple coffee-producing regions around the world and custom roast them to our exacting standards forour many blends and single-origin coffees.The price of coffee is subject to significant volatility.Although most coffee trades in the commodity market,high-altitude arabica coffee of the quality soughtby Starbucks tends to trade on a negotiated basis at a premium above the“C”coffee commodity price.Both the premium and the commodity price dependupon the supply and demand at the time of purchase.Supply and price can be affected by multiple factors in the producing countries,including weather,watersupply quality and availability throughout the coffee production chain,natural disasters,crop disease and pests,general increase in farm inputs and costs ofproduction,inventory levels and political and economic conditions.Climate change may further exacerbate many of these factors.Price is also impacted bytrading activities in the arabica coffee futures market,including hedge funds and commodity index funds.In addition,green coffee prices have been affected inthe past,and may be affected in the future,by the actions of certain organizations and associations that have historically attempted to influence prices of greencoffee through agreements establishing export quotas or by restricting coffee supplies.We buy coffee using fixed-price and price-to-be-fixed purchase commitments,depending on market conditions,to secure an adequate supply of quality greencoffee.We also utilize forward contracts,futures contracts and collars to hedge“C”price exposure under our price-to-be-fixed green coffee contracts and ourlong-term forecasted coffee demand where underlying fixed-price and price-to-be-fixed contracts are not yet available.Total purchase commitments,togetherwith existing inventory,are expected to provide an adequate supply of green coffee through fiscal 2024.We depend upon our relationships with coffee producers,outside trading companies and exporters for our supply of green coffee.We believe,based onrelationships established with our suppliers,the risk of non-delivery on such purchase commitments is remote.9Table of ContentsTo help ensure the future supply of high-quality green coffee and to reinforce our leadership role in the coffee industry,Starbucks operates ten farmer supportcenters,including our China Farmer Support Center located in the Yunnan Province of this high-growth market.Farmer support centers are staffed withagronomists and sustainability experts who work with coffee farming communities to promote best practices in coffee production designed to improve bothcoffee quality and yields and agronomy support to address climate change and other impacts.In addition to coffee,we also purchase significant amounts of dairy,particularly fluid milk,and to a lesser degree,plant-based dairy-free alternative products,such as oat milk and almond milk,to support the needs of our company-operated stores.We believe,based on relationships established with our dairy andplant-based dairy-free suppliers,that the risk of non-delivery of sufficient fluid milk and plant-based dairy-free alternatives to support our stores generally isremote.Products other than whole bean coffees and coffee beverages sold in Starbucks stores include tea and a number of ready-to-drink beverages that are purchasedfrom several specialty suppliers,usually under long-term supply contracts.Food products,such as pastries,breakfast sandwiches and lunch items,arepurchased from national,regional and local sources.We also purchase a broad range of paper and plastic products,such as cups and cutlery,from severalcompanies to support the needs of our retail stores as well as our manufacturing and distribution operations.We are also expanding our use of reusablepackaging to reduce landfill waste.We believe,based on relationships established with these suppliers and manufacturers,that the risk of non-delivery ofsufficient amounts of these items generally is remote.CompetitionOur primary competitors for coffee beverage sales are specialty coffee retailers and shops.We believe that our customers choose among specialty coffeeretailers and shops primarily on the basis of product quality,brand reputation,service and convenience,as well as price.We continue to experience directcompetition from large competitors in the quick-service restaurant sector and the ready-to-drink coffee beverage market,in addition to both well-establishedand start-up companies in many international markets.We also compete with restaurants and other specialty retailers for prime retail locations and qualifiedpersonnel to operate both new and existing stores.Our coffee and tea products sold through our Channel Development segment compete directly against specialty coffees and teas sold through grocery stores,warehouse clubs,specialty retailers,convenience stores and foodservice accounts and compete indirectly against all other coffees and teas on the market.Trademarks,Copyrights,Patents and Domain NamesStarbucks owns and has applied to register numerous trademarks and service marks in the U.S.and in other countries throughout the world.Some of ourtrademarks,including Starbucks,the Starbucks logo,Starbucks Reserve and Frappuccino are of material importance.The duration of trademark registrationsvaries from country to country.However,trademarks are generally valid and may be renewed indefinitely as long as they are in use and/or their registrationsare properly maintained.We own numerous copyrights for items such as product packaging,promotional materials,in-store graphics and training materials.We also hold patents oncertain products,systems and designs which have an average remaining useful life of approximately five years.In addition,Starbucks has registered andmaintains numerous Internet domain names,including“S,”“S”and“S.”Seasonality and Quarterly ResultsOur business is subject to moderate seasonal fluctuations,of which our second fiscal quarter typically experiences lower revenues and operating income.Additionally,as Starbucks Cards are issued to and loaded by customers during the holiday season,we tend to have higher cash flows from operations duringthe first quarter of the fiscal year.However,since revenues from Starbucks Cards are recognized upon redemption and not when cash is loaded onto the Card,the impact of seasonal fluctuations on the consolidated statements of earnings is much less pronounced.As a result of moderate seasonal fluctuations,resultsfor any quarter are not necessarily indicative of the results that may be achieved for the full fiscal year.Government RegulationAs a company with global operations,we are subject to the laws and regulations of the United States and the multiple foreign jurisdictions in which we operateas well as the rules,reporting obligations and interpretations of all such requirements and obligations by various governing bodies,which may differ amongjurisdictions.In addition,changes to such laws,regulations,rules,reporting obligations and related compliance obligations could result in significant costs butare not expected to have a material effect on our capital expenditures,results of operations and competitive position as compared to prior periods.10Table of ContentsAvailable InformationStarbucks Annual Report on Form 10-K reports,along with all other reports and amendments filed with or furnished to the Securities and ExchangeCommission(the“SEC”),are publicly available free of charge on the Investor Relations section of our website at as soon as reasonablypracticable after these materials are filed with or furnished to the SEC.In addition,the SEC maintains an internet site that contains reports,proxy andinformation statements and other information regarding issuers that file electronically with the SEC at www.sec.gov.We also use our website as a tool todisclose important information about the company and comply with our disclosure obligations under Regulation Fair Disclosure.Our corporate governancepolicies,code of ethics and Board committee charters and policies are also posted on the Investor Relations section of Starbucks website.The information onour website(or any webpages referenced in this Annual Report on Form 10-K)is not part of this or any other report Starbucks files with,or furnishes to,theSEC.Item 1A.Risk FactorsYou should carefully consider the risks described below in addition to the other information set forth in this Annual Report on Form 10-K,including theManagements Discussion and Analysis of Financial Conditions and Results of Operations section,the Quantitative and Qualitative Disclosures About MarketRisk section and the consolidated financial statements and related notes.If any of the risks and uncertainties described in the cautionary factors describedbelow actually occur or continue to occur,our business,financial condition and results of operations and the trading price of our common stock could bematerially and adversely affected.The considerations and risks that follow are organized within relevant headings but may be relevant to other headings aswell.Moreover,the risks below are not the only risks we face and additional risks not currently known to us or that we presently deem immaterial may emergeor become material at any time and may negatively impact our business,reputation,financial condition,results of operations or the trading price of ourcommon stock.It is not possible for management to predict all such risks,nor can it assess the impact of all such risks on Starbucks business or the extent towhich any risk,or combination of risks,may cause actual results to differ materially from those contained in any forward-looking statements.Given these risksand uncertainties,investors should not place undue reliance on forward-looking statements as a prediction of actual results.Risks Related to Brand Relevance and Brand Execution Our success depends substantially on the value of our brands and failure to preserve their value could have a negative impact on our financial results.We believe we have built an excellent reputation globally for the quality of our products,for delivery of a consistently positive consumer experience and forour global social and environmental impact programs.The Starbucks brand is recognized throughout most of the world,and we have received high ratings inglobal brand value studies.To be successful in the future,particularly outside of the U.S.where the Starbucks brand and our other brands are less well-known,we believe we must preserve,grow and leverage the value of our brands across all sales channels.Brand value is based in part on consumer perceptions on avariety of subjective qualities.Erosion of trust in our brand value can be caused by isolated or recurring incidents originating both from us or our business partners,or from external events.Such incidents can potentially trigger boycotts of our stores or result in civil or criminal liability and can have a negative impact on our financial results.Incidents that can erode trust in our brand value include actual or perceived breaches of privacy or violations of domestic or international privacy laws,contaminated food,product recalls,store employees or other food handlers infected with communicable diseases,safety-related incidents or other potentialincidents discussed in this risk factors section.The impact of such incidents may be exacerbated if they receive considerable publicity,including rapidlythrough social or digital media(including for malicious reasons)or result in litigation.Consumer demand for our products and our brand value could diminishsignificantly if we,our employees,licensees or other business partners fail to preserve the quality of our products,act or are perceived to act in an unethical,illegal,racially-biased,unequal,inequitable or socially irresponsible manner,including with respect to the sourcing,content or sale of our products,service andtreatment of customers at Starbucks stores,treatment of employees,including our responses to unionization efforts,or the use of customer data for general ordirect marketing or other purposes.Furthermore,if we are not effective in making sufficient progress toward our social and environmental program goals or inexecuting on our Reinvention Plan,consumer trust in our brand may suffer,and this perception could result in negative publicity or litigation.Additionally,ifwe fail to comply with laws and regulations,take controversial positions or actions or fail to deliver a consistently positive consumer experience in each of ourmarkets,including by failing to invest in the right balance of wages and benefits to attract and retain employees that represent the brand well or to foster aninclusive and diverse environment,our brand value may be diminished.The ongoing relevance of our brand may depend on making sufficient progress toward our social and environmental program goals as well as the successfulexecution of the Reinvention Plan,each of which requires company-wide coordination and alignment.We are working to manage risks and costs to us,ourlicensees and our supply chain of any effects of climate change as well as diminishing energy and water resources.These risks include any increased publicfocus,including by governmental11Table of Contentsand nongovernmental organizations,on these and other environmental sustainability matters,including packaging and waste,animal health and welfare,deforestation and land use.These risks may also include any increased pressure to make commitments or set goals and take actions to meet them,which couldexpose us to market,operational and execution costs or risks.Some third parties may object to the scope or nature of our social and environmental programinitiatives or goals,or any revisions to these initiatives or goals,which could give rise to negative responses by governmental actors(such as retaliatorylegislative treatment)or consumers(such as boycotts or negative publicity campaigns)that could adversely affect our brand value.We may not be successful in our marketing,promotional and advertising plans and pricing strategies.Our continued success depends in part on our ability to adjust our marketing,promotional and advertising plans and pricing strategy to respond quickly andeffectively to shifting economic and competitive conditions as well as evolving customer preferences.We operate in a complex and costly marketing,promotional and advertising environment.Competition to attract and retain high-quality marketing partners and endorsers has increased.Our decisions tocollaborate or to cease collaborating with certain endorsers or marketing partners in light of actions taken or statements made by them could seriously harm ourbrand image with consumers and,as a result,could have an adverse effect on our sales and financial condition.Our marketing,promotional and advertisingprograms may not be successful in reaching consumers in the way we intend.Our success depends in part on whether the allocation of our advertising,promotional and marketing resources across different channels,including digital,allows us to reach consumers effectively and efficiently,and in ways that aremeaningful to them.If the advertising,promotional and marketing programs or our pricing strategies are not successful,or are not as successful as those of ourcompetitors,our sales and market share could decrease.Finally,consumers are focusing more on sustainability and the environmental impacts of operations,as well as the alignment of Starbucks actions with itsstated mission,values and promises.An inability to meet consumer expectations with respect to these issues could adversely affect our financial results.Risks Related to Our Business If our business partners and third-party providers do not satisfactorily fulfill their responsibilities and commitments,it could damage our brand and ourfinancial results could suffer.Our global business strategy,including our plans for new stores,branded products and other initiatives,relies significantly on a variety of business partners,including licensee and joint venture relationships,third-party manufacturers,distributors and retailers,particularly for our entire global Channel Developmentbusiness.Licensees,retailers and foodservice operators are often authorized to use our logos and provide branded food,beverage and other products directly tocustomers.We believe our customers expect the same quality of service regardless of whether they visit a licensed or company-operated store,so we providetraining and support to,and monitor the operations of,certain of these licensees and other business partners.However,the product quality and service theydeliver may still be diminished by any number of factors beyond our control,including financial constraints or solvency,adherence to sanitation protocols andguidance,labor shortages and other factors.We do not have direct control over our business partners and may not have visibility into their practices.We also source our food,beverage and other products from a wide variety of domestic and international business partners,and in certain cases such productsare produced or sourced by our licensees directly.We do not monitor the quality of non-Starbucks products served by foodservice operators we have authorizedto use our logos and provide branded products as part of their foodservice business.Additionally,inconsistent uses of our brand and other of our intellectualproperty assets,as well as failure to protect our intellectual property,can erode consumer trust and our brand value and have a material negative impact on ourfinancial results.Incidents involving food or beverage-borne illnesses,tampering,adulteration,contamination or mislabeling,whether or not accurate,as well as adversepublic or medical opinions about the health effects of consuming our products,could harm our business.Instances or reports,whether true or not,of unclean water supply or food-safety issues,such as food or beverage-borne illnesses,tampering,adulteration,contamination or mislabeling,either during growing,manufacturing,packaging,storing or preparation,have in the past severely injured the reputations ofcompanies in the food and beverage processing,grocery and quick-service restaurant sectors.Any report linking us to such instances could severely hurt oursales and could possibly lead to product liability claims,litigation(including class actions),temporary store closures,or other adverse consequences.Cleanwater is critical to the preparation of coffee,tea and other beverages,as well as ice for our cold beverages,and our ability to ensure adequate supplies of cleanwater and ice to our stores can be limited,particularly in some international locations.We are also continuing to incorporate more products in our food andbeverage lineup that require freezing or refrigeration,which increases the risk of food safety related incidents if correct temperatures are not maintained due tomechanical malfunction or human error.12Table of ContentsWe also face risk by relying on third-party food suppliers to provide and transport ingredients and finished products to our stores.The product quality andservice they deliver may be diminished by any number of factors beyond our control and it may be difficult to detect contamination or other defects in theseproducts.There is greater risk from those we do not monitor,or do not monitor as closely.Furthermore,stemming from the COVID-19 pandemic,there arestricter health regulations and guidelines and increased public concern over food safety standards and controls.Potential food safety incidents,whether at ourstores or involving our business partners,could lead to wide public exposure,which could materially harm our business.In addition,instances of food or beverage-safety issues,even those involving solely the restaurants or stores of competitors or of suppliers or distributors(regardless of whether we use or have used those suppliers or distributors),could adversely affect our sales on a regional or global basis by resulting in negativepublicity about us or the foodservice industry in general.A decrease in customer traffic as a result of food-safety concerns or negative publicity,or as a result ofa temporary closure of any of our stores,product recalls,viral-contaminated food or beverage claims or other food or beverage-safety claims or litigation,couldmaterially harm our business and results of operations.We may not be successful in implementing important strategic initiatives or effectively managing growth,which may have an adverse impact on ourbusiness and financial results.There is no assurance that we will be able to implement important strategic initiatives in accordance with our expectations or that they will generate expectedreturns,which may result in an adverse impact on our business and financial results.These strategic initiatives,which include our Reinvention Plan,aredesigned to create growth,improve our results of operations and drive long-term shareholder value,and include:being an employer of choice and investing in employees to deliver a superior customer experience;building our leadership position around coffee;driving convenience,brand engagement and digital relationships through our mobile,loyalty,delivery and digital capabilities both domestically andinternationally;simplifying store administrative tasks to allow store partners to better engage with customers;increasing the scale of the Starbucks store footprint with disciplined global expansion and introducing flexible and unique store formats,including theaccelerated development of alternative store formats(such as Starbucks Pickup stores,Starbucks Now stores and curbside pickup);adjusting rapidly to changing customer preferences and behaviors as a result of the COVID-19 pandemic,changing economic conditions,increasedglobal interest rates and inflation;moving to a more licensed store model in certain markets and a more company-operated model in other markets;creating new occasions in stores across all dayparts with new product offerings,including our growing lunch food and beverage product lineup;continuing the global growth of our Channel Development business through our supply,distribution and licensing agreements with Nestl and otherChannel Development business partners;delivering continued growth in our cold beverage business;working to address the potential effects of climate change and the sustainability of our business;and reducing our operating costs,particularly general and administrative expenses.In addition to other factors listed in this risk factors section,factors that may adversely affect the successful implementation of these initiatives,which couldhave a material adverse impact on our business and financial results,include the following:imposition of additional taxes by jurisdictions,such as on certain types of beverages or based on number of employees;construction cost increases associated with new store openings and remodeling of existing stores;delays in store openings for reasons beyond ourcontrol,such as potential shortages of materials and labor and delays in permits,or a lack of desirable real estate locations available for lease atreasonable rates,either of which could keep us from meeting annual store opening targets in the U.S.and internationally;governmental regulations or other health guidelines concerning operations of stores,including due to public health emergencies;not successfully scaling our supply chain infrastructure as our product offerings increase and as we continue to expand,including our emphasis on abroad range of high-quality food offerings;13Table of Contents not successfully adapting to customer or market factors affecting our supply chain as we work to address sustainability and climate change;the deterioration in our credit ratings,which could limit the availability of additional financing and increase the cost of obtaining financing to fund ourinitiatives;and geopolitical instability and international conflicts.Effectively managing growth can be challenging,particularly as we continue to expand in international markets where we must balance the need for flexibilityand a degree of autonomy for local management against the need for consistency with our goals,policies and standards.If we are not successful inimplementing our strategic initiatives,or,in the event we undertake large acquisitions,integrations and divestitures,we may be required to evaluate whethercertain assets,including goodwill and other intangibles,have become impaired.In the event we record an impairment charge,it could have a material impacton our financial results.Evolving consumer preferences and tastes may adversely affect our business.Our continued success depends on our ability to attract and retain customers.Our financial results could be adversely affected by a shift in consumer spendingaway from outside-the-home food and beverages(such as a reduction in discretionary spending as a result of the resumption of student loan payments);lack ofcustomer acceptance of new products(including due to price increases necessary to cover the costs of new products or higher input costs),brands(such as theglobal expansion of the Starbucks brand)and platforms(such as features of our mobile technology,changes in our loyalty rewards programs and our deliveryservices initiatives);or customers reducing their demand for our current offerings as new products are introduced.In addition,some of our products containcaffeine,dairy products,sugar and other compounds and allergens,the health effects of which are the subject of public and regulatory scrutiny,including thesuggestion of linkages to a variety of adverse health effects.Particularly in the U.S.,there is increasing consumer awareness of health risks,including obesity,as well as increased consumer litigation based on alleged adverse health impacts of consumption of various food and beverage products.An unfavorable reporton the health effects of caffeine or other compounds present in our products,whether accurate or not,imposition of additional taxes on certain types of foodand beverage components,or negative publicity or litigation arising from certain health risks could significantly reduce the demand for our beverages and foodproducts and could materially harm our business and results of operations.Our financial results have been,and could continue to be,adversely affected bychanges in macroeconomic conditions,including increases in real estate costs in certain domestic and international markets,inflationary pressures and changesin prevailing interest rates,disruptions to our supply chain,changes in governmental rules and approaches to taxation,and fluctuations in foreign currencyexchange rates.Such changes could affect consumer behavior and their ability or willingness to spend discretionary income on our products.Furthermore,ourfinancial results have been and could continue to be adversely affected by the persisting impacts of the COVID-19 pandemic,including the disruption ofcustomer routines,changes to employer“work-from-home”policies and changes in consumer behavior and the ability or willingness to spend discretionaryincome on our products.Risks Related to Operating a Global Business We are highly dependent on the financial performance of our North America operating segment.Our financial performance is highly dependent on our North America operating segment,which comprised approximately 74%of consolidated total netrevenues in fiscal year 2023.If the North America operating segment revenue trends slow or decline,especially in our U.S.market,our other segments may beunable to make up any significant shortfall and our business and financial results could be adversely affected.And because the North America segment isrelatively mature and produces the large majority of our operating cash flows,such a slowdown or decline could result in reduced cash flows for funding theexpansion of our international businesses and other initiatives and for returning cash to shareholders.We are increasingly dependent on the success of certain international markets in order to achieve our growth targets.Our future growth increasingly depends on the growth and sustained profitability of certain international markets.Some or all of our international marketbusiness units(“MBUs”),which we generally define by the countries in which they operate,may not be successful in their operations or in achieving expectedgrowth,which ultimately requires achieving consistent,stable net revenues and earnings.The performance of these international operations may be adverselyaffected by economic downturns in one or more of the countries in which our large MBUs operate.A decline in performance of one or more of our significantinternational MBUs could have a material adverse impact on our consolidated results.The International segment is a significant profit center driving our global returns,along with our North America segment.In particular,our China MBUcontributes meaningfully to both consolidated and International net revenues and operating income.China is expected to be our fastest growing market in termsof percentage growth,our second largest market overall and 100%company-owned.Due to the significance of our China market for our profit and growth,weare exposed to risks in China,including the risks mentioned elsewhere and the following:14Table of Contents the effects of current U.S.-China relations,including rounds of tariff increases and retaliations and increasing restrictive regulations,potential boycottsand increasing anti-Americanism;escalating U.S.-China tension and increasing political sensitivities in China;the lingering effects of the COVID-19 pandemic and related governmental regulations and restrictions on our operations in China;entry of new competitors to the specialty coffee market in China;changes in economic conditions in China and potential negative effects to the growth of its middle class,wages,labor,inflation,discretionaryspending and real estate and supply chain costs;ongoing government regulatory reform,including relating to public health,food safety,tariffs and tax,sustainability and responses to climate change,which result in regulatory uncertainty as well as potential significant increases in compliance costs;data-privacy and cybersecurity risks unique to the conduct of business in China;and food-safety related matters,including compliance with food-safety regulations and ability to ensure product quality and safety.Additionally,some factors that will be critical to the success of our international operations overall are different than those affecting our U.S.stores andlicensees.Tastes naturally vary by region,and consumers in some MBUs may not embrace our products to the same extent as consumers in the U.S.or otherinternational markets.Occupancy costs and store operating expenses can be higher internationally than in the U.S.due to higher rents for prime store locationsor costs of compliance with country-specific regulatory requirements.Because many of our international operations are in an early phase of development,operating expenses as a percentage of related revenues are often higher compared to more developed operations.We face risks as a global business that could adversely affect our financial performance.We operate in 86 markets globally.Our international operations are also subject to additional inherent risks of conducting business abroad,such as:foreign currency exchange rate fluctuations,or requirements to transact in specific currencies;changes or uncertainties in economic,legal,regulatory,social and political conditions in our markets,as well as negative effects on U.S.businessesdue to increasing anti-American sentiment in certain markets;interpretation and application of laws and regulations,including tax,tariffs,labor,merchandise,anti-bribery and privacy laws and regulations;restrictive actions of foreign or U.S.governmental authorities affecting trade and foreign investment,especially during periods of heightened tensionbetween the U.S.and such foreign governmental authorities,including protective measures such as export and customs duties and tariffs,governmentintervention favoring local competitors and restrictions on the level of foreign ownership;import or other business licensing requirements;the enforceability of intellectual property and contract rights;limitations on the repatriation of funds and foreign currency exchange restrictions due to current or new U.S.and international regulations;in developing economies,the growth rate in the portion of the population achieving sufficient levels of disposable income may not be as fast as weforecast;difficulty in staffing,developing and managing foreign operations and supply chain logistics,including ensuring the consistency of product qualityand service,due to governmental actions affecting supply chain logistics,distance,language and cultural differences,as well as challenges inrecruiting and retaining high-quality employees in local markets;local laws that make it more expensive and complex to negotiate with,retain or terminate employees;local regulations,health guidelines and safety protocols affecting our operations;and delays in store openings for reasons beyond our control,competition with locally relevant competitors or a lack of desirable real estate locationsavailable for lease at reasonable rates,any of which could keep us from meeting annual store opening targets and,in turn,negatively impact netrevenues,operating income and earnings per share.15Table of ContentsMoreover,many of the foregoing risks are particularly acute in developing countries,which are important to our long-term growth prospects.An inability tomanage effectively the risks associated with our international operations could adversely affect our business and financial results.Our reliance on key business partners may adversely affect our business and operations.The growth of our business relies on the ability of our licensee partners to implement our growth platforms and product innovations as well as on the degree towhich we are able to enter into,maintain,develop and negotiate appropriate terms and conditions of,and enforce,commercial and other agreements and theperformance of our business partners under such agreements.Our international licensees may face capital constraints or other factors that may limit the speedat which they are able to expand and develop in a certain market.Our Channel Development business is heavily reliant on Nestl,which has the right to selland distribute our packaged goods and foodservice products to retailers and operators,with few exceptions.If Nestl fails to perform its distribution andmarketing commitments under our agreements and/or fails to support,protect and grow our brand in Channel Development,our Channel Developmentbusiness could be adversely impacted for a period of time,present long-term challenges to our brand,limit our ability to grow our Channel Developmentbusiness and have a material adverse impact on our business and financial results.Additionally,the growth of our Channel Development business is in partdependent on the level of discretionary support provided by our retail and licensed store businesses.There are generally a relatively small number of licensee partners operating in specific markets.If they are not able to access sufficient funds or financing,orare otherwise unable or unwilling to successfully operate and grow their businesses,it could have a material adverse effect on our results in the applicablemarkets.Risks Related to Supply Chain Increases in the cost of high-quality arabica coffee beans or other commodities or decreases in the availability of high-quality arabica coffee beans orother commodities could have an adverse impact on our business and financial results.The availability and prices of coffee beans and other commodities are subject to significant volatility.We purchase,roast and sell high-quality whole beanarabica coffee beans and related coffee products.The high-quality arabica coffee of the quality we seek tends to trade on a negotiated basis at a premium abovethe“C”price.This premium depends upon the supply and demand at the time of purchase and the amount of the premium can vary significantly.Increases inthe“C”coffee commodity price increase the price of high-quality arabica coffee and also impact our ability to enter into fixed-price purchase commitments.We frequently enter into supply contracts whereby the quality,quantity,delivery period and other negotiated terms are agreed upon,but the date,and thereforeprice,at which the base“C”coffee commodity price component will be fixed has not yet been established.The supply and price of coffee we purchase can also be affected by multiple factors in the producing countries,such as weather,water supply quality andavailability throughout the coffee production chain,natural disasters,crop disease and pests,general increase in farm inputs and costs of production,inventorylevels,political and economic conditions and the actions of certain organizations and associations that have historically attempted to influence prices of greencoffee through agreements establishing export quotas or by restricting coffee supplies.Climate change may further exacerbate many of these factors.Speculative trading in coffee commodities can also influence coffee prices.For example,extreme weather conditions such as drought or frost in Brazil haveimpacted coffee prices in the past,and in the likely event that such weather conditions were to reoccur in the future,they would have similar consequences oncoffee price volatility.Because of the significance of coffee beans to our operations,combined with our ability to only partially mitigate future price riskthrough purchasing practices and hedging activities,increases in the cost of high-quality arabica coffee beans could have a material adverse impact on ourprofitability.In addition,if we are not able to purchase sufficient quantities of green coffee due to any of the above factors or due to a worldwide or regionalshortage,we may not be able to fulfill the demand for our coffee,which could have a material adverse impact on our business operations and financialperformance.We also purchase significant amounts of dairy products,particularly fluid milk,and to a lesser degree,plant-based dairy-free alternative products,such as oatmilk and almond milk,to support the needs of our company-operated retail stores.Additionally,other commodities,including tea and those related to food andbeverage inputs,such as cocoa,produce,baking ingredients,meats,eggs and energy,as well as the processing of these inputs,are important to our operations.Increases in the cost of dairy products and other commodities,or lack of availability,whether due to supply shortages,delays or interruptions in processing,orotherwise,especially in international markets,could have a material adverse impact on our profitability.Similarly,increases in the cost of,or lack ofavailability,whether due to supply shortages,delays or interruptions in the processing of plant-based alternatives could have a material adverse impact on ourprofitability.Interruption of our supply chain could affect our ability to produce or deliver our products and could negatively impact our business and profitability.16Table of ContentsAny material interruption in our supply chain,such as material interruption of roasted coffee supply due to the casualty loss of any of our roasting plants,interruptions in service by our third-party logistic service providers or common carriers that ship goods within our distribution channels,trade restrictions,suchas increased tariffs or quotas,embargoes or customs restrictions,pandemics,social or labor unrest,labor shortages,natural disasters or political disputes andmilitary conflicts that cause a material disruption in our supply chain could have a negative material impact on our business and our profitability.Additionally,our food,beverage and other products are sourced from a wide variety of domestic and international business partners in our supply chain operations,and incertain cases are produced or sourced by our licensees directly.We rely on these suppliers to provide high-quality products and to comply with applicable laws.Our ability to find qualified suppliers who meet our standards and supply products in a timely and efficient manner is a significant challenge as we increase ourfresh and prepared food offerings,especially with respect to goods sourced from outside the U.S.and from countries or regions with diminished infrastructure,developing or failing economies or which are experiencing political instability or social unrest.For certain products,we may rely on one or very few suppliers.A suppliers failure to meet our standards,provide products in a timely and efficient manner or comply with applicable laws is beyond our control.These issuescould have a material negative impact on our business and profitability.Risks Related to Macroeconomic Conditions Our financial condition and results of operations are subject to,and may be adversely affected by,a number of macroeconomic and other factors,manyof which are also largely outside our control.Our operating results have been in the past and will continue to be subject to a number of macroeconomic and other factors,many of which are largely outsideour control.Any one or more of the factors listed below or described elsewhere in this risk factors section could have a material adverse impact on ourbusiness,financial condition and/or results of operations:increases in real estate costs in certain domestic and international markets;inflationary pressures and changes in prevailing interest rates;disruptions to our supply chain;changes in governmental rules and approaches to taxation;fluctuations in foreign currency exchange rates;adverse outcomes of litigation;severe weather or other natural or man-made disasters affecting a large market or several closely located markets that may temporarily butsignificantly affect our retail business in such markets;changes in climate,including changes to the frequency or severity of extreme weather events,that impact the price and availability or cost of goodsand services,energy and other materials throughout our supply chain;and especially in our largest markets,including the U.S.and China,labor discord or disruption,geopolitical events,war,terrorism(including incidentstargeting us),political instability,acts of public violence,boycotts,increasing anti-American sentiment in certain markets,hostilities and social unrestand health pandemics that lead to avoidance of public places or restrictions on public gatherings such as in our stores.Unfavorable economic conditions could also adversely affect our suppliers and licensees,who in turn could experience cash flow problems,more costly orunavailable financing,credit defaults and other financial hardships.This couldlead to supplier or licensee insolvency,increase our bad debt expense,or causeus to increase the levels of unsecured credit that we provide to suppliers and licensees.Further,if any of our licensees becomes insolvent this could result in ourexit from a particular market,and negatively impact our reputation.For example,one of our licensees is experiencing financial solvency issues,whichmayrequire the Company to expend capital resources to help fundtheiroperating expenses in the short term.Economic conditions in the U.S.and international markets could adversely affect our business and financial results.As a retailer that is dependent upon consumer discretionary spending,our results of operations are sensitive to changes in or uncertainty about macroeconomicconditions.A continued economic downturn or recession,or slowing or stalled recovery therefrom,may have a material adverse effect on our business,financial condition or results of operations.Our customers may have or in the future have less money for discretionary purchases and may stop or reduce theirpurchases of our products or switch to Starbucks or competitors lower-priced products as a result of various factors,including job losses,inflation,changes inprevailing interest rates,higher taxes,reduced access to credit,changes in federal economic policy,a global health pandemic,international trade disputes orgeopolitical instability.We may also experience a reduction and increased volatility in demand for our products in connection with a global health pandemic.For example,in China,reductions and continuing volatility in that market may be caused by,among other things:store closures or modified operating hoursand business model,reduced customer traffic due to illness,quarantine or government or self-imposed restrictions placed on our stores operations,impacts17Table of Contentscaused by precautionary measures such as those related to face coverings and vaccinations and changes in consumer spending behaviors,including thosecaused by social distancing,a decrease in consumer confidence in general macroeconomic conditions and a decrease in consumer discretionary spending.Decreases in customer traffic and/or average value per transaction without a corresponding decrease in costs would put downward pressure on margins andwould negatively impact our financial results.There is also a risk that if negative economic conditions or uncertainty persist for a long period of time orworsen,consumers may make long-lasting changes to their discretionary purchasing behavior,including less frequent discretionary purchases on a morepermanent basis or enduring changes in behavior that precipitate a more general downturn in the restaurant industry.These and other macroeconomic factorscould have an adverse effect on our sales,profitability or development plans,which could harm our results of operations and financial condition.Failure to meet market expectations for our financial performance and fluctuations in the stock market as a whole will likely adversely affect the marketprice and volatility of our stock.Failure to meet market expectations going forward,particularly with respect to our operational and financial results,and expectations regarding the success ofour Reinvention Plan and related guidance,environmental performance and shareholder returns,will likely result in a decline and/or increased volatility in themarket price of our stock.In addition,price and volume fluctuations in the stock market as a whole may affect the market price of our stock in ways that maybe unrelated to our financial performance.Risks Related to Human Capital Changes in the availability of and the cost of labor could adversely affect our business.Our business could be adversely impacted by increases in labor costs,including wages and benefits,which,in a retail business such as ours,are two of ourmost significant costs,both domestically and internationally,including those increases triggered by state and federal legislation and regulatory actionsregarding wages,scheduling and benefits;increased healthcare and workers compensation insurance costs;and increased wages and costs of other benefitsnecessary to attract and retain high-quality employees with the right skill sets.The growth of our business can make it increasingly difficult to locate and hiresufficient numbers of employees,to maintain an effective system of internal controls for a globally dispersed enterprise and to train employees worldwide todeliver a consistently high-quality product and customer experience,which could materially harm our business and results of operations.Furthermore,we haveexperienced,and could continue to experience,a shortage of labor for store positions,and the increased availability of alternative telecommuting employmentoptions by other employers could decrease the pool of available qualified talent for key functions.In addition,our wages and benefits programs may beinsufficient to attract and retain the best talent.Starting in September 2021,Starbucks partners at a number of company-operated stores sought union representation through elections conducted by theauthorities.Unions have secured representation rights at a number of these stores,with potentially more to follow.The law places limitations on unilateral actions taken with respect to employees who are represented by unions because in certain circumstances the lawrequires the employer to notify and to bargain with the union prior to making certain operational or other changes that may affect employee wages,hours orother terms and conditions of employment.These limitations could negatively affect our costs,change our employee culture,and decrease our flexibility.Theyalso present the potential to disrupt our current operational model by affecting our ability to fully implement operational changes to enhance our efficiency andadapt to changing business needs.Moreover,we have experienced job actions in some company-operated stores.Such job actions and work stoppages have the potential to negatively impact ouroperations,third-party providers upon whom we rely to deliver product,our sales,and our costs.Additionally,our position with respect to unions and the unionization of partners could negatively impact how our brand is perceived and have adverse effectson our business,including on our financial results.These positions could also expose us to legal risk,causing us to incur costs to defend legal and regulatoryactions,potential penalties and restrictions,and reputational harm.The loss of key personnel or difficulties recruiting and retaining qualified personnel or effectively managing changes in our workforce could adverselyimpact our business and financial results.Much of our future success depends on the continued availability and service of key personnel and employees.The loss of any of our executive officers orother key senior management personnel could harm our business.Our success also depends substantially on the contributions and abilities of our retail storeemployees upon whom we rely to give customers a superior in-store experience and elevate our brand.Accordingly,our performance depends on our ability torecruit and retain high-quality management personnel and other employees to work in and manage our stores,both domestically and internationally.Our18Table of Contentsability to do so has been and may continue to be impacted by challenges in the labor market,which has experienced and may continue to experience wageinflation,labor shortages,increased employee turnover,changes in availability of our workforce and a shift toward remote or hybrid work arrangements.Ourability to attract and retain corporate,retail and other personnel is also acutely impacted in certain international and domestic markets where the competition fora relatively small number of qualified employees is intense or in markets where large high-tech companies are able to offer more competitive salaries andbenefits.Additionally,there is intense competition for qualified technology systems developers necessary to develop and implement new technologies for ourgrowth initiatives,including increasing our digital relationships with customers.If we are unable to recruit,retain and motivate employees sufficiently tomaintain our current business and support our projected growth,our business and financial performance may be adversely affected.Risks Related to Competition We face intense competition in each of our channels and markets,which could lead to reduced profitability.The specialty coffee market is intensely competitive,including with respect to product quality,innovation,service,convenience,such as delivery service andmobile ordering,and price,and we face significant and increasing competition in all of these areas in each of our channels and markets.Accordingly,we do nothave leadership positions in all channels and markets.In the U.S.,the ongoing focus by large competitors in the quick-service restaurant sector on selling high-quality specialty coffee beverages could lead to decreases in customer traffic to Starbucks stores and/or average value per transaction adversely affecting oursales and results of operations.Similarly,continued competition from well-established competitors,or competition from large new entrants or well-fundedsmaller companies,in our domestic and international markets could hinder growth and adversely affect our sales and results of operations in those markets.Many small competitors also continue to open coffee specialty stores in many of our markets across the world,which in the aggregate may also lead tosignificant decreases of customer traffic to our stores in those markets.Increased competition globally in packaged coffee and tea and single-serve and ready-to-drink coffee beverage markets,including from new and large entrants to this market,could adversely affect the profitability of the Channel Developmentsegment.In addition,not all of our competitors may seek to establish environmental or sustainability goals at a comparable level to ours,which could result inlower supply chain or operating costs for our competitors.We may incur increased costs associated with reducing carbon dioxide and other greenhouse gasemissions,reducing the use of plastic or imposing performance obligations on our suppliers that could increase financial obligations for us and our businesspartners and could affect our profitability.Additionally,if we are unable to respond to consumer demand for healthy beverages and foods,or our competitorsrespond more effectively,this could have a negative effect on our business.Furthermore,declines in general consumer demand for specialty coffee products forany reason,including due to consumer preference for other products,flattening demand for our products,changed customer daily routines or traffic to stores,orchanged customer spending behaviors due to challenging economic conditions,could have a negative effect on our business.Risks Related to Environmental,Social and Governance Matters Climate change may have an adverse impact on our business.We recognize that there are inherent climate-related risks wherever business is conducted.For example,as we noted above,the supply and price of coffee wepurchase can also be affected by multiple factors in the producing countries,such as weather and water supply quality and availability,which factors may becaused by or exacerbated by climate change.Climate change may also result in decreased availability,less favorable pricing,or other adverse consequences fornon-coffee inputs in our products.In particular,climate change may affect the availability of water in the markets in which we operate and expect to operateand elsewhere in our supply chain,which could have adverse impacts on our business.We operate in 86 markets globally.Our properties and operations maybe vulnerable to the adverse effects of climate change,which are predicted to increase the frequency and severity of extreme weather events and other naturalcycles such as wildfires and droughts.Such events have the potential to disrupt our operations,cause store closures,disrupt the business of our third-partysuppliers and impact our customers,all of which may cause us to suffer losses and additional costs to maintain or resume operations.Our business is subject to evolving corporate governance and public disclosure regulations and expectations,including with respect to environmental,social and governance matters,that could expose us to numerous risks.We are subject to changing rules and regulations promulgated by a number of governmental and self-regulatory organizations,including the SEC,the NasdaqStock Market and the Financial Accounting Standards Board.These rules and regulations continue to evolve in scope and complexity and many newrequirements have been created in response to laws enacted by Congress,making compliance more difficult and uncertain.In addition,increasingly regulators,customers,investors,employees and other stakeholders are focusing on environmental,social and governance(“ESG”)matters and related disclosures.Thesechanging rules,regulations and stakeholder expectations have resulted in,and are likely to continue to result in,increased general and administrative expensesand increased management time and attention spent complying with or19Table of Contentsmeeting such regulations and expectations.For example,developing and acting on initiatives within the scope of ESG,and collecting,measuring and reportingESG-related information and metrics can be costly,difficult and time consuming and is subject to evolving reporting standards,including the SECs proposedclimate-related reporting requirements,and similar proposals by other international regulatory bodies.We may also communicate certain initiatives and goals,regarding environmental matters,diversity,responsible sourcing and social investments and other ESG-related matters,in our SEC filings or in other publicdisclosures.These initiatives and goals within the scope of ESG could be difficult and expensive to implement,the technologies needed to implement themmay not be cost effective and may not advance at a sufficient pace,and we could be criticized for the accuracy,adequacy or completeness of the disclosure.Further,statements about our ESG-related initiatives and goals,and progress toward those goals,may be based on standards for measuring progress that arestill developing,internal controls and processes that continue to evolve,and assumptions that are subject to change in the future.If we are unable to meet ourESG-related goals or evolving stakeholder or industry expectations and standards,or if we are perceived to have not responded appropriately to the growingconcern for ESG issues,customers and consumers may choose to stop purchasing our products or purchase products from another company or a competitor,and our reputation,business or financial condition may be adversely affected.If our ESG-related data,processes and reporting are incomplete or inaccurate,orif we fail to achieve progress with respect to our goals within the scope of ESG on a timely basis,or at all,our reputation,business,financial performance andgrowth could be adversely affected.In addition,we could be criticized by ESG detractors for the scope or nature of our ESG initiatives or goals or for any revisions to these goals.We could alsobe subjected to negative responses by governmental actors(such as anti-ESG legislation or retaliatory legislative treatment)or consumers(such as boycotts ornegative publicity campaigns)targeting Starbucks that could adversely affect our reputation,business,financial performance and growth.Risks Related to Intellectual Property We may not be able to adequately protect our intellectual property or adequately ensure that we are not infringing the

0人已浏览 2023-12-06 135页 5星级

Table of ContentsUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,DC 20549FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the Quarterly Period Ended July 2,2023OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from to .Commission File Number:000-20322Starbucks Corporation(Exact Name of Registrant as Specified in its Charter)Washington91-1325671(State or Other Jurisdiction ofIncorporation or Organization)(IRS EmployerIdentification No.)2401 Utah Avenue South,Seattle,Washington 98134(Address of principal executive offices)(206)447-1575(Registrants Telephone Number,including Area Code)Securities registered pursuant to Section 12(b)of the Act:TitleTrading SymbolName of each exchange on which registeredCommon Stock,par value$0.001 per shareSBUXNasdaq Global Select MarketIndicate 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 duringthe 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 forthe past 90 days.Yes x No Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 ofRegulation S-T(232.405 of this chapter)during the preceding 12 months(or for such shorter period that the registrant was required to submit suchfiles).Yes x No Indicate by check mark whether the registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,smaller reporting company,or anemerging growth company.See the definitions of“large accelerated filer,”“accelerated filer,”“smaller reporting company”and“emerging growth company”in Rule 12b-2 of the Exchange Act.Large accelerated filerxAccelerated filerNon-accelerated filerSmaller reporting companyEmerging growth companyIf 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 orrevised financial accounting standards provided pursuant to Section 13(a)of the Exchange Act.Indicate by check mark whether the registrant is a shell company(as defined in Rule 12b-2 of the Exchange Act):Yes No x Indicate the number of shares outstanding of each of the issuers classes of common stock,as of the latest practicable date.Shares Outstanding as of July 26,20231,145.4 millionTable of ContentsSTARBUCKS CORPORATIONFORM 10-QFor the Quarterly Period Ended July 2,2023Table of Contents PART I.FINANCIAL INFORMATIONItem 1Financial Statements(Unaudited)3Consolidated Statements of Earnings3Consolidated Statements of Comprehensive Income4Consolidated Balance Sheets5Consolidated Statements of Cash Flows6Consolidated Statements of Equity7Index for Notes to Consolidated Financial Statements9Notes to Consolidated Financial Statements10Item 2Managements Discussion and Analysis of Financial Condition and Results of Operations27Item 3Quantitative and Qualitative Disclosures About Market Risk38Item 4Controls and Procedures39PART II.OTHER INFORMATIONItem 1Legal Proceedings40Item 1ARisk Factors40Item 2Unregistered Sales of Equity Securities and Use of Proceeds40Item 3Defaults Upon Senior Securities40Item 4Mine Safety Disclosures40Item 5Other Information40Item 6Exhibits41Signatures42 Table of ContentsPART I FINANCIAL INFORMATIONItem 1.Financial StatementsSTARBUCKS CORPORATIONCONSOLIDATED STATEMENTS OF EARNINGS(in millions,except per share data)(unaudited)Quarter EndedThree Quarters EndedJul 2,2023Jul 3,2022Jul 2,2023Jul 3,2022Net revenues:Company-operated stores$7,556.7$6,675.5$21,782.4$19,674.7 Licensed stores1,136.2 956.8 3,325.2 2,657.0 Other475.4 517.8 1,494.4 1,504.4 Total net revenues9,168.3 8,150.1 26,602.0 23,836.1 Product and distribution costs2,864.2 2,613.6 8,476.1 7,606.4 Store operating expenses3,697.6 3,302.5 10,998.9 10,017.1 Other operating expenses138.7 135.1 394.1 338.4 Depreciation and amortization expenses342.2 356.8 1,011.2 1,090.5 General and administrative expenses604.3 486.7 1,805.6 1,494.0 Restructuring and impairments7.1 14.0 21.8 10.9 Total operating expenses7,654.1 6,908.7 22,707.7 20,557.3 Income from equity investees69.7 54.1 179.0 143.5 Gain from sale of assets 91.3 Operating income1,583.9 1,295.5 4,164.6 3,422.3 Interest income and other,net21.3 19.8 51.1 66.0 Interest expense(140.9)(123.1)(406.9)(357.6)Earnings before income taxes1,464.3 1,192.2 3,808.8 3,130.7 Income tax expense322.4 278.5 903.4 725.9 Net earnings including noncontrolling interests1,141.9 913.7 2,905.4 2,404.8 Net earnings attributable to noncontrolling interests0.2 0.8 0.2 1.5 Net earnings attributable to Starbucks$1,141.7$912.9$2,905.2$2,403.3 Earnings per share-basic$1.00$0.80$2.53$2.08 Earnings per share-diluted$0.99$0.79$2.52$2.07 Weighted average shares outstanding:Basic1,145.9 1,147.0 1,147.6 1,155.3 Diluted1,150.5 1,151.0 1,152.0 1,160.5 See Notes to Consolidated Financial Statements.3Table of ContentsSTARBUCKS CORPORATIONCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(in millions,unaudited)Quarter EndedThree Quarters EndedJul 2,2023Jul 3,2022Jul 2,2023Jul 3,2022Net earnings including noncontrolling interests$1,141.9$913.7$2,905.4$2,404.8 Other comprehensive income/(loss),net of tax:Unrealized holding gains/(losses)on available-for-sale debt securities(2.2)(2.1)3.4(16.0)Tax(expense)/benefit0.5 0.5(0.8)3.9 Unrealized gains/(losses)on cash flow hedging instruments4.6 54.4(177.3)210.3 Tax(expense)/benefit(3.8)(13.4)25.8(39.5)Unrealized gains/(losses)on net investment hedging instruments101.0 109.2 33.7 188.8 Tax(expense)/benefit(25.5)(27.6)(8.5)(47.7)Translation adjustment and other(318.1)(396.9)(34.5)(421.2)Tax(expense)/benefit Reclassification adjustment for net(gains)/losses realized in netearnings for available-for-sale debt securities,hedging instruments,and translation adjustment(16.5)(59.2)(181.5)(109.5)Tax expense/(benefit)4.1 9.8 25.4 18.7 Other comprehensive income/(loss)(255.9)(325.3)(314.3)(212.2)Comprehensive income including noncontrolling interests886.0 588.4 2,591.1 2,192.6 Comprehensive income attributable to noncontrolling interests(0.5)0.8(0.5)1.5 Comprehensive income attributable to Starbucks$886.5$587.6$2,591.6$2,191.1 See Notes to Consolidated Financial Statements.4Table of ContentsSTARBUCKS CORPORATIONCONSOLIDATED BALANCE SHEETS(in millions,except per share data)(unaudited)Jul 2,2023Oct 2,2022ASSETSCurrent assets:Cash and cash equivalents$3,357.0$2,818.4 Short-term investments263.0 364.5 Accounts receivable,net1,140.2 1,175.5 Inventories1,987.0 2,176.6 Prepaid expenses and other current assets423.5 483.7 Total current assets7,170.7 7,018.7 Long-term investments238.6 279.1 Equity investments384.4 311.2 Property,plant and equipment,net7,053.5 6,560.5 Operating lease,right-of-use asset8,178.5 8,015.6 Deferred income taxes,net1,790.3 1,799.7 Other long-term assets541.7 554.2 Other intangible assets124.4 155.9 Goodwill3,250.9 3,283.5 TOTAL ASSETS$28,733.0$27,978.4 LIABILITIES AND SHAREHOLDERS EQUITY/(DEFICIT)Current liabilities:Accounts payable$1,503.5$1,441.4 Accrued liabilities2,060.5 2,137.1 Accrued payroll and benefits755.4 761.7 Current portion of operating lease liability1,265.2 1,245.7 Stored value card liability and current portion of deferred revenue1,759.6 1,641.9 Short-term debt34.5 175.0 Current portion of long-term debt1,835.9 1,749.0 Total current liabilities9,214.6 9,151.8 Long-term debt13,544.4 13,119.9 Operating lease liability7,691.2 7,515.2 Deferred revenue6,152.5 6,279.7 Other long-term liabilities471.9 610.5 Total liabilities37,074.6 36,677.1 Shareholders deficit:Common stock($0.001 par value)authorized,2,400.0 shares;issued and outstanding,1,145.4 and 1,147.9shares,respectively1.1 1.1 Additional paid-in capital38.3 205.3 Retained deficit(7,610.5)(8,449.8)Accumulated other comprehensive income/(loss)(777.5)(463.2)Total shareholders deficit(8,348.6)(8,706.6)Noncontrolling interests7.0 7.9 Total deficit(8,341.6)(8,698.7)TOTAL LIABILITIES AND SHAREHOLDERS EQUITY/(DEFICIT)$28,733.0$27,978.4 See Notes to Consolidated Financial Statements.5Table of ContentsSTARBUCKS CORPORATIONCONSOLIDATED STATEMENTS OF CASH FLOWS(in millions,unaudited)Three Quarters EndedJul 2,2023Jul 3,2022OPERATING ACTIVITIES:Net earnings including noncontrolling interests$2,905.4$2,404.8 Adjustments to reconcile net earnings to net cash provided by operating activities:Depreciation and amortization1,073.8 1,169.0 Deferred income taxes,net(30.2)35.0 Income earned from equity method investees(182.7)(175.0)Distributions received from equity method investees146.6 145.9 Gain on sale of assets(91.3)Stock-based compensation228.5 206.6 Non-cash lease costs998.4 1,090.4 Loss on retirement and impairment of assets79.1 89.6 Other22.8(44.7)Cash provided by/(used in)changes in operating assets and liabilities:Accounts receivable44.3(245.5)Inventories194.5(557.3)Accounts payable47.3 341.7 Deferred revenue(8.2)32.7 Operating lease liability(1,056.1)(1,201.4)Other operating assets and liabilities(308.5)5.8 Net cash provided by operating activities4,063.7 3,297.6 INVESTING ACTIVITIES:Purchases of investments(357.1)(117.3)Sales of investments2.0 72.6 Maturities and calls of investments515.0 59.5 Additions to property,plant and equipment(1,634.1)(1,295.4)Proceeds from sale of assets110.0 Other(42.0)(95.7)Net cash used in investing activities(1,406.2)(1,376.3)FINANCING ACTIVITIES:Net(payments)/proceeds from issuance of commercial paper(175.0)200.0 Net proceeds from issuance of short-term debt83.7 38.9 Repayments of short-term debt(46.7)(38.9)Net proceeds from issuance of long-term debt1,497.8 1,498.1 Repayments of long-term debt(1,000.0)(1,000.0)Proceeds from issuance of common stock149.4 75.5 Cash dividends paid(1,824.8)(1,701.1)Repurchase of common stock(699.3)(4,013.0)Minimum tax withholdings on share-based awards(87.0)(123.5)Other(11.0)(9.2)Net cash used in financing activities(2,112.9)(5,073.2)Effect of exchange rate changes on cash and cash equivalents(6.0)(126.3)Net increase/(decrease)in cash and cash equivalents538.6(3,278.2)CASH AND CASH EQUIVALENTS:Beginning of period2,818.4 6,455.7 End of period$3,357.0$3,177.5 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:Cash paid during the period for:Interest,net of capitalized interest$369.6$344.9 Income taxes$939.8$911.2 See Notes to Consolidated Financial Statements.6Table of ContentsSTARBUCKS CORPORATIONCONSOLIDATED STATEMENTS OF EQUITYFor the Quarter Ended July 2,2023 and July 3,2022(in millions,except per share data,unaudited)Common StockAdditionalPaid-inCapitalRetainedEarnings/(Deficit)AccumulatedOtherComprehensiveIncome/(Loss)ShareholdersEquity/(Deficit)NoncontrollingInterestsTotal SharesAmountBalance,April 2,20231,147.0$1.1$38.2$(8,024.6)$(521.6)$(8,506.9)$7.5$(8,499.4)Net earnings 1,141.7 1,141.7 0.2 1,141.9 Other comprehensive loss (255.2)(255.2)(0.7)(255.9)Stock-based compensation expense 69.9 69.9 69.9 Exercise of stock options/vesting ofRSUs0.3 1.6 1.6 1.6 Sale of common stock0.1 12.4 12.4 12.4 Repurchase of common stock(2.0)(83.8)(121.1)(204.9)(204.9)Cash dividends declared,$0.53 pershare (606.5)(606.5)(606.5)Purchase of non-controlling interestsand other (0.7)(0.7)(0.7)Balance,July 2,20231,145.4$1.1$38.3$(7,610.5)$(777.5)$(8,348.6)$7.0$(8,341.6)Balance,April 3,20221,146.9$1.1$41.1$(9,070.5)$260.3$(8,768.0)$6.8$(8,761.2)Net earnings 912.9 912.9 0.8 913.7 Other comprehensive loss (325.3)(325.3)(325.3)Stock-based compensation expense 58.2 58.2 58.2 Exercise of stock options/vesting ofRSUs0.2 5.8 5.8 5.8 Sale of common stock0.2 12.0 12.0 12.0 Cash dividends declared,$0.49 pershare (562.1)(562.1)(562.1)Balance,July 3,20221,147.3$1.1$117.1$(8,719.7)$(65.0)$(8,666.5)$7.6$(8,658.9)See Notes to Consolidated Financial Statements.7Table of ContentsSTARBUCKS CORPORATIONCONSOLIDATED STATEMENTS OF EQUITYFor the Three Quarters Ended July 2,2023 and July 3,2022(in millions,except per share data,unaudited)Common StockAdditionalPaid-inCapitalRetainedEarnings/(Deficit)AccumulatedOtherComprehensiveIncome/(Loss)ShareholdersEquity/(Deficit)NoncontrollingInterestsTotal SharesAmountBalance,October 2,20221,147.9$1.1$205.3$(8,449.8)$(463.2)$(8,706.6)$7.9$(8,698.7)Net earnings 2,905.2 2,905.2 0.2 2,905.4 Other comprehensive loss (313.6)(313.6)(0.7)(314.3)Stock-based compensation expense 231.3 231.3 231.3 Exercise of stock options/vesting ofRSUs4.0 25.1 25.1 25.1 Sale of common stock0.4 37.3 37.3 37.3 Repurchase of common stock(6.9)(457.7)(242.5)(700.2)(700.2)Cash dividends declared,$1.59 pershare (1,823.4)(1,823.4)(1,823.4)Purchase of noncontrolling interestsand other(3.0)(0.7)(3.7)(0.4)(4.1)Balance,July 2,20231,145.4$1.1$38.3$(7,610.5)$(777.5)$(8,348.6)$7.0$(8,341.6)Balance,October 3,20211,180.0$1.2$846.1$(6,315.7)$147.2$(5,321.2)$6.7$(5,314.5)Net earnings 2,403.3 2,403.3 1.5 2,404.8 Other comprehensive loss (212.2)(212.2)(212.2)Stock-based compensation expense 209.7 209.7 209.7 Exercise of stock options/vesting ofRSUs3.2(0.1)(82.7)(82.8)(82.8)Sale of common stock0.4 34.8 34.8 34.8 Repurchase of common stock(36.3)(890.8)(3,122.2)(4,013.0)(4,013.0)Cash dividends declared,$1.47 pershare (1,685.1)(1,685.1)(1,685.1)Net distributions to noncontrollinginterests (0.6)(0.6)Balance,July 3,20221,147.3$1.1$117.1$(8,719.7)$(65.0)$(8,666.5)$7.6$(8,658.9)See Notes to Consolidated Financial Statements.8Table of ContentsSTARBUCKS CORPORATIONINDEX FOR NOTES TO CONSOLIDATED FINANCIAL STATEMENTSNote 1Summary of Significant Accounting Policies and Estimates10Note 2Acquisitions,Divestitures and Strategic Alliance10Note 3Derivative Financial Instruments11Note 4Fair Value Measurements15Note 5Inventories17Note 6Supplemental Balance Sheet and Statement of Earnings Information17Note 7Other Intangible Assets and Goodwill18Note 8Debt19Note 9Leases21Note 10Deferred Revenue22Note 11Equity23Note 12Employee Stock Plans24Note 13Earnings per Share25Note 14Commitments and Contingencies25Note 15Segment Reporting259Table of ContentsSTARBUCKS CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(unaudited)Note 1:Summary of Significant Accounting Policies and EstimatesFinancial Statement PreparationThe unaudited consolidated financial statements as of July 2,2023,and for the quarters and three quarters ended July 2,2023 and July 3,2022,have beenprepared by Starbucks Corporation under the rules and regulations of the Securities and Exchange Commission(“SEC”).In the opinion of management,thefinancial information for the quarters and three quarters ended July 2,2023 and July 3,2022 reflects all adjustments and accruals,which are of a normalrecurring nature,necessary for a fair presentation of the financial position,results of operations and cash flows for the interim periods.In this Quarterly Reporton Form 10-Q(“10-Q”),Starbucks Corporation is referred to as“Starbucks,”the“Company,”“we,”“us”or“our.”Segment information is prepared on the same basis that our management reviews financial information for operational decision-making purposes.The financial information as of October 2,2022 is derived from our audited consolidated financial statements and notes for the fiscal year ended October 2,2022(“fiscal 2022”)included in Item 8 in the Fiscal 2022 Annual Report on Form 10-K(“10-K”).The information included in this 10-Q should be read inconjunction with the footnotes and managements discussion and analysis of the consolidated financial statements in the 10-K.The results of operations for the quarter and three quarters ended July 2,2023 are not necessarily indicative of the results of operations that may be achievedfor the entire fiscal year ending October 1,2023(“fiscal 2023”).The novel coronavirus,known as the global COVID-19 pandemic,was first identified in December 2019 before spreading to markets where we have company-operated or licensed stores.We have since established the necessary protocols to operate safely,and in many of our markets,our businesses demonstratedpowerful momentum beyond recovery from the COVID-19 pandemic.During the quarter ended July 2,2023,our China market continued its recovery frompandemic-related business interruptions in previous quarters that had suppressed customer mobility.We continue to monitor the COVID-19 pandemic and itseffect on our business and results of operations;however,we cannot predict the duration,scope or severity of the COVID-19 pandemic or its future impact onour business,results of operations,cash flows and financial condition.RestructuringIn fiscal 2022,we announced our plan in the U.S.market to increase efficiency while elevating the partner and customer experience(the“Reinvention Plan”).We believe the company-operated market investments in partner wages and trainings have increased retention and productivity while the acceleration ofpurpose-built store concepts and innovations in technologies will provide additional convenience and connection with our customers.As a result of therestructuring efforts in connection with the Reinvention Plan,we recorded an immaterial charge on our consolidated statements of earnings during the quarterand three quarters ended July 2,2023.Future restructuring and impairment costs attributable to our Reinvention Plan are not expected to be material.As of July 2,2023 and October 2,2022,there were no material restructuring-related accrued liabilities on our consolidated balance sheets.Recently Adopted Accounting PronouncementsIn the first quarter of fiscal 2022,we adopted the Financial Accounting Standards Board(“FASB”)issued guidance related to reference rate reform.Thepronouncement provides temporary optional expedients and exceptions to the current guidance on contract modifications and hedge accounting to ease thefinancial reporting burden related to the expected market transition from the London Interbank Offered Rate(“LIBOR”)and other interbank offered rates toalternative reference rates.The guidance was effective upon issuance and generally can be applied to applicable contract modifications through December 31,2024.The adoption of the new guidance did not have a material impact on our financial statements.Note 2:Acquisitions,Divestitures and Strategic AllianceFiscal 2023On January 13,2023,we sold the assets,primarily consisting of intellectual properties associated with the Seattles Best Coffee brand,to Nestl for$110.0million.The transaction resulted in a pre-tax gain of$91.3 million,which was included in gain from sale of assets on our consolidated statements of earnings.Results from Seattles Best Coffee operations prior to the sale are reported in our Channel Development operating segment.10Table of ContentsFiscal 2022In the fourth quarter of fiscal 2022,we sold our Evolution Fresh brand and business to Bolthouse Farms.This transaction did not have a material impact on ourconsolidated financial statements.Note 3:Derivative Financial InstrumentsInterest RatesFrom time to time,we enter into designated cash flow hedges to manage the variability in cash flows due to changes in benchmark interest rates.We enter intointerest rate swap agreements and treasury locks,which are synthetic forward sales of U.S.Treasury securities settled in cash based upon the differencebetween an agreed-upon treasury rate and the prevailing treasury rate at settlement.These agreements are cash settled at the time of the pricing of the relateddebt.Each derivative agreements gain or loss is recorded in accumulated other comprehensive income(“AOCI”)and is subsequently reclassified to interestexpense over the life of the related debt.To hedge the exposure to changes in the fair value of our fixed-rate debt,we enter into interest rate swap agreements,which are designated as fair value hedges.The changes in fair values of these derivative instruments and the offsetting changes in fair values of the underlying hedged debt due to changes in the relevantbenchmark interest rates are recorded in interest expense.Refer to Note 8,Debt,for additional information on our long-term debt.Foreign CurrencyTo reduce cash flow volatility from foreign currency fluctuations,we enter into forward and swap contracts to hedge portions of cash flows of anticipatedintercompany royalty payments,inventory purchases,and intercompany borrowing and lending activities.The resulting gains and losses from these derivativesare recorded in AOCI and subsequently reclassified to revenue,product and distribution costs,or interest income and other,net,respectively,when the hedgedexposures affect net earnings.From time to time,we may enter into financial instruments,including,but not limited to,forward and swap contracts or foreign currency-denominated debt,tohedge the currency exposure of our net investments in certain international operations.The resulting gains and losses from these derivatives are recorded inAOCI and are subsequently reclassified to net earnings when the hedged net investment is either sold or substantially liquidated.Foreign currency forward and swap contracts not designated as hedging instruments are used to mitigate the foreign exchange risk of certain other balancesheet items.Gains and losses from these derivatives are largely offset by the financial impact of translating foreign currency-denominated payables andreceivables,and these gains and losses are recorded in interest income and other,net.CommoditiesDepending on market conditions,we may enter into coffee forward contracts,futures contracts and collars to hedge anticipated cash flows under our price-to-be-fixed green coffee contracts,which are described further in Note 5,Inventories,or our longer-dated forecasted coffee demand where underlying fixed priceand price-to-be-fixed contracts are not yet available.The resulting gains and losses are recorded in AOCI and are subsequently reclassified to product anddistribution costs when the hedged exposure affects net earnings.Depending on market conditions,we may also enter into dairy forward contracts and futures contracts to hedge a portion of anticipated cash flows under ourdairy purchase contracts and our forecasted dairy demand.The resulting gains or losses are recorded in AOCI and are subsequently reclassified to product anddistribution costs when the hedged exposure affects net earnings.Cash flow hedges related to anticipated transactions are designated and documented at the inception of each hedge.Cash flows from hedging transactions areclassified in the same categories as the cash flows from the respective hedged items.For de-designated cash flow hedges in which the underlying transactionsare no longer probable of occurring,the related accumulated derivative gains or losses are recognized in interest income and other,net on our consolidatedstatements of earnings.These derivatives may be accounted for prospectively as non-designated derivatives until maturity,re-designated to new hedgingrelationships or terminated early.We continue to believe transactions related to our other designated cash flow hedges are probable to occur.To mitigate the price uncertainty of a portion of our future purchases,including diesel fuel and other commodities,we enter into swap contracts,futures andcollars that are not designated as hedging instruments.The resulting gains and losses are recorded in interest income and other,net to help offset pricefluctuations on our beverage,food,packaging and transportation costs,which are included in product and distribution costs on our consolidated statements ofearnings.11Table of ContentsGains and losses on derivative contracts and foreign currency-denominated debt designated as hedging instruments included in AOCI and expected to bereclassified into earnings within 12 months,net of tax(in millions):Net Gains/(Losses)Included in AOCINet Gains/(Losses)Expectedto be Reclassified from AOCIinto Earnings within 12MonthsOutstanding Contract/DebtRemaining Maturity(Months)Jul 2,2023Oct 2,2022Cash Flow Hedges:Coffee$(107.6)$153.9$(95.6)6Cross-currency swaps(1.1)(1.9)17Dairy(5.2)(2.6)(5.2)9Foreign currency-other25.7 55.3 18.2 33Interest rates(5.9)(5.8)(1.7)0Net Investment Hedges:Cross-currency swaps76.5 67.3 105Foreign currency16.0 16.1 0Foreign currency debt126.8 125.7 9Pre-tax gains and losses on derivative contracts and foreign currency-denominated long-term debt designated as hedging instruments recognized in othercomprehensive income(“OCI”)and reclassifications from AOCI to earnings(in millions):Quarter EndedGains/(Losses)Recognized inOCI Before ReclassificationsGains/(Losses)Reclassified fromAOCI to EarningsLocation of gain/(loss)Jul 2,2023Jul 3,2022Jul 2,2023Jul 3,2022Cash Flow Hedges:Coffee$(20.0)$(19.3)$0.3$32.2 Product and distribution costsCross-currency swaps4.2 12.9(3.5)(2.1)Interest expense7.5 16.0 Interest income and other,netDairy(6.1)(1.4)(3.8)4.4 Product and distribution costsForeign currency-other26.5 43.4 6.1 6.6 Licensed stores revenue1.4(0.9)Product and distribution costsInterest rates 18.8 0.8(0.6)Interest expenseNet Investment Hedges:Cross-currency swaps47.6 37.0 7.8 3.8 Interest expenseForeign currency debt53.4 72.2 Three Quarters EndedGains/(Losses)Recognized inOCI Before ReclassificationsGains/(Losses)Reclassified fromAOCI to EarningsLocation of gain/(loss)Jul 2,2023Jul 3,2022Jul 2,2023Jul 3,2022Cash Flow Hedges:Coffee$(139.9)$76.1$156.9$56.6 Product and distribution costsCross-currency swaps(10.0)22.3(9.2)(3.7)Interest expense(1.7)32.3 Interest income and other,netDairy(12.0)6.6(8.6)6.8 Product and distribution costsForeign currency-other(15.7)51.1 18.0 11.0 Licensed stores revenue5.8(2.5)Product and distribution costs0.2 Interest income and other,netInterest rates0.3 54.2 0.5(1.5)Interest expenseNet Investment Hedges:Cross-currency swaps32.5 51.2 20.1 10.7 Interest expenseForeign currency debt1.2 137.6 12Table of ContentsPre-tax gains and losses on non-designated derivatives and designated fair value hedging instruments and the related fair value hedged item recognized inearnings(in millions):Gains/(Losses)Recognized in EarningsLocation of gain/(loss)recognized in earningsQuarter EndedThree Quarters Ended Jul 2,2023Jul 3,2022Jul 2,2023Jul 3,2022Non-Designated Derivatives:DairyInterest income and other,net$(0.1)$0.1$(0.1)$0.2 Foreign currency-otherInterest income and other,net 6.4(10.0)28.2 CoffeeInterest income and other,net(0.2)(5.5)9.1 Diesel fuel and other commoditiesInterest income and other,net(1.0)3.3(2.9)4.0 Fair Value Hedges:Interest rate swapInterest expense(12.2)(11.6)(9.1)(37.7)Long-term debt(hedged item)Interest expense3.4 14.5(12.0)47.5 Notional amounts of outstanding derivative contracts(in millions):Jul 2,2023Oct 2,2022Coffee$373$649 Cross-currency swaps1,092 741 Dairy67 94 Diesel fuel and other commodities24 33 Foreign currency-other1,190 1,269 Interest rate swaps1,100 1,100 Fair value of outstanding derivative contracts(in millions)including the location of the asset and/or liability on the consolidated balance sheets:Derivative AssetsBalance Sheet LocationJul 2,2023Oct 2,2022Designated Derivative Instruments:Cross-currency swapsOther long-term assets$117.3$115.4 DairyPrepaid expenses and other current assets0.1 0.5 Foreign currency-otherPrepaid expenses and other current assets27.3 39.9 Other long-term assets17.4 33.5 Non-designated Derivative Instruments:Diesel fuel and other commoditiesPrepaid expenses and other current assets0.2 0.4 Foreign currencyPrepaid expenses and other current assets6.7 34.3 Other long-term assets 7.3 Derivative LiabilitiesBalance Sheet LocationJul 2,2023Oct 2,2022Designated Derivative Instruments:DairyAccrued liabilities$3.0$2.9 Foreign currency-otherAccrued liabilities5.5 0.3 Other long-term liabilities5.5 Interest rate swapsAccrued liabilities12.9 12.0 Other long-term liabilities37.1 34.0 Non-designated Derivative Instruments:Diesel fuel and other commoditiesAccrued liabilities1.2 Foreign currencyAccrued liabilities2.0 5.8 13Table of ContentsThe following amounts were recorded on the consolidated balance sheets related to fixed-to-floating interest rate swaps designated in fair value hedgingrelationships(in millions):Carrying amount of hedged itemCumulative amount of fair value hedging adjustmentincluded in the carrying amountJul 2,2023Oct 2,2022Jul 2,2023Oct 2,2022Location on the balance sheetLong-term debt$1,059.7$1,047.7$(40.3)$(52.3)Additional disclosures related to cash flow gains and losses included in AOCI,as well as subsequent reclassifications to earnings,are included in Note 11,Equity.14Table of ContentsNote 4:Fair Value MeasurementsAssets and liabilities measured at fair value on a recurring basis(in millions):Fair Value Measurements at Reporting Date Using Balance atJuly 2,2023Quoted Prices in ActiveMarkets for Identical Assets(Level 1)Significant OtherObservable Inputs(Level 2)Significant Unobservable Inputs(Level 3)Assets:Cash and cash equivalents$3,357.0$3,357.0$Short-term investments:Available-for-sale debt securitiesCorporate debt securities68.4 68.4 U.S.government treasury securities6.9 6.9 Foreign government obligations3.9 3.9 Total available-for-sale debt securities79.2 6.9 72.3 Structured deposits111.1 111.1 Marketable equity securities72.7 72.7 Total short-term investments263.0 79.6 183.4 Prepaid expenses and other current assets:Derivative assets34.3 34.3 Long-term investments:Available-for-sale debt securitiesCorporate debt securities86.3 86.3 Mortgage and other asset-backedsecurities47.5 47.5 State and local government obligations1.3 1.3 U.S.government treasury securities103.5 103.5 Total long-term investments238.6 103.5 135.1 Other long-term assets:Derivative assets134.7 134.7 Total assets$4,027.6$3,540.1$487.5$Liabilities:Accrued liabilities:Derivative liabilities$24.6$24.6$Other long-term liabilities:Derivative liabilities42.6 42.6 Total liabilities$67.2$67.2$15Table of Contents Fair Value Measurements at Reporting Date Using Balance atOctober 2,2022Quoted Prices in ActiveMarkets for Identical Assets(Level 1)Significant OtherObservable Inputs(Level 2)SignificantUnobservable Inputs(Level 3)Assets:Cash and cash equivalents$2,818.4$2,797.3$21.1$Short-term investments:Available-for-sale debt securitiesCorporate debt securities22.4 22.4 U.S.government treasury securities9.3 9.3 Total available-for-sale debt securities31.7 9.3 22.4 Structured deposits275.1 275.1 Marketable equity securities57.7 57.7 Total short-term investments364.5 67.0 297.5 Prepaid expenses and other current assets:Derivative assets75.1 75.1 Long-term investments:Available-for-sale debt securitiesCorporate debt securities134.7 134.7 Foreign government obligations3.8 3.8 Mortgage and other asset-backedsecurities56.5 56.5 State and local government obligations1.3 1.3 U.S.government treasury securities82.8 82.8 Total long-term investments279.1 82.8 196.3 Other long-term assets:Derivative assets156.2 156.2 Total assets$3,693.3$2,947.1$746.2$Liabilities:Accrued liabilities:Derivative liabilities$21.0$21.0$Other long-term liabilities:Derivative liabilities34.0 34.0 Total liabilities$55.0$55.0$There were no material transfers between levels and there was no significant activity within Level 3 instruments during the periods presented.The fair valuesof any financial instruments presented above exclude the impact of netting assets and liabilities when a legally enforceable master netting agreement exists.Gross unrealized holding gains and losses on available-for-sale debt securities,structured deposits and marketable equity securities were not material as ofJuly 2,2023 and October 2,2022.Assets and Liabilities Measured at Fair Value on a Nonrecurring BasisAssets and liabilities recognized or disclosed at fair value on the consolidated financial statements on a nonrecurring basis include items such as property,plantand equipment,ROU assets,goodwill and other intangible assets and other assets.These assets are measured at fair value if determined to be impaired.16Table of ContentsThe estimated fair value of our long-term debt based on the quoted market price(Level 2)is included at Note 8,Debt.There were no material fair valueadjustments during the three quarters ended July 2,2023 and July 3,2022.Note 5:Inventories(in millions):Jul 2,2023Oct 2,2022Coffee:Unroasted$926.7$1,018.6 Roasted270.9 310.3 Other merchandise held for sale345.8 430.9 Packaging and other supplies443.6 416.8 Total$1,987.0$2,176.6 Other merchandise held for sale includes,among other items,serveware,food and tea.Inventory levels vary due to seasonality,commodity market supply andprice fluctuations.As of July 2,2023,we had committed to purchasing green coffee totaling$300.5 million under fixed-price contracts and an estimated$786.0 million underprice-to-be-fixed contracts.A portion of our price-to-be-fixed contracts are effectively fixed through the use of futures.See Note 3,Derivative FinancialInstruments,for further discussion.Price-to-be-fixed contracts are purchase commitments whereby the quality,quantity,delivery period and other negotiatedterms are agreed upon,but the date,and therefore the price,at which the base“C”coffee commodity price component will be fixed has not yet beenestablished.For most contracts,either Starbucks or the seller has the option to“fix”the base“C”coffee commodity price prior to the delivery date.For othercontracts,Starbucks and the seller may agree upon pricing parameters determined by the base“C”coffee commodity price.Until prices are fixed,we estimatethe total cost of these purchase commitments.We believe,based on established relationships with our suppliers and continuous monitoring,the risk of non-delivery on these purchase commitments is remote.Note 6:Supplemental Balance Sheet and Statement of Earnings Information(in millions):Property,Plant and Equipment,netJul 2,2023Oct 2,2022Land$46.1$46.1 Buildings622.7 555.4 Leasehold improvements9,731.5 9,066.8 Store equipment3,203.9 3,018.2 Roasting equipment829.1 838.5 Furniture,fixtures and other1,578.0 1,526.1 Work in progress729.9 558.7 Property,plant and equipment,gross16,741.2 15,609.8 Accumulated depreciation(9,687.7)(9,049.3)Property,plant and equipment,net$7,053.5$6,560.5 Accrued LiabilitiesJul 2,2023Oct 2,2022Accrued occupancy costs$82.3$84.6 Accrued dividends payable607.0 608.3 Accrued capital and other operating expenditures737.2 878.1 Self-insurance reserves255.1 232.3 Income taxes payable184.2 139.2 Accrued business taxes194.7 194.6 Total accrued liabilities$2,060.5$2,137.1 17Table of ContentsStore Operating ExpensesQuarter EndedThree Quarters EndedJul 2,2023Jul 3,2022Jul 2,2023Jul 3,2022Wages and benefits$2,185.7$1,983.0$6,575.6$6,012.0 Occupancy costs727.4 652.9 2,102.2 1,983.1 Other expenses784.5 666.6 2,321.1 2,022.0 Total store operating expenses$3,697.6$3,302.5$10,998.9$10,017.1 Note 7:Other Intangible Assets and GoodwillIndefinite-Lived Intangible Assets(in millions)Jul 2,2023Oct 2,2022Trade names,trademarks and patents$79.1$97.5 Finite-Lived Intangible AssetsJul 2,2023Oct 2,2022(in millions)Gross CarryingAmountAccumulatedAmortizationNet CarryingAmountGross CarryingAmountAccumulatedAmortizationNet CarryingAmountAcquired and reacquired rights$966.5$(966.5)$990.0$(990.0)$Acquired trade secrets and processes27.6(27.6)27.6(27.3)0.3 Trade names,trademarks and patents130.2(87.2)43.0 124.6(69.6)55.0 Licensing agreements16.9(14.6)2.3 19.3(16.2)3.1 Other finite-lived intangible assets20.3(20.3)20.6(20.6)Total finite-lived intangible assets$1,161.5$(1,116.2)$45.3$1,182.1$(1,123.7)$58.4 Amortization expense for finite-lived intangible assets was$5.4 million and$16.4 million for the quarter and three quarters ended July 2,2023,respectively,and$47.6 million and$147.0 million for the quarter and three quarters ended July 3,2022,respectively.Estimated future amortization expense as of July 2,2023(in millions):Fiscal YearTotal2023(excluding the three quarters ended July 2,2023)$5.0 202419.7 202514.0 20262.0 20271.7 Thereafter2.9 Total estimated future amortization expense$45.3 GoodwillChanges in the carrying amount of goodwill by reportable operating segment(in millions):North AmericaInternationalChannel DevelopmentCorporate and OtherTotalGoodwill balance at October 2,2022$491.1$2,756.7$34.7$1.0$3,283.5 Other0.9(33.5)(32.6)Goodwill balance at July 2,2023$492.0$2,723.2$34.7$1.0$3,250.9“Other”consists of changes in the goodwill balance resulting from foreign currency translation.(1)(1)18Table of ContentsNote 8:DebtRevolving Credit FacilityOur$3.0 billion unsecured five-year revolving credit facility(the“2021 credit facility”),of which$150.0 million may be used for issuances of letters of credit,is currently set to mature on September 16,2026.The 2021 credit facility is available for working capital,capital expenditures and other corporate purposes,including acquisitions and share repurchases.We have the option,subject to negotiation and agreement with the related banks,to increase the maximumcommitment amount by an additional$1.0 billion.Borrowings under the 2021 credit facility,which was most recently amended in April 2023,will bear interest at a variable rate based on Term SOFR,and,forU.S.dollar-denominated loans under certain circumstances,a Base Rate(as defined in the 2021 credit facility),in each case plus an applicable margin.Theapplicable margin is based on the Companys long-term credit ratings assigned by the Moodys and Standard&Poors rating agencies.The“Base Rate”is thehighest of(i)the Federal Funds Rate(as defined in the 2021 credit facility)plus 0.500%,(ii)Bank of Americas prime rate,and(iii)Term SOFR plus 1.000%.Term SOFR means the forward-looking SOFR term rate administrated by the Chicago Mercantile Exchange plus a SOFR Adjustment of 0.100%.The 2021 credit facility contains provisions requiring us to maintain compliance with certain covenants,including a minimum fixed charge coverage ratio,which measures our ability to cover financing expenses.As of July 2,2023,we were in compliance with all applicable covenants.No amounts wereoutstanding under our 2021 credit facility as of July 2,2023 or October 2,2022.Short-term DebtUnder our commercial paper program,we may issue unsecured commercial paper notes up to a maximum aggregate amount outstanding at any time of$3.0billion,with individual maturities that may vary but not exceed 397 days from the date of issue.Amounts outstanding under the commercial paper program arerequired to be backstopped by available commitments under our 2021 credit facility.The proceeds from borrowings under our commercial paper program maybe used for working capital needs,capital expenditures and other corporate purposes,including,but not limited to,business expansion,payment of cashdividends on our common stock and share repurchases.As of July 2,2023,we had no borrowings outstanding under the program.As of October 2,2022,wehad$175.0 million in borrowings outstanding under this program.Additionally,we hold the following Japanese yen-denominated credit facilities that are available for working capital needs and capital expenditures within ourJapanese market:A 5 billion,or$34.5 million,credit facility is currently set to mature on January 4,2024.Borrowings under this credit facility are subject to termsdefined within the facility and will bear interest at a variable rate based on Tokyo Interbank Offered Rate(TIBOR)plus an applicable margin of0.400%.A 10 billion,or$69.1 million,credit facility is currently set to mature on March 27,2024.Borrowings under this credit facility are subject to termsdefined within the facility and will bear interest at a variable rate based on TIBOR plus an applicable margin of 0.300%.As of July 2,2023,we had 5 billion,or$34.5 million,of borrowings outstanding under these credit facilities.As of October 2,2022,we had no borrowingsoutstanding under these credit facilities.19Table of ContentsLong-term DebtComponents of long-term debt including the associated interest rates and related estimated fair values by calendar maturity(in millions,except interest rates):Jul 2,2023Oct 2,2022Stated Interest RateEffective InterestRateIssuanceAmountEstimated FairValueAmountEstimated FairValueMarch 2023 notes$1,000.0$996.5 3.100%3.107%October 2023 notes750.0 747.1 750.0 744.8 3.850%2.859bruary 2024 notes500.0 500.4 500.0 497.3 5.600%5.830%March 2024 notes587.2 586.9 588.4 584.7 0.372%0.462%August 2025 notes1,250.0 1,209.1 1,250.0 1,209.6 3.800%3.721bruary 2026 notes1,000.0 990.0 4.750%4.788%June 2026 notes500.0 464.6 500.0 458.3 2.450%2.511%March 2027 notes500.0 449.5 500.0 437.9 2.000%2.058%March 2028 notes600.0 563.2 600.0 554.8 3.500%3.529%November 2028 notes750.0 719.0 750.0 704.7 4.000%3.958%August 2029 notes1,000.0 931.1 1,000.0 900.3 3.550%3.840%March 2030 notes750.0 634.4 750.0 607.7 2.250%3.084%November 2030 notes1,250.0 1,061.2 1,250.0 1,017.9 2.550%2.582bruary 2032 notes1,000.0 864.9 1,000.0 827.1 3.000%3.155bruary 2033 notes500.0 493.1 4.800%3.798%June 2045 notes350.0 304.5 350.0 281.5 4.300%4.348cember 2047 notes500.0 393.5 500.0 369.6 3.750%3.765%November 2048 notes1,000.0 890.3 1,000.0 824.6 4.500%4.504%August 2049 notes1,000.0 881.3 1,000.0 817.8 4.450%4.447%March 2050 notes500.0 367.5 500.0 342.0 3.350%3.362%November 2050 notes1,250.0 945.2 1,250.0 874.9 3.500%3.528%Total15,537.2 13,996.8 15,038.4 13,052.0 Aggregate debt issuance costs andunamortized premium/(discount),net(116.6)(117.2)Hedge accounting fair value adjustment(40.3)(52.3)Total$15,380.3$14,868.9 Includes the effects of the amortization of any premium or discount and any gain or loss upon settlement of related treasury locks or forward-startinginterest rate swaps utilized to hedge interest rate risk prior to the debt issuance.Amount includes the change in fair value due to changes in benchmark interest rates related to hedging our October 2023 notes and$350 million of ourAugust 2029 notes.Refer to Note 3,Derivative Financial Instruments,for additional information on our interest rate swaps designated as fair value hedges.Floating rate notes which bear interest at a rate equal to Compounded SOFR(as defined in the February 2024 notes)plus 0.420%,resulting in a statedinterest rate of 5.600%at July 2,2023.Japanese yen-denominated long-term debt.(1)(2)(3)(4)(2)(2)(1)(2)(3)(4)20Table of ContentsThe following table summarizes our long-term debt maturities as of July 2,2023 by fiscal year(in millions):Fiscal YearTotal2023$750.0 20241,087.2 20251,250.0 20261,500.0 2027500.0 Thereafter10,450.0 Total$15,537.2 Note 9:LeasesThe components of lease costs(in millions):Quarter EndedThree Quarters EndedJul 2,2023Jul 3,2022Jul 2,2023Jul 3,2022Operating lease costs$401.6$386.5$1,188.2$1,166.0 Variable lease costs264.1 221.5 753.3 687.1 Short-term lease costs7.0 6.9 20.9 21.1 Total lease costs$672.7$614.9$1,962.4$1,874.2 Includes immaterial amounts of sublease income and rent concessions.The following table includes supplemental information(in millions):Three Quarters EndedJul 2,2023Jul 3,2022Cash paid related to operating lease liabilities$1,234.8$1,248.7 Operating lease liabilities arising from obtaining ROU assets1,245.5 1,121.6 Jul 2,2023Jul 3,2022Weighted-average remaining operating lease term8.5 years8.5 yearsWeighted-average operating lease discount rate3.0%2.5%Finance lease assets are recorded in property,plant and equipment,net with the corresponding lease liabilities included in accrued liabilities and other long-term liabilities on the consolidated balance sheet.There were no material finance leases as of July 2,2023 and October 2,2022.Minimum future maturities of operating lease liabilities(in millions):Fiscal YearTotal2023(excluding the three quarters ended July 2,2023)$384.8 20241,527.5 20251,458.8 20261,313.8 20271,128.2 Thereafter4,428.2 Total lease payments10,241.3 Less imputed interest(1,284.9)Total$8,956.4 As of July 2,2023,we have entered into operating leases that have not yet commenced of$1.4 billion,primarily related to real estate leases.These leases willcommence between fiscal year 2023 and fiscal year 2026 with lease terms ranging from two to twenty years.(1)(1)21Table of ContentsNote 10:Deferred RevenueOur deferred revenue primarily consists of the prepaid royalty from Nestl,for which we have continuing performance obligations to support the Global CoffeeAlliance,our unredeemed stored value card liability and unredeemed loyalty points(“Stars”)associated with our loyalty program.As of July 2,2023,the current and long-term deferred revenue related to Nestl was$177.0 million and$6.0 billion,respectively.As of October 2,2022,thecurrent and long-term deferred revenue related to the Nestl up-front payment was$177.0 million and$6.2 billion,respectively.During the quarter and threequarters ended July 2,2023,we recognized$44.1 million and$132.3 million of prepaid royalty revenue related to Nestl.During the quarter and three quartersended July 3,2022,we recognized$44.1 million and$132.5 million of prepaid royalty revenue related to Nestl.Changes in our deferred revenue balance related to our stored value cards and loyalty program(in millions):Quarter Ended July 2,2023TotalStored value cards and loyalty program at April 2,2023$1,664.5 Revenue deferred-card activations,card reloads and Stars earned3,641.3 Revenue recognized-card and Stars redemptions and breakage(3,662.9)Other(14.7)Stored value cards and loyalty program at July 2,2023$1,628.2 Quarter Ended July 3,2022TotalStored value cards and loyalty program at April 3,2022$1,645.2 Revenue deferred-card activations,card reloads and Stars earned3,282.6 Revenue recognized-card and Stars redemptions and breakage(3,312.3)Other(21.7)Stored value cards and loyalty program at July 3,2022$1,593.8 Three Quarters Ended July 2,2023TotalStored value cards and loyalty program at October 2,2022$1,503.0 Revenue deferred-card activations,card reloads and Stars earned11,280.7 Revenue recognized-card and Stars redemptions and breakage(11,155.4)Other(0.1)Stored value cards and loyalty program at July 2,2023$1,628.2 Three Quarters Ended July 3,2022TotalStored value cards and loyalty program at October 3,2021$1,448.5 Revenue deferred-card activations,card reloads and Stars earned10,324.1 Revenue recognized-card and Stars redemptions and breakage(10,149.4)Other(29.4)Stored value cards and loyalty program at July 3,2022$1,593.8“Other”primarily consists of changes in the stored value cards and loyalty program balances resulting from foreign currency translation.As of July 2,2023 and July 3,2022,approximately$1.5 billion and$1.5 billion of these amounts were current,respectively.(1)(2)(1)(2)(1)(2)(1)(2)(1)(2)22Table of ContentsNote 11:EquityChanges in AOCI by component,net of tax(in millions):Quarter Ended Available-for-SaleDebt Securities Cash FlowHedges Net InvestmentHedgesTranslationAdjustment andOtherTotalJuly 2,2023Net gains/(losses)in AOCI,beginning of period$(10.9)$(88.1)$149.6$(572.2)$(521.6)Net gains/(losses)recognized in OCI before reclassifications(1.7)0.8 75.5(317.4)(242.8)Net(gains)/losses reclassified from AOCI to earnings0.2(6.8)(5.8)(12.4)Other comprehensive income/(loss)attributable to Starbucks(1.5)(6.0)69.7(317.4)(255.2)Other comprehensive income/(loss)attributable to NCI (0.7)(0.7)Net gains/(losses)in AOCI,end of period$(12.4)$(94.1)$219.3$(890.3)$(777.5)July 3,2022Net gains/(losses)in AOCI,beginning of period$(9.0)$251.7$103.0$(85.4)$260.3 Net gains/(losses)recognized in OCI before reclassifications(1.6)41.0 81.6(396.9)(275.9)Net(gains)/losses reclassified from AOCI to earnings0.1(46.7)(2.8)(49.4)Other comprehensive income/(loss)attributable to Starbucks(1.5)(5.7)78.8(396.9)(325.3)Net gains/(losses)in AOCI,end of period$(10.5)$246.0$181.8$(482.3)$(65.0)Three Quarters EndedAvailable-for-SaleDebt SecuritiesCash FlowHedgesNet InvestmentHedgesTranslationAdjustment andOtherTotalJuly 2,2023Net gains/(losses)in AOCI,beginning of period$(15.5)$199.0$209.1$(855.8)$(463.2)Net gains/(losses)recognized in OCI before reclassifications2.6(151.5)25.2(33.8)(157.5)Net(gains)/losses reclassified from AOCI to earnings0.5(141.6)(15.0)(156.1)Other comprehensive income/(loss)attributable to Starbucks3.1(293.1)10.2(33.8)(313.6)Other comprehensive income/(loss)attributable to NCI (0.7)(0.7)Net gains/(losses)in AOCI,end of period$(12.4)$(94.1)$219.3$(890.3)$(777.5)July 3,2022Net gains/(losses)in AOCI,beginning of period$1.5$158.3$48.6$(61.2)$147.2 Net gains/(losses)recognized in OCI before reclassifications(12.1)170.8 141.1(421.2)(121.4)Net(gains)/losses reclassified from AOCI to earnings0.1(83.1)(7.9)0.1(90.8)Other comprehensive income/(loss)attributable to Starbucks(12.0)87.7 133.2(421.1)(212.2)Net gains/(losses)in AOCI,end of period$(10.5)$246.0$181.8$(482.3)$(65.0)23Table of ContentsImpact of reclassifications from AOCI on the consolidated statements of earnings(in millions):Quarter EndedAOCIComponentsAmounts Reclassified from AOCIAffected Line Item inthe Statements of EarningsJul 2,2023Jul 3,2022Gains/(losses)on available-for-sale debt securities$(0.1)$(0.2)Interest income and other,netGains/(losses)on cash flow hedges8.8 55.6 Please refer to Note 3,Derivative Financial Instrumentsfor additional information.Gains/(losses)on net investment hedges7.8 3.8 Interest expense16.5 59.2 Total before tax(4.1)(9.8)Tax expense$12.4$49.4 Net of taxThree Quarters EndedAOCIComponentsAmounts Reclassified from AOCIAffected Line Item inthe Statements of EarningsJul 2,2023Jul 3,2022Gains/(losses)on available-for-sale debt securities$(0.5)$(0.2)Interest income and other,netGains/(losses)on cash flow hedges161.9 99.0 Please refer to Note 3,Derivative Financial Instrumentsfor additional information.Gains/(losses)on net investment hedges20.1 10.7 Interest expense181.5 109.5 Total before tax(25.4)(18.7)Tax expense$156.1$90.8 Net of taxIn addition to 2.4 billion shares of authorized common stock with$0.001 par value per share,the Company has authorized 7.5 million shares of preferred stock,none of which was outstanding as of July 2,2023.During the three quarters ended July 2,2023 and July 3,2022,we repurchased 6.9 million and 36.3 million shares of common stock for$699.3 million and$4.0 billion,respectively.As of July 2,2023,45.7 million shares remained available for repurchase under current authorizations.During the third quarter of fiscal 2023,our Board of Directors approved a quarterly cash dividend to shareholders of$0.53 per share to be paid on August 25,2023 to shareholders of record as of the close of business on August 11,2023.Note 12:Employee Stock PlansAs of July 2,2023,there were 92.5 million shares of common stock available for issuance pursuant to future equity-based compensation awards and 10.4million shares available for issuance under our employee stock purchase plan.Stock-based compensation expense recognized in the consolidated statements of earnings(in millions):Quarter EndedThree Quarters Ended Jul 2,2023Jul 3,2022Jul 2,2023Jul 3,2022Restricted Stock Units(“RSUs”)$69.1$57.4$228.3$207.2 Options0.1(0.1)0.2(0.6)Total stock-based compensation expense$69.2$57.3$228.5$206.6 Stock option and RSU transactions from October 2,2022 through July 2,2023(in millions):Stock OptionsRSUsOptions outstanding/Nonvested RSUs,October 2,20224.1 7.0 Granted 4.3 Options exercised/RSUs vested(2.0)(2.9)Forfeited/expired0.0(0.9)Options outstanding/Nonvested RSUs,July 2,20232.1 7.5 Total unrecognized stock-based compensation expense,net of estimated forfeitures,as of July 2,2023$223.9 24Table of ContentsNote 13:Earnings per ShareCalculation of net earnings per common share(“EPS”)basic and diluted(in millions,except EPS):Quarter EndedThree Quarters EndedJul 2,2023Jul 3,2022Jul 2,2023Jul 3,2022Net earnings attributable to Starbucks$1,141.7$912.9$2,905.2$2,403.3 Weighted average common shares outstanding(for basiccalculation)1,145.9 1,147.0 1,147.6 1,155.3 Dilutive effect of outstanding common stock options andRSUs4.6 4.0 4.4 5.2 Weighted average common and common equivalent sharesoutstanding(for diluted calculation)1,150.5 1,151.0 1,152.0 1,160.5 EPS basic$1.00$0.80$2.53$2.08 EPS diluted$0.99$0.79$2.52$2.07 Potential dilutive shares consist of the incremental common shares issuable upon the exercise of outstanding stock options(both vested and non-vested)andunvested RSUs,calculated using the treasury stock method.The calculation of dilutive shares outstanding excludes anti-dilutive stock options or unvestedRSUs,which were immaterial in the periods presented.Note 14:Commitments and ContingenciesLegal ProceedingsStarbucks is involved in various legal proceedings arising in the ordinary course of business,including certain employment litigation cases that have beencertified as class or collective actions,but is not currently a party to any legal proceeding that management believes could have a material adverse effect on ourconsolidated financial position,results of operations or cash flows.Note 15:Segment ReportingSegment information is prepared on the same basis that our chief executive officer,who is our chief operating decision maker,manages the segments,evaluatesfinancial results and makes key operating decisions.Consolidated revenue mix by product type(in millions):Quarter EndedThree Quarters EndedJul 2,2023Jul 3,2022Jul 2,2023Jul 3,2022Beverage$5,587.9 61%$4,944.6 61%$15,988.9 60%$14,442.9 61%Food1,704.5 19%1,472.0 18%4,861.0 18%4,271.5 18%Other1,875.9 20%1,733.5 21%5,752.1 22%5,121.7 21%Total$9,168.3 100%$8,150.1 100%$26,602.0 100%$23,836.1 100verage represents sales within our company-operated stores.Food includes sales within our company-operated stores.Other primarily consists of packaged and single-serve coffees and teas,royalty and licensing revenues,beverage-related ingredients and serveware,amongother items.(1)(2)(3)(1)(2)(3)25Table of ContentsThe tables below present financial information for our reportable operating segments and Corporate and Other segment(in millions):Quarter EndedNorth AmericaInternationalChannelDevelopmentCorporate and OtherTotalJuly 2,2023Total net revenues$6,737.8$1,972.9$448.8$8.8$9,168.3 Depreciation and amortization expenses230.4 83.1 0.0 28.7 342.2 Income from equity investees 0.8 68.9 69.7 Operating income/(loss)1,463.9 374.5 208.0(462.5)1,583.9 July 3,2022Total net revenues$6,058.4$1,584.7$479.7$27.3$8,150.1 Depreciation and amortization expenses201.2 125.0 0.0 30.6 356.8 Income from equity investees 0.4 53.7 54.1 Operating income/(loss)1,330.1 135.3 191.7(361.6)1,295.5 Three Quarters EndedNorth AmericaInternationalChannelDevelopmentCorporate and OtherTotalJuly 2,2023Total net revenues$19,669.7$5,507.8$1,407.7$16.8$26,602.0 Depreciation and amortization expenses673.5 250.8 0.1 86.8 1,011.2 Income from equity investees 2.0 177.0 179.0 Operating income/(loss)3,894.3 929.6 696.4(1,355.7)4,164.6 July 3,2022Total net revenues$17,236.4$5,163.1$1,359.9$76.7$23,836.1 Depreciation and amortization expenses603.2 391.4 0.1 95.8 1,090.5 Income from equity investees 1.6 141.9 143.5 Operating income/(loss)3,344.8 615.7 572.7(1,110.9)3,422.3 26Table of ContentsItem 2.Managements Discussion and Analysis of Financial Condition and Results of OperationsCAUTIONARY STATEMENT PURSUANT TO THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995Certain statements contained herein are“forward-looking”statements within the meaning of applicable securities laws and regulations.Generally,thesestatements can be identified by the use of words such as“aim,”“anticipate,”“believe,”“continue,”“could,”“estimate,”“expect,”“feel,”“forecast,”“intend,”“may,”“outlook,”“plan,”“potential,”“predict,”“project,”“seek,”“should,”“will,”“would,”and similar expressions intended to identifyforward-looking statements,although not all forward-looking statements contain these identifying words.By their nature,forward-looking statements involverisks,uncertainties,and other factors(many beyond our control)that could cause our actual results to differ materially from our historical experience or fromour current expectations or projections.Our forward-looking statements,and the risks and uncertainties related thereto,include,but are not limited to,thosedescribed under the“Risk Factors”and“Managements Discussion and Analysis of Financial Condition and Results of Operations”sections of the companysmost recently filed periodic reports on Form 10-K and Form 10-Q and subsequent filings with the SEC,as well as:our ability to preserve,grow and leverage our brands;the acceptance of the companys products and changes in consumer preferences,consumption,or spending behavior and our ability to anticipate orreact to them;shifts in demographic or health and wellness trends;or unfavorable consumer reaction to new products,platforms,reformulations,orother innovations;the costs associated with,and the successful execution and effects of,our existing and any future business opportunities,expansions,initiatives,strategies,investments and plans,including our Reinvention Plan;the impacts of partner investments and changes in the availability and cost of labor including any union organizing efforts and our responses to suchefforts;the ability of our business partners,suppliers and third-party providers to fulfill their responsibilities and commitments;higher costs,lower quality,or unavailability of coffee,dairy,energy,water,raw materials,or product ingredients;the impact of significant increases in logistics costs;unfavorable global or regional economic conditions and related economic slowdowns or recessions,low consumer confidence,high unemployment,weak credit or capital markets,budget deficits,burdensome government debt,austerity measures,higher interest rates,higher taxes,politicalinstability,higher inflation,or deflation;inherent risks of operating a global business including geopolitical considerations related to our business in China and any potential negative effectsstemming from the Russian invasion of Ukraine;failure to attract or retain key executive or partner talent or successfully transition executives;the potential negative effects of incidents involving food or beverage-borne illnesses,tampering,adulteration,contamination or mislabeling;negative publicity related to our company,products,brands,marketing,executive leadership,partners,board of directors,founder,operations,business performance,or prospects;potential negative effects of a material breach,failure,or corruption of our information technology systems or those of our direct and indirectbusiness partners,suppliers or third-party providers,or failure to comply with personal data protection laws;our environmental,social and governance(“ESG”)efforts and any reaction related thereto such as the rise in opposition to ESG and inclusion anddiversity efforts;risks associated with acquisitions,dispositions,business partnerships,or investments such as acquisition integration,termination difficulties orcosts or impairment in recorded value;the impact of foreign currency translation,particularly a stronger U.S.dollar;the impact of substantial competition from new entrants,consolidations by competitors,and other competitive activities,such as pricing actions(including price reductions,promotions,discounting,couponing,or free goods),marketing,category expansion,product introductions,or entry orexpansion in our geographic markets;the impact of changes in U.S.tax law and related guidance and regulations that may be implemented,including on tax rates and the InflationReduction Act of 2022;the impact of health epidemics,pandemics or other public health events on our business and financial results,and the risk of negative economicimpacts and related regulatory measures or voluntary actions that may be put in place,including restrictions on business operations or socialdistancing requirements,and the duration and efficacy of such restrictions;failure to comply with anti-corruption laws,trade sanctions and restrictions or similar laws or regulations;andthe impact of significant legal disputes and proceedings,or government investigations.A forward-looking statement is neither a prediction nor a guarantee of future events or circumstances,and those future events or circumstances may not occur.You should not place undue reliance on the forward-looking statements,which speak only as of the date of this report.We are under no obligation to update oralter any forward-looking statements,whether as a result of new information,future events or otherwise.This information should be read in conjunction with the consolidated financial statements and the notes included in Item 1 of Part I of this 10-Q and the auditedconsolidated financial statements and notes,and Managements Discussion and Analysis of Financial Condition and Results of Operations(“MD&A”),contained in the 10-K filed with the SEC on November 18,2022.27Table of ContentsIntroduction and OverviewStarbucks is the premier roaster,marketer and retailer of specialty coffee in the world,operating in 86 markets.As of July 2,2023,Starbucks had more than37,200 company-operated and licensed stores,an increase of 7%from the prior year.Additionally,we sell a variety of consumer-packaged goods,primarilythrough the Global Coffee Alliance established with Nestl and other partnerships and joint ventures.We have three reportable operating segments:1)North America,which is inclusive of the U.S.and Canada,2)International,which is inclusive of China,Japan,Asia Pacific,Europe,Middle East,Africa,Latin America and the Caribbean;and 3)Channel Development.Non-reportable operating segments and unallocatedcorporate expenses are reported within Corporate and Other.We believe our financial results and long-term growth model will continue to be driven by new store openings,comparable store sales growth and operatingmargin management,underpinned by disciplined capital allocation.We believe these key operating metrics are useful to investors because management usesthese metrics to assess the growth of our business and the effectiveness of our marketing and operational strategies.Throughout this MD&A,we commonlydiscuss the following key operating metrics:New store openings and store countComparable store sales growthOperating marginComparable store sales growth represents the percentage change in sales in one period from the same prior year period for company-operated stores open for13 months or longer and exclude the impact of foreign currency translation.We analyze comparable store sales growth on a constant currency basis as thishelps identify underlying business trends,without distortion from the effects of currency movements.Stores that are temporarily closed or operating at reducedhours due to the COVID-19 pandemic remain in comparable store sales while stores identified for permanent closure have been removed.Our fiscal year ends on the Sunday closest to September 30.Fiscal 2023 and 2022 include 52 weeks.All references to store counts,including data for new storeopenings,are reported net of store closures,unless otherwise noted.Starbucks results for the third quarter of fiscal 2023 demonstrate the overall strength of our brand.Consolidated net revenues increased 12%to$9.2 billion inthe third quarter of fiscal 2023 compared to$8.2 billion in the third quarter of fiscal 2022,primarily driven by strength in our U.S.business and internationallicensed markets as well as continued recovery from COVID-19 pandemic-related business interruptions in China.During the quarter ended July 2,2023,ourglobal comparable store sales grew 10%,primarily driven by 7%growth in the U.S.market and 24%growth internationally,demonstrating the strength of theStarbucks brand globally.Consolidated operating margin increased 140 basis points from the prior year to 17.3%,primarily driven by sales leverage,pricingand productivity improvement from increased efficiency in our U.S.stores.These were partially offset by previously-committed investments in labor,includingenhancements in retail store partner wages and benefits as well as increased general and administrative costs related to our Reinvention Plan.Results of Operations(in millions)Revenues Quarter EndedThree Quarters EndedJul 2,2023Jul 3,2022$Change%ChangeJul 2,2023Jul 3,2022$Change%ChangeCompany-operated stores$7,556.7$6,675.5$881.2 13.2%$21,782.4$19,674.7$2,107.7 10.7%Licensed stores1,136.2 956.8 179.4 18.8 3,325.2 2,657.0 668.2 25.1 Other475.4 517.8(42.4)(8.2)1,494.4 1,504.4(10.0)(0.7)Total net revenues$9,168.3$8,150.1$1,018.2 12.5%$26,602.0$23,836.1$2,765.9 11.6%For the quarter ended July 2,2023 compared with the quarter ended July 3,2022Total net revenues for the third quarter of fiscal 2023 increased$1.0 billion,primarily due to higher revenues from company-operated stores($881 million).The growth of company-operated stores revenue was driven by a 10%increase in comparable store sales($632 million),attributable to a 5%increase incomparable transactions and a 4%increase in average ticket.Also contributing was incremental revenues from 1,265 net new Starbucks company-operatedstores,or a 7%increase,over the past 12 months($336 million).Partially offsetting these increases was unfavorable foreign currency translation($96 million).Licensed stores revenue increased$179 million contributing to the increase in total net revenues,driven by higher product and equipment sales to and royaltyrevenues from our licensees($185 million).Other revenues decreased$42 million,primarily due to a decline in revenue in the Global Coffee Alliance($31 million)and the absence of revenues from theEvolution Fresh business following its sale in the fourth quarter of fiscal 2022($18 million).28Table of ContentsFor the three quarters ended July 2,2023 compared with the three quarters ended July 3,2022Total net revenues for the first three quarters of fiscal 2023 increased$2.8 billion,primarily due to higher revenues from company-operated stores($2.1billion).The growth of company-operated stores revenue was driven by a 9%increase in comparable store sales($1.6 billion)attributed to a 5%increase inaverage ticket and a 3%increase in transactions.Also contributing to the increase were incremental revenues from 1,265 net new Starbuckscompany-operatedstores,or a 7%increase,over the past 12 months($907 million).Partially offsetting these increases was unfavorable foreign currency translation($484million).Licensed stores revenue increased$668 million contributing to the increase in total net revenues,driven by higher product and equipment sales to and royaltyrevenues from our licensees($716 million).Partially offsetting this increase was unfavorable foreign currency translation($66 million).Other revenues decreased$10 million,primarily due to the absence of revenues from the Evolution Fresh business following its sale in the fourth quarter offiscal 2022($55 million),partially offset by an increase in revenue in the Global Coffee Alliance($32 million).Operating Expenses Quarter EndedThree Quarters EndedJul 2,2023Jul 3,2022$ChangeJul 2,2023Jul 3,2022Jul 2,2023Jul 3,2022$ChangeJul 2,2023Jul 3,2022As a%ofTotal Net RevenuesAs a%ofTotal Net RevenuesProduct and distributioncosts$2,864.2$2,613.6$250.6 31.22.1%$8,476.1$7,606.4$869.7 31.91.9%Store operating expenses3,697.6 3,302.5 395.1 40.3 40.5 10,998.9 10,017.1 981.8 41.3 42.0 Other operating expenses138.7 135.1 3.6 1.5 1.7 394.1 338.4 55.7 1.5 1.4 Depreciation andamortization expenses342.2 356.8(14.6)3.7 4.4 1,011.2 1,090.5(79.3)3.8 4.6 General andadministrative expenses604.3 486.7 117.6 6.6 6.0 1,805.6 1,494.0 311.6 6.8 6.3 Restructuring andimpairments7.1 14.0(6.9)0.1 0.2 21.8 10.9 10.9 0.1 0.0 Total operating expenses7,654.1 6,908.7 745.4 83.5 84.8 22,707.7 20,557.3 2,150.4 85.4 86.2 Income from equityinvestees69.7 54.1 15.6 0.8 0.7 179.0 143.5 35.5 0.7 0.6 Gain from sale of assets 91.3 91.3 0.3 Operating income$1,583.9$1,295.5$288.4 17.3.9%$4,164.6$3,422.3$742.3 15.7.4%Store operating expenses as a%of company-operated stores revenue48.9I.5P.5P.9%For the quarter ended July 2,2023 compared with the quarter ended July 3,2022Product and distribution costs as a percentage of total net revenues decreased 90 basis points for the third quarter of fiscal 2023,primarily due to pricing.Store operating expenses as a percentage of total net revenues decreased 20 basis points for the third quarter of fiscal 2023.Store operating expenses as apercentage of company-operated stores revenue decreased 60 basis points,primarily due to sales leverage(approximately 250 basis points)and productivityimprovement(approximately 190 basis points).These were partially offset by previously-committed investments in labor,including enhancements in retailstore partner wages and benefits(approximately 340 basis points)and increased spend on partner training(approximately 50 basis points).Depreciation and amortization expenses as a percentage of total net revenues decreased 70 basis points,primarily due to lapping amortization expenses ofacquisition-related intangibles assets that are now fully amortized.General and administrative expenses increased$118 million,primarily due to incremental investments in technology($38 million),increased support costs ofstrategic initiatives including the Reinvention Plan($27 million),higher performance-based compensation($20 million)and a donation to the StarbucksFoundation($15 million).29Table of ContentsIncome from equity investees increased$16 million,primarily due to higher income from our North American Coffee Partnership joint venture.The combination of these changes resulted in an overall increase in operating margin of 140 basis points for the third quarter of fiscal 2023.For the three quarters ended July 2,2023 compared with the three quarters ended July 3,2022Store operating expenses as a percentage of total net revenues decreased 70 basis points for the first three quarters of fiscal 2023.Store operating expenses as apercentage of company-operated stores revenue decreased 40 basis points,primarily due to pricing(approximately 180 basis points),sales leverage(approximately 160 basis points)and productivity improvement(approximately 130 basis points).These were partially offset by previously-committedinvestments in labor,including enhancements in retail store partner wages and benefits(approximately 340 basis points)and increased spend on partnertraining(approximately 50 basis points).Other operating expenses increased$56 million for the first three quarters of fiscal 2023,primarily due to higher strategic investments in technology and otherinitiatives($21 million)and support costs for our growing licensed markets($21 million).Depreciation and amortization expenses as a percentage of total net revenues decreased 80 basis points,primarily due to lapping amortization expenses ofacquisition-related intangibles assets that are now fully amortized.General and administrative expenses increased$312 million,primarily due to incremental investments in technology($103 million),increased support costs ofstrategic initiatives including the Reinvention Plan($57 million),higher performance-based compensation($45 million),donations to the StarbucksFoundation($30 million)and other labor and leadership support costs($26 million).Income from equity investees increased$36 million,primarily due to higher income from our North American Coffee Partnership joint venture.Gain from sale of assets includes the sale of our Seattles Best Coffee brand to Nestl in the second quarter of fiscal 2023.The combination of these changes resulted in an overall increase in operating margin of 130 basis points for the first three quarters of fiscal 2023.30Table of ContentsOther Income and Expenses Quarter EndedThree Quarters EndedJul 2,2023Jul 3,2022$ChangeJul 2,2023Jul 3,2022Jul 2,2023Jul 3,2022$ChangeJul 2,2023Jul 3,2022As a%of TotalNet RevenuesAs a%of TotalNet RevenuesOperating income$1,583.9$1,295.5$288.4 17.3.9%$4,164.6$3,422.3$742.3 15.7.4%Interest income and other,net21.3 19.8 1.5 0.2 0.2 51.1 66.0(14.9)0.2 0.3 Interest expense(140.9)(123.1)(17.8)(1.5)(1.5)(406.9)(357.6)(49.3)(1.5)(1.5)Earnings before incometaxes1,464.3 1,192.2 272.1 16.0 14.6 3,808.8 3,130.7 678.1 14.3 13.1 Income tax expense322.4 278.5 43.9 3.5 3.4 903.4 725.9 177.5 3.4 3.0 Net earnings includingnoncontrolling interests1,141.9 913.7 228.2 12.5 11.2 2,905.4 2,404.8 500.6 10.9 10.1 Net earningsattributable tononcontrolling interests0.2 0.8(0.6)0.0 0.0 0.2 1.5(1.3)0.0 0.0 Net earningsattributable toStarbucks$1,141.7$912.9$228.8 12.5.2%$2,905.2$2,403.3$501.9 10.9.1fective tax rate includingnoncontrolling interests22.0#.4#.7#.2%For the quarter ended July 2,2023 compared with the quarter ended July 3,2022Interest expense increased$18 million,primarily due to higher debt balances and a rising interest rate environment.The effective tax rate for the quarter ended July 2,2023 was 22.0%compared to 23.4%for the same period in fiscal 2022.The decrease was primarily due tothe release of valuation allowances recorded against certain deferred tax assets of an international jurisdiction(approximately 300 basis points),partially offsetby lapping beneficial valuation allowance activity from the prior year.For the three quarters ended July 2,2023 compared with the three quarters ended July 3,2022Interest income and other,net decreased$15 million,primarily due to lapping higher investment gains in the prior year.Interest expense increased$49 million,primarily due to higher debt balances and a rising interest rate environment.The effective tax rate for the first three quarters ended July 2,2023 was 23.7%compared to 23.2%for the same period in fiscal 2022.The increase wasprimarily due to lapping a beneficial return-to-provision adjustment recorded related to the divestiture of certain joint venture operations(approximately 70basis points)and a decrease in stock-based compensation excess tax benefits(approximately 50 basis points),offset by the release of valuation allowancesrecorded against certain deferred tax assets of an international jurisdiction(approximately 120 basis points).31Table of ContentsSegment InformationResults of operations by segment(in millions):North America Quarter EndedThree Quarters EndedJul 2,2023Jul 3,2022$ChangeJul 2,2023Jul 3,2022Jul 2,2023Jul 3,2022$ChangeJul 2,2023Jul 3,2022As a%of North AmericaTotal Net RevenuesAs a%of North AmericaTotal Net RevenuesNet revenues:Company-operatedstores$6,080.6$5,513.2$567.4 90.2.0%$17,693.9$15,663.6$2,030.3 90.0.9%Licensed stores655.8 544.2 111.6 9.7 9.0 1,973.2 1,567.1 406.1 10.0 9.1 Other1.4 1.0 0.4 0.0 0.0 2.6 5.7(3.1)0.0 0.0 Total net revenues6,737.8 6,058.4 679.4 100.0 100.0 19,669.7 17,236.4 2,433.3 100.0 100.0 Product and distributioncosts1,885.4 1,713.2 172.2 28.0 28.3 5,624.7 4,906.5 718.2 28.6 28.5 Store operating expenses2,990.1 2,670.0 320.1 44.4 44.1 8,973.2 7,997.8 975.4 45.6 46.4 Other operating expenses67.8 55.4 12.4 1.0 0.9 196.7 150.7 46.0 1.0 0.9 Depreciation andamortization expenses230.4 201.2 29.2 3.4 3.3 673.5 603.2 70.3 3.4 3.5 General andadministrative expenses93.1 76.5 16.6 1.4 1.3 286.6 224.5 62.1 1.5 1.3 Restructuring andimpairments7.1 12.0(4.9)0.1 0.2 20.7 8.9 11.8 0.1 0.1 Total operating expenses5,273.9 4,728.3 545.6 78.3 78.0 15,775.4 13,891.6 1,883.8 80.2 80.6 Operating income$1,463.9$1,330.1$133.8 21.7.0%$3,894.3$3,344.8$549.5 19.8.4%Store operating expenses as a%ofcompany-operated stores revenue49.2H.4P.7Q.1%For the quarter ended July 2,2023 compared with the quarter ended July 3,2022RevenuesNorth America total net revenues for the third quarter of fiscal 2023 increased$679 million,or 11%,primarily due to a 7%increase in comparable store sales($379 million)driven by a 6%increase in average ticket and a 1%increase in transactions.Also contributing to these increases were the performance of netnew company-operated store openings over the past 12 months($206 million)and higher product and equipment sales to and royalty revenues from ourlicensees($108 million).Operating MarginNorth America operating income for the third quarter of fiscal 2023 increased 10%to$1.5 billion,compared to$1.3 billion in the third quarter of fiscal 2022.Operating margin decreased 30 basis points to 21.7%,primarily due to previously-committed investments in labor,including enhancements in retail storepartner wages and benefits(approximately 360 basis points)and increased spend on partner training(approximately 50 basis points),partially offset by pricing(approximately 220 basis points),labor productivity(approximately 210 basis points)and sales leverage.32Table of ContentsFor the three quarters ended July 2,2023 compared with the three quarters ended July 3,2022RevenuesNorth America total net revenues for the first three quarters of fiscal 2023 increased$2.4 billion,or 14%,primarily due to a 10%increase in comparable storesales($1.5 billion)driven by a 7%increase in average ticket and a 3%increase in transactions.Also contributing to these increases were net new company-operated store openings over the past 12 months($593 million)and higher product and equipment sales to and royalty revenues from our licensees($390million).Operating MarginNorth America operating income for the first three quarters of fiscal 2023 increased 16%to$3.9 billion,compared to$3.3 billion for the same period in fiscal2022.Operating margin increased 40 basis points to 19.8%,primarily due to pricing(approximately 350 basis points),labor productivity(approximately 150basis points)and sales leverage.These increases were partially offset by previously-committed investments in labor,including enhancements in retail storepartner wages and benefits(approximately 370 basis points)and increased spend on partner training(approximately 50 basis points)as well as inflationarypressures on commodities and our supply chain(approximately 100 basis points).International Quarter EndedThree Quarters Ended Jul 2,2023Jul 3,2022$ChangeJul 2,2023Jul 3,2022Jul 2,2023Jul 3,2022$ChangeJul 2,2023Jul 3,2022As a%of InternationalTotal Net RevenuesAs a%of InternationalTotal Net RevenuesNet revenues:Company-operatedstores$1,476.1$1,162.3$313.8 74.8s.3%$4,088.5$4,011.1$77.4 74.2w.7%Licensed stores480.4 412.6 67.8 24.3 26.0 1,352.0 1,089.9 262.1 24.5 21.1 Other16.4 9.8 6.6 0.8 0.6 67.3 62.1 5.2 1.2 1.2 Total net revenues1,972.9 1,584.7 388.2 100.0 100.0 5,507.8 5,163.1 344.7 100.0 100.0 Product and distributioncosts677.3 550.3 127.0 34.3 34.7 1,903.8 1,746.8 157.0 34.6 33.8 Store operating expenses707.5 632.5 75.0 35.9 39.9 2,025.7 2,019.3 6.4 36.8 39.1 Other operating expenses54.3 60.2(5.9)2.8 3.8 155.0 138.8 16.2 2.8 2.7 Depreciation andamortization expenses83.1 125.0(41.9)4.2 7.9 250.8 391.4(140.6)4.6 7.6 General andadministrative expenses77.0 81.8(4.8)3.9 5.2 244.9 252.7(7.8)4.4 4.9 Total operating expenses1,599.2 1,449.8 149.4 81.1 91.5 4,580.2 4,549.0 31.2 83.2 88.1 Income from equityinvestees0.8 0.4 0.4 0.0 0.0 2.0 1.6 0.4 0.0 0.0 Operating income$374.5$135.3$239.2 19.0%8.5%$929.6$615.7$313.9 16.9.9%Store operating expenses as a%of company-operated stores revenue47.9T.4I.5P.3%For the quarter ended July 2,2023 compared with the quarter ended July 3,2022RevenuesInternational total net revenues for the third quarter of fiscal 2023 increased$388 million,or 24%,primarily due to a 24%increase in comparable store sales($253 million)driven by a 21%increase in customer transactions,primarily attributable to business recovery from COVID-19 pandemic related disruptions inChina.Also contributing were 863 net new company-operated store openings,or an 11%increase,over the past 12 months($131 million)and higher productand equipment sales to and royalty revenues from our licensees($77 million).These increases were partially offset by unfavorable foreign currency translation($86 million).33Table of ContentsOperating MarginInternational operating income for the third quarter of fiscal 2023 increased 177%to$375 million,compared to$135 million in the third quarter of fiscal 2022.Operating margin increased 1,050 basis points to 19.0%,primarily due to sales leverage(approximately 860 basis points),including lapping prior year mobilityrestrictions in China.Also contributing was lapping amortization expenses of acquisition-related intangibles assets that are now fully amortized(approximately260 basis points),partially offset by digital investments(approximately 110 basis points)and inflationary pressures(approximately 100 basis points).For the three quarters ended July 2,2023 compared with the three quarters ended July 3,2022RevenuesInternational total net revenues for the first three quarters of fiscal 2023 increased$345 million,or 7%,primarily due to higher product and equipment sales toand royalty revenues from our licensees($326 million)and 863 net new company-operated store openings,or an 11%increase,over the past 12 months($314million).Also contributing was a 5%increase in comparable store sales($168 million)driven by a 4%increase in customer transactions.These increases werepartially offset by unfavorable foreign currency translation($485 million).Operating MarginInternational operating income for the first three quarters of fiscal 2023 increased 51%to$930 million,compared to$616 million for the same period in fiscal2022.Operating margin increased 500 basis points to 16.9%,primarily due to sales leverage(approximately 290 basis points)and lapping amortizationexpenses of acquisition-related intangibles assets that are now fully amortized(approximately 250 basis points).Channel Development Quarter EndedThree Quarters Ended Jul 2,2023Jul 3,2022$ChangeJul 2,2023Jul 3,2022Jul 2,2023Jul 3,2022$ChangeJul 2,2023Jul 3,2022As a%of ChannelDevelopmentTotal Net RevenuesAs a%of ChannelDevelopmentTotal Net RevenuesNet revenues$448.8$479.7$(30.9)$1,407.7$1,359.9$47.8 Product and distributioncosts293.0 325.8(32.8)65.3g.92.7 885.2 47.5 66.3e.1%Other operating expenses14.8 13.6 1.2 3.3 2.8 40.6 35.7 4.9 2.9 2.6 Depreciation andamortization expenses0.0 0.0 0.0 0.0 0.0 0.1 0.1 0.0 0.0 0.0 General and administrativeexpenses1.9 2.3(0.4)0.4 0.5 6.2 8.1(1.9)0.4 0.6 Total operating expenses309.7 341.7(32.0)69.0 71.2 979.6 929.1 50.5 69.6 68.3 Income from equityinvestees68.9 53.7 15.2 15.4 11.2 177.0 141.9 35.1 12.6 10.4 Gain from sale of assets nmnm91.3 91.3 6.5%nmOperating income$208.0$191.7$16.3 46.3.0%$696.4$572.7$123.7 49.5B.1%For the quarter ended July 2,2023 compared with the quarter ended July 3,2022RevenuesChannel Development total net revenues for the third quarter of fiscal 2023 decreased$31 million,or 6%,primarily due to a decline in revenue in the GlobalCoffee Alliance($31 million).Operating MarginChannel Development operating income for the third quarter of fiscal 2023 increased 9%to$208 million,compared to$192 million in the third quarter offiscal 2022.Operating margin increased 630 basis points to 46.3%,primarily due to growth in our North American Coffee Partnership joint venture income(approximately 410 basis points)and mix shift(approximately 310 basis points).34Table of ContentsFor the three quarters ended July 2,2023 compared with the three quarters ended July 3,2022RevenuesChannel Development total net revenues for the first three quarters of fiscal 2023 increased$48 million,or 4%,primarily due to an increase in revenue in theGlobal Coffee Alliance($32 million)and growth in our global ready-to-drink business($27 million).Operating MarginChannel Development operating income for the first three quarters of fiscal 2023 increased 22%to$696 million,compared to$573 million for the same periodin fiscal 2022.Operating margin increased 740 basis points to 49.5%,primarily due to the gain from sale of our Seattles Best Coffee brand(approximately 650basis points)and growth in our North American Coffee Partnership joint venture income(approximately 200 basis points),partially offset by impairmentcharges against certain manufacturing assets(approximately 120 basis points).Corporate and Other Quarter EndedThree Quarters EndedJul 2,2023Jul 3,2022$Change%ChangeJul 2,2023Jul 3,2022$Change%ChangeNet revenues:Other$8.8$27.3$(18.5)(67.8)%$16.8$76.7$(59.9)(78.1)%Total net revenues8.8 27.3(18.5)(67.8)16.8 76.7(59.9)(78.1)Product and distribution costs8.5 24.3(15.8)(65.0)14.9 67.9(53.0)(78.1)Other operating expenses1.8 5.9(4.1)(69.5)1.8 13.2(11.4)(86.4)Depreciation and amortizationexpenses28.7 30.6(1.9)(6.2)86.8 95.8(9.0)(9.4)General and administrativeexpenses432.3 326.1 106.2 32.6 1,267.9 1,008.7 259.2 25.7 Restructuring and impairments 2.0(2.0)nm1.1 2.0(0.9)(45.0)%Total operating expenses471.3 388.9 82.4 21.2 1,372.5 1,187.6 184.9 15.6 Operating loss$(462.5)$(361.6)$(100.9)27.9%$(1,355.7)$(1,110.9)$(244.8)22.0%Corporate and Other primarily consists of our unallocated corporate expenses and Evolution Fresh,prior to its sale in the fourth quarter of fiscal 2022.Unallocated corporate expenses include corporate administrative functions that support the operating segments but are not specifically attributable to ormanaged by any segment and are not included in the reported financial results of the operating segments.For the quarter ended July 2,2023 compared with the quarter ended July 3,2022Corporate and Other operating loss increased by 28%to$463 million for the third quarter of fiscal 2023 compared to$362 million for the third quarter of fiscal2022.This increase was primarily driven by incremental investments in technology($38 million),increased support costs of strategic initiatives including theReinvention Plan($27 million),higher performance-based compensation($17 million)and a donation to the Starbucks Foundation($15 million).For the three quarters ended July 2,2023 compared with the three quarters ended July 3,2022Corporate and Other operating loss increased by 22%to$1.4 billion for the first three quarters of fiscal 2023 compared to$1.1 billion for the same period infiscal 2022.This increase was primarily driven by incremental investments in technology($100 million),increased support costs of strategic initiativesincluding the Reinvention Plan($57 million),higher performance-based compensation($33 million)and donations to the Starbucks Foundation($30 million).35Table of ContentsQuarterly Store DataOur store data for the periods presented is as follows:Net stores opened/(closed)and transferred during the period Quarter EndedThree Quarters EndedStores open as ofJul 2,2023Jul 3,2022Jul 2,2023Jul 3,2022Jul 2,2023Jul 3,2022North AmericaCompany-operated stores105 96 236 189 10,452 10,050 Licensed stores5 28 61 35 7,140 7,000 Total North America110 124 297 224 17,592 17,050 InternationalCompany-operated stores272 130 543 445 8,580 7,717 Licensed stores206 64 671 446 11,050 10,181 Total International478 194 1,214 891 19,630 17,898 Total Company588 318 1,511 1,115 37,222 34,948 Financial Condition,Liquidity and Capital ResourcesCash and Investment OverviewOur cash and investments totaled$3.9 billion as of July 2,2023 and$3.5 billion as of October 2,2022.We actively manage our cash and investments in orderto internally fund operating needs,make scheduled interest and principal payments on our borrowings,make acquisitions and return cash to shareholdersthrough common stock cash dividend payments and share repurchases.Our investment portfolio primarily includes highly liquid available-for-sale securities,including corporate debt securities,government treasury securities(foreign and domestic)and commercial paper as well as principal-protected structureddeposits.As of July 2,2023,approximately$2.5 billion of cash and short-term investment were held in foreign subsidiaries.Borrowing CapacityRevolving Credit FacilityOur$3.0 billion unsecured five-year revolving credit facility(the“2021 credit facility”),of which$150.0 million may be used for issuances of letters of credit,is currently set to mature on September 16,2026.The 2021 credit facility is available for working capital,capital expenditures and other corporate purposes,including acquisitions and share repurchases.We have the option,subject to negotiation and agreement with the related banks,to increase the maximumcommitment amount by an additional$1.0 billion.Borrowings under the 2021 credit facility,which was most recently amended in April 2023,will bear interest at a variable rate based on Term SOFR,and,forU.S.dollar-denominated loans under certain circumstances,a Base Rate(as defined in the 2021 credit facility),in each case plus an applicable margin.Theapplicable margin is based on the Companys long-term credit ratings assigned by the Moodys and Standard&Poors rating agencies.The“Base Rate”is thehighest of(i)the Federal Funds Rate(as defined in the 2021 credit facility)plus 0.500%,(ii)Bank of Americas prime rate,and(iii)Term SOFR plus 1.000%.Term SOFR means the forward-looking SOFR term rate administrated by the Chicago Mercantile Exchange plus a SOFR Adjustment of 0.100%.The 2021 credit facility contains provisions requiring us to maintain compliance with certain covenants,including a minimum fixed charge coverage ratio,which measures our ability to cover financing expenses.As of July 2,2023,we were in compliance with all applicable covenants.No amounts wereoutstanding under our 2021 credit facility as of July 2,2023 or October 2,2022.Commercial PaperUnder our commercial paper program,we may issue unsecured commercial paper notes up to a maximum aggregate amount outstanding at any time of$3.0billion,with individual maturities that may vary but not exceed 397 days from the date of issue.Amounts outstanding under the commercial paper program arerequired to be backstopped by available commitments under the 2021 credit facility discussed above.The proceeds from borrowings under our commercialpaper program may be used for working capital needs,capital expenditures and other corporate purposes,including,but not limited to,business expansion,payment of cash dividends on our common stock and share repurchases.As of July 2,2023,we had no borrowings outstanding under our commercial paperprogram.As of October 2,2022,we had$175.0 million in borrowings outstanding under this36Table of Contentsprogram.Our total contractual borrowing capacity for general corporate purposes was$3.0 billion as of the end of our third quarter of fiscal 2023.Credit facilities in JapanAdditionally,we hold Japanese yen-denominated credit facilities for the use of our Japan subsidiary.These are available for working capital needs and capitalexpenditures within our Japanese market.A 5 billion,or$34.5 million,credit facility is currently set to mature on January 4,2024.Borrowings under this credit facility are subject to termsdefined within the facility and will bear interest at a variable rate based on TIBOR plus an applicable margin of 0.400%.A 10 billion,or$69.1 million,credit facility is currently set to mature on March 27,2024.Borrowings under this credit facility are subject to termsdefined within the facility and will bear interest at a variable rate based on TIBOR plus an applicable margin of 0.300%.As of July 2,2023,we had 5 billion,or$34.5 million,of borrowings outstanding under these credit facilities.As of October 2,2022,we had no borrowingsoutstanding under these credit facilities.See Note 8,Debt,to the consolidated financial statements included in Item 1 of Part I of this 10-Q for details of the components of our long-term debt.Our ability to incur new liens and conduct sale and leaseback transactions on certain material properties is subject to compliance with terms of the indenturesunder which the long-term notes were issued.As of July 2,2023,we were in compliance with all applicable covenants.Use of CashWe expect to use our available cash and investments,including,but not limited to,additional potential future borrowings under the credit facilities,commercialpaper program and the issuance of debt to support and invest in our core businesses,including investing in new ways to serve our customers and supporting ourstore partners,repaying maturing debts,as well as returning cash to shareholders through common stock cash dividend payments and discretionary sharerepurchases and investing in new business opportunities related to our core and developing businesses.Furthermore,we may use our available cash resourcesto make proportionate capital contributions to our investees.We may also seek strategic acquisitions to leverage existing capabilities and further build ourbusiness.Acquisitions may include increasing our ownership interests in our investees.Any decisions to increase such ownership interests will be driven byvaluation and fit with our ownership strategy.We believe that net future cash flows generated from operations and existing cash and investments both domestically and internationally combined with ourability to leverage our balance sheet through the issuance of debt will be sufficient to finance capital requirements for our core businesses as well asshareholder distributions for at least the next 12 months.We are currently not aware of any trends or demands,commitments,events or uncertainties that willresult in,or that are reasonably likely to result in,our liquidity increasing or decreasing in any material way that will impact our capital needs during or beyondthe next 12 months.We have borrowed funds and continue to believe we have the ability to do so at reasonable interest rates;however,additional borrowingswould result in increased interest expense in the future.In this regard,we may incur additional debt,within targeted levels,as part of our plans to fund ourcapital programs,including cash returns to shareholders through future dividends and discretionary share repurchases as well as investing in new businessopportunities.If necessary,we may pursue additional sources of financing,including both short-term and long-term borrowings and debt issuances.We regularly review our cash positions and our determination of indefinite reinvestment of foreign earnings.In the event we determine that all or a portion ofsuch foreign earnings are no longer indefinitely reinvested,we may be subject to additional foreign withholding taxes and U.S.state income taxes,which couldbe material.While we do not anticipate the need for repatriated funds to the U.S.to satisfy domestic liquidity requirements,any foreign earnings which are notindefinitely reinvested may be repatriated at managements discretion.During the third quarter of fiscal 2023,our Board of Directors approved a quarterly cash dividend to shareholders of$0.53 per share to be paid on August 25,2023 to shareholders of record as of the close of business on August 11,2023.During the first quarter of fiscal 2023,we resumed our share repurchase program which was temporarily suspended in April 2022.During the three quartersended July 2,2023,we repurchased 6.9 million shares of common stock for$699.3 million.As of July 2,2023,45.7 million shares remained available forrepurchase under current authorizations.Other than normal operating expenses,cash requirements for the remainder of fiscal 2023 are expected to consist primarily of capital expenditures forinvestments in our new and existing stores,our supply chain and corporate facilities.Total capital expenditures for fiscal 2023 are expected to be approximately$2.5 billion.37Table of ContentsIn the MD&A included in the 10-K,we disclosed that we had$33.2 billion of current and long-term material cash requirements as of October 2,2022.Therehave been no material changes to our material cash requirements during the period covered by this 10-Q outside of the normal course of our business.Cash FlowsCash provided by operating activities was$4.1 billion for the first three quarters of fiscal 2023,compared to$3.3 billion for the same period in fiscal 2022.Thechange was primarily due to a decrease in net cash used by changes in operating assets and liabilities and higher net earnings during the period.Cash used in investing activities totaled$1.4 billion for each of the first three quarters of fiscal 2023 and fiscal 2022,respectively.Increased maturities andcalls of investments in fiscal 2023 were offset by increased capital expenditures and higher investment purchases.Cash used in financing activities for the first three quarters of fiscal 2023 totaled$2.1 billion compared to cash used in financing activities of$5.1 billion forthe same period in fiscal 2022.The change is primarily due to a decrease in share repurchase activities.Commodity Prices,Availability and General Risk ConditionsCommodity price risk represents our primary market risk,generated by our purchases of green coffee and dairy products,among other items.We purchase,roast and sell high-quality arabica coffee and related products and risk arises from the price volatility of green coffee.In addition to coffee,we also purchasesignificant amounts of dairy products to support the needs of our company-operated stores.The price and availability of these commodities directly impact ourresults of operations,and we expect commodity prices,particularly coffee,to impact future results of operations.For additional details,see Product Supply inItem 1 of the 10-K,as well as Risk Factors in Item 1A of the 10-K.Seasonality and Quarterly ResultsOur business is subject to moderate seasonal fluctuations,of which our fiscal second quarter typically experiences lower revenues and operating income.Additionally,as our stored value cards are issued to and loaded by customers during the holiday season,we tend to have higher cash flows from operationsduring the first quarter of the fiscal year.However,since revenues from our stored value cards are recognized upon redemption and not when cash is loaded,the impact of seasonal fluctuations on the consolidated statements of earnings is much less pronounced.As a result of moderate seasonal fluctuations,resultsfor any quarter are not necessarily indicative of the results that may be achieved for the full fiscal year.Critical Accounting EstimatesThe preparation of financial statements and related disclosures in conformity with U.S.generally accepted accounting principles and the Companys discussionand analysis of its financial condition and operating results require the Companys management to make judgments,assumptions and estimates that affect theamounts reported.Note 1,Summary of Significant Accounting Policies and Estimates,to the consolidated financial statements included in Item 1 of Part I ofthis 10-Q and in the Notes to Consolidated Financial Statements in Part II,Item 8 of the 10-K describe the significant accounting policies and methods used inthe preparation of the Companys consolidated financial statements.There have been no material changes to the Companys critical accounting estimates sincethe 10-K.RECENT ACCOUNTING PRONOUNCEMENTSSee Note 1,Summary of Significant Accounting Policies and Estimates,to the consolidated financial statements included in Item 1 of Part I of this 10-Q,for adetailed description of recent accounting pronouncements.Item 3.Quantitative and Qualitative Disclosures About Market RiskThere has been no material change in the commodity price risk,foreign currency exchange risk,equity security price risk or interest rate risk discussed inItem 7A of the 10-K.38Table of ContentsItem 4.Controls and ProceduresWe maintain disclosure controls and procedures that are designed to ensure that material information required to be disclosed in our periodic reports filed orsubmitted under the Securities Exchange Act of 1934,as amended(the“Exchange Act”),is recorded,processed,summarized and reported within the timeperiods specified in the SECs rules and forms.Our disclosure controls and procedures are also designed to ensure that information required to be disclosed inthe reports we file or submit under the Exchange Act is accumulated and communicated to our management,including our principal executive officer andprincipal financial officer as appropriate,to allow timely decisions regarding required disclosure.During the third qua

0人已浏览 2023-12-06 46页 5星级

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON,D.C.20549 FORM 6-K REPORT OF FOREIGN PRIVATE ISSUERPURSUANT TO RULE 13a-16 OR 15d-16 UNDERTHE SECURITIES EXCHANGE ACT OF 1934 For the month of November 2023 Commission File Number:001-38591 PDD Holdings Inc.First Floor,25 St Stephens Green,Dublin 2,D02 XF99Ireland(Address of principal executive offices)Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.Form 20-F Form 40-F Exhibit Index Exhibit 99.1Press Release(Earnings Release)SIGNATURES 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 theundersigned,thereunto duly authorized.PDD HOLDINGS INC.By:/s/Lei Chen Name:Lei Chen Title:Chairman of the Board of Directors and Co-Chief ExecutiveOfficer Date:November 28,2023 Exhibit 99.1 PDD Holdings Announces Third Quarter 2023 Unaudited Financial Results DUBLIN and SHANGHAI,November 28,2023(GLOBE NEWSWIRE)PDD Holdings Inc.(“PDD Holdings”or the“Company”)(NASDAQ:PDD),today announced its unaudited financial results for the third quarter ended September 30,2023.Third Quarter 2023 Highlights Total revenues in the quarter were RMB68,840.4 million(US$19,435.4 million),an increase of 94%from RMB35,504.3 million in the same quarterof 2022.Operating profit in the quarter was RMB16,656.0 million(US$2,282.9 million),an increase of 60%from RMB10,436.6 million in the same quarterof 2022.Non-GAAP2 operating profit in the quarter was RMB18,125.8 million(US$2,484.4 million),an increase of 47%from RMB12,301.5million in the same quarter of 2022.Net income attributable to ordinary shareholders in the quarter was RMB15,537.1 million(US$2,129.5 million),an increase of 47%fromRMB10,588.6 million in the same quarter of 2022.Non-GAAP net income attributable to ordinary shareholders in the quarter was RMB17,027.1million(US$2,333.8 million),an increase of 37%from RMB12,447.2 million in the same quarter of 2022.“We are dedicated to generating value through innovations,which forms the foundation of our high-quality development,”said Mr.Lei Chen,Chairmanand Co-Chief Executive Officer of PDD Holdings.“We continued to invest decisively in areas such as agritech,supply chain technology,and core R&Dcapabilities.Through these efforts,we aim to create our unique value.”“Last month,we celebrated our eighth anniversary.We sincerely thank all stakeholders for the support we received,”said Mr.Jiazhen Zhao,ExecutiveDirector and Co-Chief Executive Officer of PDD Holdings.“Throughout the past third quarter,consumption vitality kept improving.We continued toprovide consumers with more savings and better service through increased investments.”“Under our high-quality development strategy,we increased our investment in technology and further deepened user mindshare in the third quarter.Ourfinancial performance reflects the early results we have achieved,”said Ms.Jun Liu,VP of Finance at PDD Holdings.“Going forward,we will continue toinvest decisively to support our high-quality development.”1 This announcement contains translations of certain Renminbi(“RMB”)amounts into U.S.dollars(“US$”)at a specified rate solely for the convenience ofthe reader.Unless otherwise noted,the translation of RMB into US$has been made at RMB7.2960 to US$1.00,the noon buying rate in effect onSeptember 29,2023 as set forth in the H.10 Statistical Release of the Federal Reserve Board.2 The Companys non-GAAP financial measures exclude share-based compensation expenses,fair value change of certain investments,and interestexpenses related to the convertible bonds amortization to face value.See“Reconciliation of Non-GAAP Measures to The Most Directly ComparableGAAP Measures”set forth at the end of this press release.1 Third Quarter 2023 Unaudited Financial Results Total revenues were RMB68,840.4 million(US$9,435.4 million),an increase of 94%from RMB35,504.3 million in the same quarter of 2022.Theincrease was primarily due to an increase in revenues from online marketing services and transaction services.Revenues from online marketing services and others were RMB39,687.7 million(US$5,439.7 million),an increase of 39%from RMB28,482.0million in the same quarter of 2022.Revenues from transaction services were RMB29,152.7 million(US$3,995.7 million),an increase of 315%from RMB7,022.3 million in the samequarter of 2022.Total costs of revenues were RMB26,830.2 million(US$3,677.4 million),an increase of 262%from RMB7,414.1 million in the same quarter of 2022.The increase mainly came from the increased fulfilment fees,payment processing fees,maintenance costs and call center expenses.Total operating expenses were RMB25,354.1 million(US$3,475.1 million),an increase of 44%from RMB17,653.6 million in the same quarter of 2022.The increase was primarily due to an increase in sales and marketing expenses.Sales and marketing expenses were RMB21,748.5 million(US$2,980.9 million),an increase of 55%from RMB14,048.8 million in the same quarterof 2022,mainly due to the increased spending in promotion and advertising activities.General and administrative expenses were RMB758.3 million(US$103.9 million),compared with RMB906.6 million in the same quarter of 2022.Research and development expenses were RMB2,847.3 million(US$390.3 million),compared with RMB2,698.2 million in the same quarter of2022.2 Operating profit in the quarter was RMB16,656.0 million(US$2,282.9 million),an increase of 60%from RMB10,436.6 million in the same quarter of2022.Non-GAAP operating profit in the quarter was RMB18,125.8 million(US$2,484.4 million),an increase of 47%from RMB12,301.5 million in thesame quarter of 2022.Net income attributable to ordinary shareholders in the quarter was RMB15,537.1 million(US$2,129.5 million),an increase of 47%fromRMB10,588.6 million in the same quarter of 2022.Non-GAAP net income attributable to ordinary shareholders in the quarter was RMB17,027.1million(US$2,333.8 million),an increase of 37%from RMB12,447.2 million in the same quarter of 2022.Basic earnings per ADS was RMB11.38(US$1.56)and the diluted earnings per ADS was RMB10.60(US$1.45),compared with basic earnings perADS of RMB8.38 and diluted earnings per ADS of RMB7.34 in the same quarter of 2022.Non-GAAP diluted earnings per ADS was RMB11.61(US$1.55),compared with RMB8.62 in the same quarter of 2022.Net cash generated from operating activities was RMB32,537.9 million(US$4,459.7 million),compared with RMB11,651.8 million in the same quarterof 2022,mainly due to the increase in net income and the changes in working capitals.Cash,cash equivalents and short-term investments were RMB202.8 billion(US$27.8 billion)as of September 30,2023,compared with RMB149.4billion as of December 31,2022.3 Conference Call The Companys management will hold an earnings conference call at 7:30 AM ET on November 28,2023(12:30 PM GMT and 8:30 PM HKT on the sameday).The conference call will be webcast live at https:/ webcast will be available for replay at the same websitefollowing the conclusion of the call.Use of Non-GAAP Financial Measures In evaluating the business,the Company considers and uses non-GAAP measures,such as non-GAAP operating profit,non-GAAP net income attributableto ordinary shareholders,non-GAAP diluted earnings per ordinary share and non-GAAP diluted earnings per ADS,as supplemental measures to reviewand assess operating performance.The presentation of these non-GAAP financial measures is not intended to be considered in isolation or as a substitutefor the financial information prepared and presented in accordance with accounting principles generally accepted in the United States of America(“U.S.GAAP”).The Companys non-GAAP financial measures exclude the impact of share-based compensation expenses,fair value change of certaininvestments,and interest expenses related to the convertible bonds amortization to face value.The Company presents these non-GAAP financial measures because they are used by management to evaluate operating performance and formulatebusiness plans.The Company believes that the non-GAAP financial measures help identify underlying trends in its business by excluding the impact ofshare-based compensation expenses,fair value change of certain investments,and interest expenses related to the convertible bonds amortization to facevalue,which are non-cash charges.The Company also believes that the non-GAAP financial measures may provide further information about theCompanys results of operations,and enhance the overall understanding of the Companys past performance and future prospects.The Companys non-GAAP financial measures are not defined under U.S.GAAP and are not presented in accordance with U.S.GAAP.The non-GAAPfinancial measures have limitations as analytical tools.These non-GAAP financial measures do not reflect all items of income and expenses that affect theCompanys operations and do not represent the residual cash flow available for discretionary expenditures.Further,these non-GAAP measures may differfrom the non-GAAP information used by other companies,including peer companies,and therefore their comparability may be limited.The Companycompensates for these limitations by reconciling the non-GAAP financial measures to the nearest U.S.GAAP performance measure,all of which should beconsidered when evaluating performance.The Company encourages you to review the Companys financial information in its entirety and not rely on asingle financial measure.For more information on the non-GAAP financial measures,please see the table captioned“Reconciliation of Non-GAAP Measures to The Most DirectlyComparable GAAP Measures”set forth at the end of this press release.4 Safe Harbor Statements This announcement contains forward-looking statements.These statements are made under the“safe harbor”provisions of the U.S.Private SecuritiesLitigation Reform Act of 1995.These forward-looking statements can be identified by terminology such as“will,”“expects,”“anticipates,”“aims,”“future,”“intends,”“plans,”“believes,”“estimates,”“confident,”“potential,”“continue”or other similar expressions.Among other things,the businessoutlook and quotations from management in this announcement,as well as the Companys strategic and operational plans,contain forward-lookingstatements.The Company may also make written or oral forward-looking statements in its periodic reports to the U.S.Securities and ExchangeCommission(the“SEC”),in its annual report to shareholders,in press releases and other written materials and in oral statements made by its officers,directors or employees to third parties.Statements that are not historical facts,including but not limited to statements about the Companys beliefs andexpectations,are forward-looking statements.Forward-looking statements involve inherent risks and uncertainties.A number of factors could cause actualresults to differ materially from those contained in any forward-looking statement,including but not limited to the following:the Companys growthstrategies;its future business development,results of operations and financial condition;its ability to understand buyer needs and provide products andservices to attract and retain buyers;its ability to maintain and enhance the recognition and reputation of its brand;its ability to rely on merchants and third-party logistics service providers to provide delivery services to buyers;its ability to maintain and improve quality control policies and measures;its abilityto establish and maintain relationships with merchants;trends and competition in the e-commerce markets globally and in the countries or regions wherethe Company has operations;changes in its revenues and certain cost or expense items;the expected growth of e-commerce markets globally and in thecountries or regions where the Company has operations;developments in the relevant governmental policies and regulations relating to the Companysindustry;and general economic and business conditions globally and in the countries or regions where the Company has operations;and assumptionsunderlying or related to any of the foregoing.Further information regarding these and other risks is included in the Companys filings with the SEC.Allinformation provided in this press release and in the attachments is as of the date of this press release,and the Company undertakes no obligation to updateany forward-looking statement,except as required under applicable law.5 About PDD Holdings PDD Holdings is a multinational commerce group that owns and operates a portfolio of businesses.PDD Holdings aims to bring more businesses andpeople into the digital economy so that local communities and small businesses can benefit from the increased productivity and new opportunities.For investor and media inquiries,please contact: 6 PDD HOLDINGS INC.CONDENSED CONSOLIDATED BALANCE SHEETS(Amounts in thousands of Renminbi(“RMB”)and U.S.dollars(“US$”)As of December31,2022 September 30,2023 RMB RMB US$(Unaudited)ASSETS Current assets Cash and cash equivalents 34,326,192 54,939,761 7,530,121 Restricted cash 57,974,225 56,413,498 7,732,113 Receivables from online payment platforms 587,696 2,547,134 349,114 Short-term investments 115,112,554 147,906,904 20,272,328 Amounts due from related parties 6,318,830 6,138,625 841,369 Prepayments and other current assets 2,298,379 3,629,894 497,518 Total current assets 216,617,876 271,575,816 37,222,563 Non-current assets Property,equipment and software,net 1,044,847 1,065,180 145,995 Intangible assets 134,002 21,900 3,002 Right-of-use assets 1,416,081 3,662,756 502,022 Deferred tax assets 1,045,030 1,631,825 223,660 Other non-current assets 16,862,117 36,293,655 4,974,459 Total non-current assets 20,502,077 42,675,316 5,849,138 Total Assets 237,119,953 314,251,132 43,071,701 7 PDD HOLDINGS INC.CONDENSED CONSOLIDATED BALANCE SHEETS(Amounts in thousands of Renminbi(“RMB”)and U.S.dollars(“US$”)As of December31,2022 September 30,2023 RMB RMB US$(Unaudited)LIABILITIES AND SHAREHOLDERS EQUITY Current liabilities Amounts due to related parties 1,676,391 2,028,787 278,068 Customer advances and deferred revenues 1,389,655 2,043,857 280,134 Payable to merchants 63,316,695 68,099,716 9,333,843 Accrued expenses and other liabilities 20,960,723 43,936,446 6,021,992 Merchant deposits 15,058,229 16,282,948 2,231,764 Convertible bonds,current portion 13,885,751 14,351,445 1,967,029 Lease liabilities 602,036 1,381,067 189,291 Total current liabilities 116,889,480 148,124,266 20,302,121 Non-current liabilities Convertible bonds 1,575,755 1,623,726 222,550 Lease liabilities 870,782 2,397,222 328,567 Deferred tax liabilities 13,025 55,903 7,662 Total non-current liabilities 2,459,562 4,076,851 558,779 Total Liabilities 119,349,042 152,201,117 20,860,900 Shareholders equity Ordinary shares 170 177 24 Additional paid-in capital 99,250,468 104,152,729 14,275,319 Statutory reserves 5,000 5,000 685 Accumulated other comprehensive income 3,322,238 5,952,839 815,904 Retained earnings 15,193,035 51,939,270 7,118,869 Total Shareholders Equity 117,770,911 162,050,015 22,210,801 Total Liabilities and Shareholders Equity 237,119,953 314,251,132 43,071,701 8 PDD HOLDINGS INC.CONDENSED CONSOLIDATED STATEMENTS OF INCOME(Amounts in thousands of RMB and US$)For the three months ended September 30,For the nine months ended September 30,2022 2023 2022 2023 RMB RMB US$RMB RMB US$(Unaudited)(Unaudited)(Unaudited)(Unaudited)(Unaudited)(Unaudited)Revenues 35,504,304 68,840,371 9,435,358 90,737,561 158,758,169 21,759,617 Costs of revenues (7,414,132)(26,830,233)(3,677,390)(22,535,593)(56,645,305)(7,763,885)Sales and marketing expenses (14,048,820)(21,748,449)(2,980,873)(36,611,335)(55,550,346)(7,613,808)General and administrative expenses (906,573)(758,345)(103,940)(2,324,408)(2,170,780)(297,530)Research and development expenses (2,698,166)(2,847,323)(390,258)(7,978,039)(8,087,944)(1,108,545)Total operating expenses (17,653,559)(25,354,117)(3,475,071)(46,913,782)(65,809,070)(9,019,883)Operating profit 10,436,613 16,656,021 2,282,897 21,288,186 36,303,794 4,975,849 Interest and investment income,net 1,092,150 2,127,356 291,578 2,645,402 5,878,696 805,742 Interest expenses (13,646)(12,208)(1,673)(39,434)(35,832)(4,911)Foreign exchange gain/(loss)53,374 94,860 13,002 (125,891)234,540 32,146 Other income,net 546,528 290,384 39,800 2,052,533 2,624,375 359,701 Profit before income tax and share of results ofequity investees 12,115,019 19,156,413 2,625,604 25,820,796 45,005,573 6,168,527 Share of results of equity investees 10,732 (105,811)(14,503)(76,377)10,359 1,420 Income tax expenses (1,537,177)(3,513,480)(481,563)(3,660,054)(8,269,697)(1,133,456)Net income 10,588,574 15,537,122 2,129,538 22,084,365 36,746,235 5,036,491 9 PDD HOLDINGS INC.CONDENSED CONSOLIDATED STATEMENTS OF INCOME(Amounts in thousands of RMB and US$,except for per share data)For the three months ended September 30,For the nine months ended September 30,2022 2023 2022 2023 RMB RMB US$RMB RMB US$(Unaudited)(Unaudited)(Unaudited)(Unaudited)(Unaudited)(Unaudited)Net income 10,588,574 15,537,122 2,129,538 22,084,365 36,746,235 5,036,491 Net income attributable to ordinary shareholders 10,588,574 15,537,122 2,129,538 22,084,365 36,746,235 5,036,491 Earnings per ordinary share:-Basic 2.10 2.84 0.39 4.38 6.81 0.93-Diluted 1.84 2.65 0.36 3.86 6.28 0.86 Earnings per ADS(4 ordinary shares equals 1ADS):-Basic 8.38 11.38 1.56 17.52 27.24 3.73-Diluted 7.34 10.60 1.45 15.43 25.13 3.44 Weighted average number of outstandingordinary shares(in thousands):-Basic 5,051,256 5,462,542 5,462,542 5,043,522 5,395,211 5,395,211-Diluted 5,776,165 5,865,102 5,865,102 5,733,453 5,853,748 5,853,748 10 PDD HOLDINGS INC.NOTES TO FINANCIAL INFORMATION(Amounts in thousands of RMB and US$)For the three months ended September 30,For the nine months ended September 30,2022 2023 2022 2023 RMB RMB US$RMB RMB US$(Unaudited)(Unaudited)(Unaudited)(Unaudited)(Unaudited)(Unaudited)Revenues -Online marketing services and others 28,482,052 39,687,678 5,439,649 71,907,695 104,864,935 14,372,935-Transaction services 7,022,252 29,152,693 3,995,709 18,829,866 53,893,234 7,386,682 Total 35,504,304 68,840,371 9,435,358 90,737,561 158,758,169 21,759,617 11 PDD HOLDINGS INC.NOTES TO FINANCIAL INFORMATION(Amounts in thousands of RMB and US$)For the three months ended September 30,For the nine months ended September 30,2022 2023 2022 2023 RMB RMB US$RMB RMB US$(Unaudited)(Unaudited)(Unaudited)(Unaudited)(Unaudited)(Unaudited)Share-based compensation expenses included in:Costs of revenues 5,841 20,422 2,799 22,011 86,066 11,796 Sales and marketing expenses 608,462 464,950 63,726 1,623,126 1,943,049 266,318 General and administrative expenses 680,252 355,053 48,664 1,724,567 1,058,914 145,136 Research and development expenses 570,327 629,394 86,266 1,862,276 1,805,821 247,508 Total 1,864,882 1,469,819 201,455 5,231,980 4,893,850 670,758 12 PDD HOLDINGS INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(Amounts in thousands of RMB and US$)For the three months ended September 30,For the nine months ended September 30,2022 2023 2022 2023 RMB RMB US$RMB RMB US$(Unaudited)(Unaudited)(Unaudited)(Unaudited)(Unaudited)(Unaudited)Net cash generated from operating activities 11,651,823 32,537,857 4,459,684 21,957,598 57,271,860 7,849,762 Net cash used in investing activities (356,394)(4,820,500)(660,704)(13,801,754)(38,960,607)(5,339,995)Net cash generated from financing activities 258 385 53 569 7,671 1,051 Effect of exchange rate changes on cash,cashequivalents and restricted cash 250,227 201,058 27,557 209,551 733,918 100,591 Increase in cash,cash equivalents and restricted cash 11,545,914 27,918,800 3,826,590 8,365,964 19,052,842 2,611,409 Cash,cash equivalents and restricted cash atbeginning of period 62,864,021 83,434,459 11,435,644 66,043,971 92,300,417 12,650,825 Cash,cash equivalents and restricted cash at endof period 74,409,935 111,353,259 15,262,234 74,409,935 111,353,259 15,262,234 13 PDD HOLDINGS INC.RECONCILIATION OF NON-GAAP MEASURES TO THE MOST DIRECTLY COMPARABLE GAAP MEASURES(Amounts in thousands of RMB and US$,except for per share data)For the three months ended September 30,For the nine months ended September 30,2022 2023 2022 2023 RMB RMB US$RMB RMB US$(Unaudited)(Unaudited)(Unaudited)(Unaudited)(Unaudited)(Unaudited)Operating profit 10,436,613 16,656,021 2,282,897 21,288,186 36,303,794 4,975,849 Add:Share-based compensation expenses 1,864,882 1,469,819 201,455 5,231,980 4,893,850 670,758 Non-GAAP operating profit 12,301,495 18,125,840 2,484,352 26,520,166 41,197,644 5,646,607 Net income attributable to ordinary shareholders 10,588,574 15,537,122 2,129,538 22,084,365 36,746,235 5,036,491 Add:Share-based compensation expenses 1,864,882 1,469,819 201,455 5,231,980 4,893,850 670,758 Add:Interest expenses related to convertible bondsamortization to face value 13,646 12,208 1,673 39,434 35,832 4,911 Add:(Gain)/loss from fair value change of certaininvestments (19,886)7,935 1,088 68,173 746,915 102,373 Non-GAAP net income attributable to ordinaryshareholders 12,447,216 17,027,084 2,333,754 27,423,952 42,422,832 5,814,533 Non-GAAP diluted weighted-average number ofordinary shares outstanding(in thousands)5,776,165 5,865,102 5,865,102 5,733,453 5,853,748 5,853,748 Diluted earnings per ordinary share 1.84 2.65 0.36 3.86 6.28 0.86 Add:Non-GAAP adjustments to earnings perordinary share 0.31 0.25 0.03 0.92 0.97 0.13 Non-GAAP diluted earnings per ordinary share 2.15 2.90 0.39 4.78 7.25 0.99 Non-GAAP diluted earnings per ADS 8.62 11.61 1.55 19.13 28.99 3.96 14

0人已浏览 2023-11-30 17页 5星级

JD.com,Inc.23Q3 Financial and Operational HighlightsNov 2023DisclaimerThe following document has been prepared by JD.com,Inc.(“JD”or the“Company”)solely for informational purposes and should not be construed to be,directly or indirectly,in whole or in part,an offer to buy or sell and/or an invitation and/or a recommendation and/or a solicitation of an offer to buy or sell any security or instrument or to participate in any investment or trading strategy,nor shall any part of it form the basis of,or be relied on in connection with,any contract or investment decision in relation to any securities or otherwise.This document does not contain all relevant information relating to the Company or its securities,particularly with respect to the risks and special considerations involved with an investment in the securities of the Company.Nothing contained in this document shall be relied upon as a promise or representation as to the past or future performance of the Company.Past performance does not guarantee or predict future performance.You acknowledge that any assessment of the Company that may be made by you will be independent of this document and that you will be solely responsible for your own assessment of the market and the market position of the Company and that you will conduct your own analysis and be solely responsible for forming your own view of the potential future performance of the business of the Company.This document contains forward-looking statements.These statements are made under the“safe harbor”provisions of the U.S.Private Securities Litigation Reform Act of 1995.These forward-looking statements can be identified by terminology such as“will,”“expects,”“anticipates,”“future,”“intends,”“plans,”“believes,”“estimates,”“confident”and similar statements.Among other things,the quotations from management in this announcement,as well as JD.coms strategic and operational plans,contain forward-looking statements.JD.com may also make written or oral forward-looking statements in its periodic reports to the U.S.Securities and Exchange Commission(the“SEC”),in announcements made on the website of the Hong Kong Stock Exchange,in its annual report to shareholders,in press releases and other written materials and in oral statements made by its officers,directors or employees to third parties.Statements that are not historical facts,including statements about JD.coms beliefs and expectations,are forward-looking statements.Forward-looking statements involve inherent risks and uncertainties.A number of factors could cause actual results to differ materially from those contained in any forward-looking statement,including but not limited to the following:JD.coms growth strategies;its future business development,results of operations and financial condition;its ability to attract and retain new customers and to increase revenues generated from repeat customers;its expectations regarding demand for and market acceptance of its products and services;trends and competition in Chinas e-commerce market;changes in its revenues and certain cost or expense items;the expected growth of the Chinese e-commerce market;laws,regulations and governmental policies relating to the industries in which JD.com or its business partners operate;potential changes in laws,regulations and governmental policies or changes in the interpretation and implementation of laws,regulations and governmental policies that could adversely affect the industries in which JD.com or its business partners operate,including,among others,initiatives to enhance supervision of companies listed on an overseas exchange and tighten scrutiny over data privacy and data security;risks associated with JD.coms acquisitions,investments and alliances,including fluctuation in the market value of JD.coms investment portfolio;natural disasters and geopolitical events;change in tax rates and financial risks;intensity of competition;and general market and economic conditions in China and globally.Further information regarding these and other risks is included in JD.coms filings with the SEC and the announcements on the website of the Hong Kong Stock Exchange.All information provided herein is as of the date of this announcement,and JD.com undertakes no obligation to update any forward-looking statement,except as required under applicable law.This document also contains non-GAAP financial measures,the document of which is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with accounting principles generally accepted in the United States of America.In addition,the Companys calculation of these non-GAAP financial measures may be different from the calculation used by other companies,and therefore comparability may be limited.The reconciliation of those measures to the most comparable GAAP measures is contained within this document or available at our website http:/.This document speaks as of September 30,2023.Neither the delivery of this document nor any further discussions of the Company with any of the recipients shall,under any circumstances,create any implication that there has been no change in the affairs of the Company since that date.1Solid Growth Momentum362.3 462.0 576.9 745.8 951.6 1,046.2 243.5 247.7 20020202120222022Q32023Q3Net Revenues(RMB Billions)24 17 2022 CAGR331.8 416.1 510.7 651.9 815.7 865.1 197.0 195.3 -100.0 200.0 300.0 400.0 500.0 600.0 700.0 800.0 900.0 1,000.020020202120222022Q32023Q3General Merchandise RevenuesElectronics and Home Appliance RevenuesNet Product Revenues Breakdown30.5 45.9 66.2 93.9 135.9 181.2 46.5 52.4 -20.0 40.0 60.0 80.0 100.0 120.0 140.0 160.0 180.0 200.020020202120222022Q32023Q3Marketplace and Marketing RevenuesLogistics and Other Services RevenuesNet Service Revenues Breakdown(RMB Billions)(RMB Billions)30 17 2022 CAGR17& 17 2022 CAGR81%Net Revenues Breakdown331.8 416.1 510.7 651.9 815.7 865.1 197.0 195.3 30.5 45.9 66.2 93.9 135.9 181.2 46.5 52.4 20020202120222022Q32023Q3Net Product RevenuesNet Service Revenues(RMB Billions)21 17 2022 CAGR43%Net Product Revenues YoY-1%Net Service Revenues YoY 13%Net Revenues YoY 2%Marketplace and MarketingYoY 3%Logistics and Other ServicesYoY 19%General Merchandise YoY-2%Electronics and Home ApplianceYoY 0%2JD RetailJD LogisticsRevenues(RMB Billions)Operating Income/(Loss)(RMB Billions)211.9 35.8 2.4 5.0 212.1 41.7 2.9 3.8 -50.0 100.0 150.0 200.0 250.0Resilient performance in core categories Continued growth momentum(1)10.9 0.3-0.3 0.3 11.0 0.3-0.1-0.1 Diversified Businesses in a Wide Spectrum of Sectors(1)The company reports four segments,JD Retail,JD Logistics,Dada and New businesses.JD Retail,including JD Health and JD Industrials,among other components,mainly engage in online retail,online marketplace and marketing services in China.JD Logistics includes both internal and external logistics businesses.Dada is a local on-demand delivery and retail platform in China.New businesses mainly include JD Property,Jingxi and overseas businesses.2022Q32023Q32022Q32023Q3New BusinessesRationalized Investment for long-term sustainable business2022Q32023Q3Dada2022Q32023Q3Synergistic growth in intra-city business 3JD Group Non-GAAP Net Profit(2)5.03.510.716.817.228.210.0 10.61.4%0.7%1.9%2.3%1.8%2.7%4.1%4.3%(8.0%)2.0%0.05.010.015.020.025.030.035.040.020020202120222022Q32023Q3Non-GAAP Net ProfitNon-GAAP Net Margin(RMB Billions)(1)JD Logistics and other subsidiaries within JD Group(including JD Retail),on an annual basis,engage an industry consultant or conduct researches on comparable companies to determine the applicable market rates for the services provided under the Supply Chain Solutions and Logistics Services Framework Agreement.(2)Non-GAAP net income attributable to ordinary shareholders;refer to the companys quarterly results for Non-GAAP adjustments.JD Retail Operating Income(1)8.210.97.99.88.111.0 3.4%5.2%3.0%4.6%3.2%5.2%(2.0%)0.02.04.06.08.010.012.014.016.018.02022Q22022Q32022Q42023Q12023Q22023Q3JD Retail-Operating IncomeJD Retail-Operating Margin(RMB Billions)Improving operating efficiency&economies of scale in core business over the long termDrivers of ProfitabilityFast growth from marketing service and logistic business Resilient Core Profitability with the Benefits of Scale Investment in improving user experience(2)Financial discipline in investment and spending 413.5 20.5 42.6 44.8 57.6 58.8 200212022TTM2023Q3Adjusted Operating Cash Flow(RMB Billions)(7.9)19.534.926.235.639.4200212022TTM2023Q3Free Cash Flow(RMB Billions)Free Cash Flow CharacteristicsOutstanding cash conversion cycle results in operating cash flow greater than net profitDevelopment properties as a long-term cash flow positive business Robust Cash Flow Generation21.41.17.718.622.0200212022TTM2023Q319.4Capital Expenditures(RMB Billions)Other CapexCapital expenditures for development properties,net of related sales proceeds(2.4)5(1)Refer to public disclosures for Non-GAAP adjustment items.Unaudited Selected Financial Data(RMB Millions)2022Q32022Q42023Q12023Q22023Q3Net revenues243,535 295,446 242,956 287,931 247,698 Non-GAAP operating expensesCost of revenues-207,299-253,866-206,901 -246,471-208,912Fulfillment-13,990-16,512-15,067-16,444-14,883Marketing-7,210-11,615-7,651-10,760-7,623Research and development-3,617-3,875-3,763-3,834-3,525General and administrative-1,493-2,326-1,699-1,746-1,658Non-GAAP income from operations(1)9,926 7,252 7,875 8,676 11,097 Non-GAAP net income attributable to ordinary shareholders(1)10,040 7,659 7,591 8,557 10,637 Non-GAAP operating margin(1)4.1%2.5%3.2%3.0%4.5%GAAP operating margin3.6%1.6%2.6%2.9%3.8%Non-GAAP net margin(1)4.1%2.6%3.1%3.0%4.3%GAAP net margin2.4%1.0%2.6%2.3%3.2%Unaudited Selected Financial Data6(1)Refer to public disclosures for definitions of turnover days.(2)Free cash flow is defined as operating cash flow adding back or subtracting the impact JD Technology related credit products included in the operating cash flow,and less capital expenditures,net of proceeds from disposals of long-lived assets.Supplemental Information2022Q32022Q42023Q12023Q22023Q3Inventory turnover days(1)TTM31.733.232.4 31.730.8Accounts payable turnover days(1)TTM50.452.551.3 52.852.6Accounts receivable turnover days(1)TTM4.04.54.8 5.0 5.4Free Cash Flow(2)TTM(RMB Billions)25.835.619.033.5 39.4Supplemental Financial Information and Business Metrics7Cities with Asia No.1 smart industrial parks(4)Nationwide Warehouse Network&Last-mile ReachRapid Expansion&Best-in-Class Fulfillment CapabilitiesProvide best-in-class customer experience(1)Map and data as of September 30,2023.(2)Including floor area managed under JDL Open Warehouse Platform.The numbers also include warehouses managed by Deppon Logistics Co.,Ltd.(3)The number also includes delivery personnel from Deppon Logistics Co.,Ltd.(4)Starting from the interim results announcement for the six months ended June 30,2022,JDL further adjusted and raised the classification standard for the Asia No.1 industrial parks,including but not limited to the GFA,the investment scale,and the level of automation.ShenyangBeijingXiamenNanningNational Customer Service CenterCustomer Service CenterHaikouSuperior Services through Nationwide Logistics Network Warehouses1,600 warehousesGFA(2)32 million sq.m.Deliverypersonnel(3)300,000 pplGeographic CoverageAlmost allcounties&districts in ChinaGuangzhouDongguanHarbinTianjinQingdaoZhengzhouChangchunXianWuhanHefeiShanghaiKunshanHangzhouChongqingChengduNanchangChangshaUrumqiDeyangYiwuWenzhouHengyang8

0人已浏览 2023-11-30 10页 5星级

Financial presentationto accompany management commentaryFY24 Q3The following guidance reflects the C.

0人已浏览 2023-11-29 35页 5星级

Financial presentationto accompany management commentaryFY24 Q2The following guidance reflects the C.

0人已浏览 2023-11-29 35页 5星级

 Financial presentationto accompany management commentaryQ1 FY24The following guidance reflects the C.

0人已浏览 2023-11-29 35页 5星级

FY2023 Second Quarter Financial ResultsSUZUKI MOTOR CORPORATIONNovember 7,2023Representative Directo.

0人已浏览 2023-11-14 35页 5星级

HALF YEAR FINANCIAL REPORTSix-month period ended June 30,2023Condensed Consolidated Financial Statem.

0人已浏览 2023-11-13 30页 5星级

 Table of ContentsUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549 _FORM 10-Q_(Mar.

0人已浏览 2023-10-30 51页 5星级

Table of ContentsUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549 _FORM 10-Q_(Mar.

0人已浏览 2023-10-30 51页 5星级

Meta Earnings Presentation Q3 $13,094$15,062$12,024$12,788$12,766$15,005$12,710$14,131$14,956$6,821$8,174$6,364$6,360$5,707$6,904$6,269$7,268$7,721$5,398$6,183$5,661$5,835$5,717$5,968$5,893$6,435$6,829$2,963$3,220$2,949$3,169$3,047$3,377$3,229$3,664$4,137Q321Q421Q122Q222Q322Q422Q123Q223Q323Advertising Revenue by User GeographyIn MillionsOur revenue by user geography is geographically apportioned based on our estimation of the geographic location of our users when they perform a revenue-generating activity.This allocation differs from our revenue disaggregated by geography disclosure in our condensed consolidated financial statements where revenue is geographically apportioned based on the addressesof our customers.2Rest of WorldAsia-PacificEuropeUS&Canada$28,276$32,639$33,643$26,998$28,152$27,237$31,254$28,101$31,498$13,613$15,826$12,671$13,249$13,035$15,636$13,048$14,422$15,190$6,955$8,357$6,486$6,452$5,797$7,050$6,345$7,323$7,777$5,461$6,244$5,759$5,908$5,782$6,050$5,960$6,515$6,928$2,981$3,244$2,992$3,213$3,100$3,429$3,292$3,739$4,251Q321Q421Q122Q222Q322Q422Q123Q223Q323Revenue by User GeographyIn MillionsOur revenue by user geography is geographically apportioned based on our estimation of the geographic location of our users when they perform a revenue-generating activity.This allocation differs from our revenue disaggregated by geography disclosure in our condensed consolidated financial statements where revenue is geographically apportioned based on the addressesof our customers.3Rest of WorldAsia-PacificEuropeUS&Canada$28,822$29,010$27,908$33,671$27,714$34,146$32,165$28,645$31,999Segment ResultsIn MillionsBeginning in the fourth quarter of 2021,we report our financial results based on two reportable segments:Family of Apps(FoA)and Reality Labs(RL).FoA includes Facebook,Instagram,Messenger,WhatsApp,and other services.RL includes augmented and virtual reality related consumer hardware,software,and content.For comparative purposes,amounts in prior periods have been recast.Q321Q421Q122Q222Q322Q422Q123Q223Q323Advertising$28,276$32,639$26,998$28,152$27,237$31,254$28,101$31,498$33,643 Other 176 155 215 218 192 184 205 225 293 Family of Apps Revenue 28,452 32,794 27,213 28,370 27,429 31,438 28,306 31,723 33,936 Reality Labs Revenue 558 877 695 452 285 727 339 276 210 Total Revenue$29,010$33,671$27,908$28,822$27,714$32,165$28,645$31,999$34,146 Family of Apps Operating Income$13,054$15,889$11,484$11,164$9,336$10,678$11,219$13,131$17,490 Reality Labs Operating(Loss)(2,631)(3,304)(2,960)(2,806)(3,672)(4,279)(3,992)(3,739)(3,742)Total Income from Operations$10,423$12,585$8,524$8,358$5,664$6,399$7,227$9,392$13,748 Operating Margin 3671) %)B0!&!(0303)%8%8%6%Q321Q421Q122Q222Q322Q422Q123Q223Q323Expenses as a Percentage of Revenue5General&AdministrativeMarketing&SalesResearch&DevelopmentCost ofRevenueEffective Tax RateIn Millions,Except for PercentagesQ321Q421Q122Q222Q322Q422Q123Q223Q323Income before provision for income taxes$10,565$12,702$8,908$8,186$5,576$6,149$7,307$9,293$14,020 Provision for income taxes 1,371 2,417 1,443 1,499 1,181 1,497 1,598 1,505 2,437 Effective Tax Rate 13!$%6Q321Q421Q122Q222Q322Q422Q123Q223Q323Net IncomeIn Millions7$7,788$4,652$4,395$6,687$7,465$10,285$9,194$5,709$11,583Q321Q421Q122Q222Q322Q422Q123Q223Q323Diluted Earnings Per Share$3.22$4.39$2.46$2.72$3.67$2.98$2.20$1.76$1.648Q322Q32320222023Capital ExpendituresIn Millions9QuarterlyYTDCapital expenditures for periods presented were related to purchases of property and equipment,net and principal payments on finance leases.$20,204$22,813$6,763$9,518Q321Q421Q122Q222Q322Q422Q123Q223Q323Family Daily Active People(DAP)In Billions10Q321Q421Q122Q222Q322Q422Q123Q223Q32378yyyyyyyyP/MAPWe define a daily active person(DAP)as a registered and logged-in user of Facebook,Instagram,Messenger,and/or WhatsApp(collectively,our Family of products)who visited at least one of these Family products through a mobile device application or using a web or mobile browser on a given day.The numbers for DAP do not include users on our other products unless they would otherwise qualify as DAP based on their other activities on our Family products.We do not require people to use a common identifier or link their accounts to use multiple products in our Family,and therefore must seek to attribute multiple user accounts within and across products to individual people.Our calculations of DAP rely upon complex techniques,algorithms,and machine learning models that seek to estimate the underlying number of unique people using one or more of these products,including by matching user accounts within an individual product and across multiple products when we believe they are attributable to a single person,and counting such group of accounts as one person.As these techniques and models require significant judgment,are developed based on internal reviews of limited samples of user accounts,and are calibrated against user survey data,there is necessarily some margin of error in our estimates.We view DAP,and DAP as a percentage of MAP,as measures of engagement across our products.For additional information,see Limitations of Key Metrics and Other Data located in the Appendix of this presentation.In the third quarter of 2022,we updated our Family metrics calculations to maintain calibration of our models against recent user survey data,and we estimate such update contributed an aggregate of approximately 30million DAP to our reported worldwide DAP in September 2022.2.813.143.072.962.872.932.882.823.02Q321Q421Q122Q222Q322Q422Q123Q223Q323Family Monthly Active People(MAP)In Billions11We define a monthly active person(MAP)as a registered and logged-in user of one or more Family products who visited at least one of these Family products through a mobile device application or using a web or mobile browser in the last 30days as of the date of measurement.The numbers for MAP do not include users on our other products unless they would otherwise qualify as MAP based on their other activities on our Family products.We do not require people to use a common identifier or link their accounts to use multiple products in our Family,and therefore must seek to attribute multiple user accounts within and across products to individual people.Our calculations of MAP rely upon complex techniques,algorithms,and machine learning models that seek to estimate the underlying number of unique people using one or more of these products,including by matching user accounts within an individual product and across multiple products when we believe they are attributable to a single person,and counting such group of accounts as one person.As these techniques and models require significant judgment,are developed based on internal reviews of limited samples of user accounts,and are calibrated against user survey data,there is necessarily some margin of error in our estimates.We view MAP as a measure of the size of our global active community of people using our products.For additional information,see Limitations of Key Metrics and Other Data located in the Appendix of this presentation.In the third quarter of 2022,we updated our Family metrics calculations to maintain calibration of our models against recent user survey data,and we estimate such update contributed an aggregate of approximately 40million MAP to our reported worldwide MAP in September 2022.3.963.813.743.713.653.643.593.583.88Q321Q421Q122Q222Q322Q422Q123Q223Q323Family Average Revenue per Person(ARPP)12We define average revenue per person(ARPP)as our total revenue during a given quarter,divided by the average of the number of MAP at the beginning and end of the quarter.While ARPP includes all sources of revenue,the number of MAP used in this calculation only includes users of our Family products as described in the definition of MAP in the previous slide.$8.71$7.59$8.32$8.63$7.53$7.91$7.72$9.39$8.020220330830930730330330430730730780580682783684585487389296365676Q321Q421Q122Q222Q322Q422Q123Q223Q323Facebook Daily Active Users(DAUs)In MillionsPlease see Metas most recent quarterly or annual report filed with the SEC for definitions of user activity used to determine the number of our Facebook DAUs and MAUs.The numbers for DAUs and MAUs do not include users on Instagram,WhatsApp,or our other productsunless they would otherwise qualify as DAUs or MAUs,respectively,based on their other activities on Facebook.13Q321Q421Q122Q222Q322Q422Q123Q223Q32366fgggghhhUs/MAUsRest of WorldAsia-PacificEuropeUS&Canada1,9301,9681,9601,9842,0002,0372,0642,0851,929266626626927027074084074114094081,2781,2781,2971,3051,3121,3121,3241,3491,3579499459579599719799861,0021,013Q321Q421Q122Q222Q322Q422Q123Q223Q323Facebook Monthly Active Users(MAUs)In MillionsPlease see Metas most recent quarterly or annual report filed with the SEC for definitions of user activity used to determine the number of our Facebook DAUs and MAUs.The numbers for DAUs and MAUs do not include users on Instagram,WhatsApp,or our other productsunless they would otherwise qualify as DAUs or MAUs,respectively,based on their other activities on Facebook.14Rest of WorldAsia-PacificEuropeUS&Canada2,9342,9102,9122,9362,9582,9632,9893,0303,049Q322Q422Q123Q223Q323Facebook Average Revenue per User(ARPU)15WorldwideWe define ARPU as our total revenue in a given geography during a given quarter,divided by the average of the number of MAUs in the geography at the beginning and end of the quarter.While ARPU includes all sources of revenue,the number of MAUs used in this calculation only includes users of Facebook and Messenger as described in the definition of MAU in the previous slide.Our revenue by user geography is geographically apportioned based on our estimation of the geographic location of our users when they perform a revenue-generating activity.This allocation differs from our revenue disaggregated by geography disclosure in our condensed consolidated financial statements where revenue is geographically apportioned based on the addresses of our customers.Q322Q422Q123Q223Q323Q322Q422Q123Q223Q323US&CanadaEuropeQ322Q422Q123Q223Q323Asia-PacificQ322Q422Q123Q223Q323Rest of WorldAsia-Pacific$4.22$9.41$56.11$53.53$11.23$10.63$9.62$10.86$58.77$48.85$49.13$19.04$17.88$15.51$17.29$14.23$3.52$3.21$4.88$4.52$4.61$4.42$5.12$3.76$3.35AppendixFree Cash Flow ReconciliationIn MillionsQ321Q421Q122Q222Q322Q422Q123Q223Q323Net cash provided by operating activities$14,091$18,104$14,076$12,197$9,691$14,511$13,998$17,309$20,402 Less:Purchases of property and equipment,net 4,313 5,370 5,315 7,528 9,355 8,988 6,823 6,134 6,496 Less:Principal payments on finance leases 231 172 233 219 163 235 264 220 267 Free Cash Flow$9,547$12,562$8,528$4,450$173$5,288$6,911$10,955$13,639 17Free cash flow(FCF)is a non-GAAP financial measure that has limitations as an analytical tool,and you should not consider it in isolation or as a substitute for analysis of other GAAP financial measures,such as net cash provided by operating activities.FCF is not intended to represent our residual cash flow available for discretionary expenses.Some of the limitations of FCF are:(i)FCF does not reflect our future contractual commitments,and(ii)other companies in our industry present similarly titled measures differently than we do,limiting their usefulness as comparative measures.Limitations of Key Metrics and Other Data18The numbers for our key metrics are calculated using internal company data based on the activity of user accounts.We report our estimates of the numbers of our daily active people(DAP),monthly active people(MAP),and average revenue per person(ARPP)(collectively,our Family metrics)based on the activity of users who visited at least one of Facebook,Instagram,Messenger,and WhatsApp(collectively,our Family of products)during the applicable period of measurement.We have historically reported the numbers of our daily active users(DAUs),monthly active users(MAUs),and average revenue per user(ARPU)(collectively,our Facebook metrics)based on user activity only on Facebook and Messenger and not on our other products.We believe our Family metrics better reflect the size of our community and the fact that many people are using more than one of our products.As a result,over time we intend to report our Family metrics as key metrics in place of DAUs,MAUs,and ARPU.While these numbers are based on what we believe to be reasonable estimates of our user base for the applicable period of measurement,there are inherent challenges in measuring usage of our products across large online and mobile populations around the world.The methodologies used to measure these metrics require significant judgment and are also susceptible to algorithm or other technical errors.In addition,we are continually seeking to improve our estimates of our user base,and such estimates may change due to improvements or changes in our methodology.We regularly review our processes for calculating these metrics,and from time to time we discover inaccuracies in our metrics or make adjustments to improve their accuracy,which can result in adjustments to our historical metrics.Our ability to recalculate our historical metrics may be impacted by data limitations or other factors that require us to apply different methodologies for such adjustments.We generally do not intend to update previously disclosed Family metrics for any such inaccuracies or adjustments that are within the error margins disclosed below.In addition,our Family metrics and Facebook metrics estimates will differ from estimates published by third parties due to differences in methodology or other factors such as data limitations or other challenges in measuring large online and mobile populations.For example,our Family metrics estimates in some instances exceed estimates of addressable online and mobile populations that are based on data published by third parties.Family MetricsMany people in our community have user accounts on more than one of our products,and some people have multiple user accounts within an individual product.Accordingly,for our Family metrics,we do not seek to count the total number of user accounts across our products because we believe that would not reflect the actual size of our community.Rather,our Family metrics represent our estimates of the number of unique people using at least one of Facebook,Instagram,Messenger,and WhatsApp.We do not require people to use a common identifier or link their accounts to use multiple products in our Family,and therefore must seek to attribute multiple user accounts within and across products to individual people.To calculate these metrics,we rely upon complex techniques,algorithms and machine learning models that seek to count the individual people behind user accounts,including by matching multiple user accounts within an individual product and across multiple products when we believe they are attributable to a single person,and counting such group of accounts as one person.These techniques and models require significant judgment,are subject to data and other limitations discussed below,and inherently are subject to statistical variances and uncertainties.We estimate the potential error in our Family metrics primarily based on user survey data,which itself is subject to error as well.While we expect the error margin for our Family metrics to vary from period to period,we estimate that such margin generally will be approximately 3%of our worldwide MAP.At our scale,it is very difficult to attribute multiple user accounts within and across products to individual people,and it is possible that the actual numbers of unique people using our products may vary significantly from our estimates,potentially beyond our estimated error margins.As a result,it is also possible that our Family metrics may indicate changes or trends in user numbers that do not match actual changes or trends.Limitations of Key Metrics and Other Data19To calculate our estimates of Family DAP and MAP,we currently use a series of machine learning models that are developed based on internal reviews of limited samples of user accounts and calibrated against user survey data.We apply significant judgment in designing these models and calculating these estimates.For example,to match user accounts within individual products and across multiple products,we use data signals such as similar device information,IP addresses,and user names.We also calibrate our models against data from periodic user surveys of varying sizes and frequency across our products,which are inherently subject to error.The timing and results of such user surveys have in the past contributed,and may in the future contribute,to changes in our reported Family metrics from period to period.In addition,our data limitations may affect our understanding of certain details of our business and increase the risk of error for our Family metrics estimates.Our techniques and models rely on a variety of data signals from different products,and we rely on more limited data signals for some products compared to others.For example,as a result of limited visibility into encrypted products,we have fewer data signals from WhatsApp user accounts and primarily rely on phone numbers and device information to match WhatsApp user accounts with accounts on our other products.Similarly,although Messenger Kids users are included in our Family metrics,we do not seek to match their accounts with accounts on our other applications for purposes of calculating DAP and MAP.Any loss of access to data signals we use in our process for calculating Family metrics,whether as a result of our own product decisions,actions by third-party browser or mobile platforms,regulatory or legislative requirements,or other factors,also may impact the stability or accuracy of our reported Family metrics,as well as our ability to report these metrics at all.Our estimates of Family metrics also may change as our methodologies evolve,including through the application of new data signals or technologies,product changes,or other improvements in our user surveys,algorithms,or machine learning that may improve our ability to match accounts within and across our products or otherwise evaluate the broad population of our users.In addition,such evolution may allow us to identify previously undetected violating accounts(as defined below).We regularly evaluate our Family metrics to estimate the percentage of our MAP consisting solely of violating accounts.We define violating accounts as accounts which we believe are intended to be used for purposes that violate our terms of service,including bots and spam.In the fourth quarter of 2022,we estimated that approximately 3%of our worldwide MAP consisted solely of violating accounts.Such estimation is based on an internal review of a limited sample of accounts,and we apply significant judgment in making this determination.For example,we look for account information and behaviors associated with Facebook and Instagram accounts that appear to be inauthentic to the reviewers,but we have limited visibility into WhatsApp user activity due to encryption.In addition,if we believe an individual person has one or more violating accounts,we do not include such person in our violating accounts estimation as long as we believe they have one account that does not constitute a violating account.From time to time,we disable certain user accounts,make product changes,or take other actions to reduce the number of violating accounts among our users,which may also reduce our DAP and MAP estimates in a particular period.We intend to disclose our estimates of the percentage of our MAP consisting solely of violating accounts on an annual basis.Violating accounts are very difficult to measure at our scale,and it is possible that the actual number of violating accounts may vary significantly from our estimates.The numbers of Family DAP and MAP discussed in this presentation,as well as ARPP,do not include users on our other products,unless they would otherwise qualify as DAP or MAP,respectively,based on their other activities on our Family products.Limitations of Key Metrics and Other Data20Facebook MetricsWe regularly evaluate our Facebook metrics to estimate the number of duplicate and false accounts among our MAUs.A duplicate account is one that a user maintains in addition to his or her principal account.We divide false accounts into two categories:(1)user-misclassified accounts,where users have created personal profiles for a business,organization,or non-human entity such as a pet(such entities are permitted on Facebook using a Page rather than a personal profile under our terms of service);and(2)violating accounts,which represent user profiles that we believe are intended to be used for purposes that violate our terms of service,such as bots and spam.The estimates of duplicate and false accounts are based on an internal review of a limited sample of accounts,and we apply significant judgment in making this determination.For example,to identify duplicate accounts we use data signals such as identical IP addresses and similar user names,and to identify false accounts we look for names that appear to be fake or other behavior that appears inauthentic to the reviewers.Any loss of access to data signals we use in this process,whether as a result of our own product decisions,actions by third-party browser or mobile platforms,regulatory or legislative requirements,or other factors,also may impact the stability or accuracy of our estimates of duplicate and false accounts.Our estimates also may change as our methodologies evolve,including through the application of new data signals or technologies or product changes that may allow us to identify previously undetected duplicate or false accounts and may improve our ability to evaluate a broader population of our users.Duplicate and false accounts are very difficult to measure at our scale,and it is possible that the actual number of duplicate and false accounts may vary significantly from our estimates.In the fourth quarter of 2022,we estimated that duplicate accounts may have represented approximately 11%of our worldwide MAUs.We believe the percentage of duplicate accounts is meaningfully higher in developing markets such as the Philippines and Vietnam,as compared to more developed markets.In the fourth quarter of 2022,we estimated that false accounts may have represented approximately 4-5%of our worldwide MAUs.Our estimation of false accounts can vary as a result of episodic spikes in the creation of such accounts,which we have seen originate more frequently in specific countries such as Indonesia,Nigeria,and Vietnam.From time to time,we disable certain user accounts,make product changes,or take other actions to reduce the number of duplicate or false accounts among our users,which may also reduce our DAU and MAU estimates in a particular period.We intend to disclose our estimates of the number of duplicate and false accounts among our MAUs on an annual basis.The numbers of DAUs and MAUs discussed in this presentation,as well as ARPU,do not include users on Instagram,WhatsApp,or our other products,unless they would otherwise qualify as DAUs or MAUs,respectively,based on their other activities on Facebook.User GeographyOur data regarding the geographic location of our users is estimated based on a number of factors,such as the users IP address and self-disclosed location.These factors may not always accurately reflect the users actual location.For example,a user may appear to be accessing Facebook from the location of the proxy server that the user connects to rather than from the users actual location.The methodologies used to measure our metrics are also susceptible to algorithm or other technical errors,and our estimates for revenue by user location and revenue by user device are also affected by these factors.Meta Earnings Presentation Q3

0人已浏览 2023-10-27 21页 5星级

UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549Form 10-Q QUARTERLY REPORT PURSU.

0人已浏览 2023-10-16 127页 5星级

 2023Bridgepoint Group plc Interim Report Financial highlights Assets under management(AUM)39.5bn(YE . 

0人已浏览 2023-10-16 49页 5星级

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549_FORM 10-Q _(Mark One)QUARTERLY R.

1人已浏览 2023-10-13 46页 5星级

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549_FORM 10-Q_(Mark One)QUARTERLY RE. 

1人已浏览 2023-10-13 80页 5星级

2023Interim ReportStock Code:1398Industrial and Commercial Bank of China was established on 1 Januar. 

4人已浏览 2023-10-12 223页 5星级