NVIDIA Corp. (NASDAQ:NVDA)

An analysis of short-term operating activity ratios reveals fluctuating performance over the observed period. Several ratios exhibit cyclical patterns, while others demonstrate clear directional trends. Overall, the period from 2021 to 2026 shows increasing variability in operational efficiency.

Inventory Management

Inventory turnover decreased from 3.44 in 2021 to 2.25 in 2023, indicating a slower rate of inventory sales. A partial recovery to 3.15 in 2024 was followed by a slight decline to 2.92 in 2026. Correspondingly, the average inventory processing period lengthened from 106 days in 2021 to 162 days in 2023, before decreasing to 113 days in 2025 and increasing again to 125 days in 2026. These movements suggest potential challenges in managing inventory levels and demand forecasting, particularly in 2023.

Receivables Management

Receivables turnover experienced a decline from 6.86 in 2021 to 5.79 in 2022, followed by an increase to 7.05 in 2023, and then a decrease to 5.61 in 2026. The average receivable collection period increased from 53 days in 2021 to 65 days in both 2025 and 2026, suggesting a lengthening of the time required to collect payments from customers. This trend could indicate a loosening of credit terms or difficulties in collecting outstanding receivables.

Payables Management

Payables turnover increased significantly from 5.23 in 2021 to 9.74 in 2023, indicating a faster rate of paying suppliers. This was followed by a decrease to 6.37 in 2026. The average payables payment period decreased from 70 days in 2021 to 37 days in 2023, then increased to 71 days in 2025 and decreased to 57 days in 2026. The fluctuations suggest a dynamic approach to managing supplier payments, potentially influenced by cash flow considerations or supplier negotiations.

Overall Operating Cycle & Cash Conversion

The operating cycle lengthened from 159 days in 2021 to 214 days in 2023, before decreasing to 178 days in 2025 and increasing to 190 days in 2026. The cash conversion cycle followed a similar pattern, increasing from 89 days in 2021 to 177 days in 2023, decreasing to 107 days in 2025, and increasing to 133 days in 2026. These trends indicate that the time taken to convert investments in inventory and other resources into cash has generally increased over the period, with a notable peak in 2023.

Working Capital Efficiency

Working capital turnover increased from 1.37 in 2021 to 2.31 in 2026, suggesting improved efficiency in utilizing working capital to generate sales. This increase indicates that the company is generating more revenue per dollar invested in working capital, although the increase is not consistent year-over-year.

In summary, the observed ratios suggest a period of operational adjustments and fluctuating efficiency. While working capital turnover shows improvement, trends in inventory, receivables, and the cash conversion cycle indicate potential areas for closer monitoring and optimization.

Analysis of the presented financial information reveals fluctuating trends in inventory turnover over the observed period. While cost of revenue and inventories both demonstrate consistent increases, the resulting inventory turnover ratio exhibits a more complex pattern.

Inventory Turnover Trend

The inventory turnover ratio initially increased from 3.44 in 2021 to 3.62 in 2022, indicating a slightly improved efficiency in converting inventory into revenue. However, a significant decrease to 2.25 was observed in 2023. The ratio partially recovered to 3.15 in 2024, followed by a slight increase to 3.24 in 2025. Most recently, in 2026, the ratio decreased again to 2.92.

Cost of Revenue and Inventory Relationship

Cost of revenue experienced substantial growth throughout the period, more than doubling from 2021 to 2026. Inventories also increased considerably, but at a slower rate than cost of revenue until 2025, where the growth rate accelerated. The combination of rising costs and inventories appears to be a primary driver of the fluctuations in the inventory turnover ratio.

2023 Decline

The notable decline in inventory turnover in 2023 warrants further investigation. While both cost of revenue and inventories increased, the inventory level grew at a faster pace than the cost of revenue, resulting in a lower turnover ratio. This suggests a potential buildup of inventory relative to sales during that year.

Recent Performance

The most recent year, 2026, shows a further decrease in inventory turnover despite continued growth in both cost of revenue and inventories. This suggests that the rate of inventory accumulation is outpacing the rate of sales, potentially indicating challenges in managing inventory levels or shifts in demand patterns.

Overall, the inventory turnover ratio demonstrates a lack of consistent improvement. While there are periods of slight gains, the overall trend is one of volatility, with a recent downward shift. Continued monitoring of this ratio, alongside detailed analysis of inventory management practices and sales trends, is recommended.

An examination of the provided financial information reveals trends in receivables turnover alongside changes in revenue and accounts receivable. While revenue has demonstrated substantial growth over the observed period, receivables turnover has exhibited a more moderate and fluctuating pattern.

Overall Trend

The receivables turnover ratio generally remained within a relatively narrow range between 5.61 and 7.05 over the six-year period. This suggests a consistent, though not dramatically changing, efficiency in collecting receivables. There isn't a clear, sustained upward or downward trend.

Revenue and Receivables Relationship

Revenue increased significantly from US$16,675 million in 2021 to US$215,938 million in 2026. Accounts receivable also increased substantially, rising from US$2,429 million in 2021 to US$38,466 million in 2026. The increase in receivables is proportionate to the revenue growth, which explains the relatively stable receivables turnover ratio.

Short-Term Fluctuations

The receivables turnover ratio peaked at 7.05 in 2023, then decreased to 6.09 in 2024. It continued to decline, reaching 5.66 in 2025 and 5.61 in 2026. This recent downward trend, while slight, warrants further investigation to determine if it indicates a potential slowdown in the collection process or a shift in credit terms.

Ratio Values

A ratio of approximately 6 indicates that, on average, the company collects its accounts receivable roughly six times per year. The slight decrease in the ratio towards the end of the period suggests a marginally longer collection cycle, though the difference is not substantial.

In conclusion, the receivables turnover ratio demonstrates a generally stable performance, aligning with significant revenue growth. The recent minor decline in the ratio should be monitored to assess its potential implications for cash flow and working capital management.

The accounts payable turnover ratio exhibits fluctuations over the observed period. While cost of revenue consistently increased, the accounts payable turnover ratio did not follow a strictly linear pattern, indicating a changing relationship between purchases and payment timing.

Overall Trend

The accounts payable turnover ratio initially showed modest increases from 5.23 in 2021 to 5.29 in 2022. A significant jump to 9.74 was observed in 2023, followed by a decrease to 6.16 in 2024. The ratio then decreased again to 5.17 in 2025 before increasing to 6.37 in 2026.

2021-2022

From 2021 to 2022, the accounts payable turnover ratio remained relatively stable. This suggests that the company maintained a consistent policy regarding the timing of payments to suppliers despite a substantial increase in cost of revenue, from US$6,279 million to US$9,439 million. Accounts payable also increased during this period, but at a similar rate.

2023

The substantial increase in the accounts payable turnover ratio in 2023, reaching 9.74, is noteworthy. This coincided with a further increase in cost of revenue to US$11,618 million, while accounts payable decreased to US$1,193 million. This suggests the company significantly accelerated its payments to suppliers, potentially taking advantage of early payment discounts or responding to changing supplier terms. Alternatively, it could indicate a shift in procurement strategy.

2024-2026

Following the peak in 2023, the accounts payable turnover ratio decreased in 2024 to 6.16, despite continued growth in both cost of revenue and accounts payable. This suggests a slowing of payment acceleration. The ratio then dipped to 5.17 in 2025, before rising to 6.37 in 2026. The increase in 2026, alongside a substantial increase in both cost of revenue and accounts payable, suggests a return to a more efficient use of trade credit, but not to the levels seen in 2023.

The observed fluctuations warrant further investigation to understand the underlying drivers of these changes in payment behavior and their impact on the company’s working capital management.

The working capital turnover ratio exhibits a generally increasing trend over the observed period. Initially, the ratio decreased from 1.37 in 2021 to 1.10 in 2022, before demonstrating consistent growth through 2026, reaching 2.31.

Working Capital

Working capital experienced substantial growth between 2021 and 2026, increasing from US$12,130 million to US$93,442 million. A notable dip occurred between 2022 and 2023, falling to US$16,510 million before resuming its upward trajectory. This fluctuation suggests potential shifts in short-term asset and liability management.

Revenue

Revenue also increased significantly over the period, rising from US$16,675 million in 2021 to US$215,938 million in 2026. The rate of revenue growth accelerated considerably from 2023 onwards, exceeding the growth rate observed in the earlier years. This acceleration likely contributes to the observed increase in the working capital turnover ratio.

Working Capital Turnover Ratio

The initial decline in the working capital turnover ratio in 2022 could be attributed to a slower growth in revenue relative to the increase in working capital. However, the subsequent and sustained increase in the ratio indicates that the company is becoming more efficient in utilizing its working capital to generate revenue. The ratio’s increase from 1.81 in 2024 to 2.31 in 2026 suggests improved operational efficiency and potentially more effective management of current assets and liabilities. The increasing trend suggests a positive correlation between revenue growth and efficient working capital management.

Overall, the analysis indicates a strengthening relationship between working capital and revenue generation. While a temporary dip in the turnover ratio was observed in 2022, the subsequent trend demonstrates improved efficiency in managing short-term assets and liabilities to support revenue growth.

The average inventory processing period exhibited fluctuations over the observed period. Initially, a decrease was noted, followed by a substantial increase, and then a period of relative stabilization with a slight upward trend towards the end of the observation window.

Average Inventory Processing Period

The average inventory processing period decreased from 106 days in 2021 to 101 days in 2022, indicating a more efficient conversion of inventory into sales during that timeframe. However, a significant increase occurred in 2023, with the period rising to 162 days. This suggests a slowdown in the inventory cycle, potentially due to factors such as overstocking, decreased demand, or supply chain disruptions.

Following the peak in 2023, the period decreased to 116 days in 2024 and remained relatively stable at 113 days in 2025. This suggests a partial recovery in inventory management efficiency. A slight increase to 125 days is observed in 2026, indicating a potential resumption of the slower inventory cycle, though not to the extent seen in 2023.

The observed changes in the average inventory processing period do not appear to correlate directly with the inventory turnover ratio. While inventory turnover decreased in 2023, coinciding with the peak in processing period, turnover recovered somewhat in 2024 and 2025, but the processing period did not return to its earlier levels. This suggests that factors beyond simple sales velocity are influencing the time it takes to process inventory.

Further investigation would be required to determine the underlying causes of these fluctuations, including analysis of sales trends, purchasing practices, and supply chain dynamics.

The average receivable collection period exhibited fluctuations over the observed period. While the receivables turnover ratio showed some variability, the collection period provides a more direct view of how efficiently the company converts receivables into cash.

Average Receivable Collection Period

The average receivable collection period began at 53 days as of January 31, 2021. An increase was noted in the following year, reaching 63 days by January 30, 2022. This represents a 10-day lengthening in the time taken to collect receivables.

Subsequently, the collection period decreased to 52 days as of January 29, 2023, before rising again to 60 days by January 28, 2024. The most recent two years show a consistent collection period of 65 days as of January 26, 2025, and January 25, 2026.

The period remained stable at 65 days for the last two years of the observation window, indicating a potential plateau in collection efficiency or a deliberate adjustment to credit terms.

The initial increase in the collection period from 2021 to 2022 warrants further investigation. Potential causes could include changes in customer creditworthiness, alterations to credit policies, or a shift in the sales mix towards customers with longer payment terms. The subsequent stabilization at 65 days suggests that any adjustments made to address the earlier increase have had a lasting effect, or that this period is now considered acceptable by management.

Overall, the trend suggests a potential weakening in collection efficiency between 2021 and 2023, followed by a stabilization at a longer collection period. Continued monitoring of this metric is recommended to assess whether the current collection period is optimal and sustainable.

The operating cycle exhibited a fluctuating pattern over the analyzed period. Initially, the cycle length increased from 159 days in 2021 to 164 days in 2022, before experiencing a substantial rise to 214 days in 2023. Subsequently, the cycle decreased to 176 days in 2024 and remained relatively stable at 178 days in 2025, before increasing again to 190 days in 2026.

Average Inventory Processing Period

The average inventory processing period demonstrated variability. It decreased slightly from 106 days in 2021 to 101 days in 2022, then increased significantly to 162 days in 2023. Following this peak, the period decreased to 116 days in 2024 and 113 days in 2025, before rising to 125 days in 2026. This suggests potential inefficiencies in inventory management in 2023, followed by improvements in subsequent years, with a slight reversal in the latest period.

Average Receivable Collection Period

The average receivable collection period generally trended upward. It increased from 53 days in 2021 to 63 days in 2022, decreased to 52 days in 2023, and then rose to 60 days in 2024. The period continued to increase, reaching 65 days in both 2025 and 2026. This indicates a lengthening of the time required to collect receivables, potentially signaling changes in credit policies or customer payment behavior.

The operating cycle’s movements appear to be influenced by both the inventory processing and receivable collection periods. The substantial increase in the operating cycle in 2023 is largely attributable to the significant increase in the average inventory processing period during that year. The consistent increase in the receivable collection period from 2024 onwards also contributes to the overall lengthening of the operating cycle in the later years of the analyzed period.

The average payables payment period exhibited fluctuations over the observed period. Initially stable, the metric demonstrated a significant decrease followed by a return towards initial values, and then another decrease. This suggests evolving supplier relationships and/or changes in the company’s cash management practices.

Payables Turnover & Average Payment Period Relationship

An inverse relationship exists between payables turnover and the average payables payment period, as expected. Higher payables turnover corresponds to shorter payment periods, and vice versa. This confirms the consistency of the calculations.

Initial Stability (2021-2022)

From January 31, 2021, to January 30, 2022, the average payables payment period remained relatively consistent, at 70 days and 69 days respectively. This indicates a stable approach to managing payments to suppliers during this timeframe.

Significant Decrease (2023)

A substantial decrease in the average payables payment period was observed on January 29, 2023, falling to 37 days. This represents a considerable shortening of the time taken to settle obligations with suppliers, potentially due to negotiated payment terms, improved cash flow, or a strategic decision to optimize working capital. The payables turnover increased significantly in the same period, supporting this observation.

Partial Reversion & Subsequent Decrease (2024-2026)

The average payables payment period increased to 59 days on January 28, 2024, partially reversing the prior year’s decline. It then rose further to 71 days on January 26, 2025, exceeding the initial values from 2021 and 2022. However, a subsequent decrease to 57 days was recorded on January 25, 2026. This recent fluctuation suggests potential shifts in supplier agreements or internal payment policies, or perhaps temporary disruptions in cash flow. The payables turnover figures reflect these changes, showing a decrease in 2024, an increase in 2025, and another increase in 2026.

Overall, the trend indicates a period of stability, followed by a significant shift in payment practices, and then a period of adjustment and fluctuation. Further investigation into the underlying causes of these changes would be beneficial.

The short-term operating activity of the company, as measured by its cash conversion cycle and component ratios, exhibits fluctuating trends over the analyzed period. Overall, the cash conversion cycle demonstrates considerable volatility, with a notable peak in 2023 followed by a decrease and subsequent increase.

Average Inventory Processing Period

The average time to process inventory generally remained relatively stable between 101 and 116 days from 2022 to 2024. However, a significant increase to 162 days was observed in 2023, suggesting a potential slowdown in inventory turnover during that year. The period then decreased slightly in 2024 and remained around 113 days in 2025 before increasing again to 125 days in 2026.

Average Receivable Collection Period

The average number of days to collect receivables showed a consistent upward trend from 53 days in 2021 to 65 days in both 2025 and 2026. This indicates a lengthening of the time required to convert sales into cash, potentially due to changes in credit terms offered to customers or a decline in the efficiency of collection efforts. A slight dip to 52 days occurred in 2023, but the overall trend is clearly increasing.

Average Payables Payment Period

The average time taken to pay suppliers fluctuated considerably. A decrease from 70 days in 2021 to 37 days in 2023 was observed, suggesting improved cash management or more aggressive negotiation of payment terms with suppliers. However, this was followed by an increase to 71 days in 2025, and a decrease to 57 days in 2026. This volatility suggests a dynamic relationship with suppliers and potentially strategic adjustments to payment timing.

Cash Conversion Cycle

The cash conversion cycle increased from 89 days in 2021 to 95 days in 2022. A substantial increase to 177 days occurred in 2023, driven primarily by the extended inventory processing period. The cycle then decreased to 117 days in 2024, followed by a further decrease to 107 days in 2025. However, the cycle increased again to 133 days in 2026, indicating a potential return to longer operating cycles. The overall trend suggests a cyclical pattern influenced by changes in inventory management and receivable collection efficiency.

The interplay between these ratios suggests that the company’s ability to efficiently manage its working capital has varied over the period. The significant increase in the cash conversion cycle in 2023 warrants further investigation to understand the underlying causes and potential implications for liquidity.