NVIDIA Corp. (NASDAQ:NVDA)

The analysis of short-term operating activity ratios reveals a period of significant volatility in operational efficiency, characterized by a distinct cycle of deterioration, recovery, and a subsequent recent decline in liquidity velocity.

Inventory Management Efficiency

Inventory turnover exhibited a notable decline from 3.63 in May 2021 to a trough of 2.25 in January 2023, correlating with an increase in the average inventory processing period from 100 to 162 days. A recovery phase followed, with turnover peaking at 3.57 in October 2024. However, a downward trend is observed in the final periods, with turnover falling to 2.43 and the processing period extending to 150 days by July 2026, suggesting a recent accumulation of unsold stock or a slowdown in inventory throughput.

Receivables and Payables Dynamics

Receivables turnover remained relatively stable, generally fluctuating between 4.63 and 7.05. The collection period showed minimal volatility, though a peak of 79 days was recorded in July 2023, with a recent increase to 76 days by July 2026. In contrast, payables turnover showed sharp fluctuations; a significant spike to 9.91 in April 2023 indicated a rapid acceleration of payments to suppliers (reducing the payment period to 37 days), followed by a return to a more extended payment window of 72 days by July 2026.

Working Capital Utilization

Working capital turnover demonstrates a consistent long-term upward trajectory, rising from 1.36 in May 2021 to a peak of 2.37 in April 2026. This indicates an increasing ability to generate sales relative to the investment in net working capital, despite fluctuations in individual component ratios.

Operating and Cash Conversion Cycles

The operating cycle peaked at 215 days in July 2023, driven primarily by the surge in inventory processing time. While the cycle contracted to 147 days by April 2025, it expanded again to 226 days by July 2026. This expansion is mirrored in the cash conversion cycle (CCC), which saw a significant peak of 177 days in January 2023. After a period of optimization where the CCC dropped to 87 days in April 2025, it rose sharply to 154 days by July 2026, indicating a longer duration for converting resource inputs into cash flows.

The inventory turnover ratio exhibits a cyclical pattern characterized by an initial decline, a mid-term recovery, and a subsequent downward trend coinciding with a massive expansion in operational scale. While the cost of revenue and total inventory levels have grown substantially over the observed period, the efficiency with which inventory is cycled has fluctuated significantly.

Initial Decline and Trough (May 2021 – January 2023)

A gradual erosion of inventory efficiency is observed starting in early 2022. The turnover ratio decreased from a peak of 3.87 in October 2021 to a period low of 2.25 by January 2023. This decline occurred as inventory levels grew from approximately 2.2 billion to 5.2 billion, outpacing the growth in the cost of revenue, which suggests a period of inventory accumulation or softening demand relative to stock levels.

Recovery and Efficiency Peak (April 2023 – October 2024)

A consistent recovery in turnover efficiency followed the January 2023 trough. The ratio improved steadily, reaching 3.57 by October 2024. This phase indicates a realignment where the cost of revenue began to grow more rapidly than inventory holdings, reflecting higher throughput and improved operational efficiency in managing stock.

Scaling Phase and Recent Deceleration (January 2025 – July 2026)

Following a peak turnover of 3.92 in April 2025, a downward trend is observed through July 2026, where the ratio fell to 2.43. This decline is occurring despite an unprecedented surge in the cost of revenue, which rose from 10.6 billion in October 2024 to 24.1 billion in July 2026. However, inventory levels grew even more aggressively, increasing from 7.6 billion to 31.6 billion in the same window. This suggests that the organization is aggressively stocking up to support massive growth, leading to a decrease in the turnover ratio as inventory builds faster than it is consumed.

Correlation Between Volume and Turnover

An inverse relationship is observed between total inventory volume and turnover efficiency in the most recent periods. As inventories surpassed 20 billion, the turnover ratio dropped below 3.0, indicating that the sheer scale of current inventory holdings is placing downward pressure on the operating ratio, despite the significant increase in absolute cost of revenue.

The financial data indicates a period of exponential revenue expansion accompanied by fluctuating efficiency in the collection of outstanding receivables. While total revenue grew from 5,661 million US$ in May 2021 to 96,221 million US$ by July 2026, the receivables turnover ratio did not follow a linear trajectory, suggesting varying degrees of credit management efficiency during this growth phase.

Revenue and Receivables Scaling

A strong positive correlation is observed between revenue growth and the increase in net accounts receivable. As revenue accelerated—particularly from July 2023 onwards—accounts receivable climbed from 7,066 million US$ to a peak of 63,059 million US$ in July 2026. This scaling reflects the massive increase in sales volume, though the proportional growth of receivables has occasionally outpaced revenue growth.

Receivables Turnover Volatility

The turnover ratio remained relatively stable between 5.43 and 6.37 during the 2021-2022 period. A peak efficiency was reached in January 2023 with a ratio of 7.05, followed by a sharp decline to 4.63 in July 2023. Subsequent quarters showed a recovery, peaking again at 6.81 in April 2024, before entering a period of moderate volatility between 5.60 and 6.71 through early 2026.

Recent Collection Efficiency Trends

A significant decline in turnover efficiency is noted in the final reported period. From April 2026 to July 2026, the receivables turnover ratio dropped from 6.23 to 4.80. This decline corresponds with a substantial increase in net accounts receivable, which rose from 40,710 million US$ to 63,059 million US$ in a single quarter, despite a revenue increase of approximately 14,606 million US$. This suggests a slowdown in the speed of payment collections or a strategic shift in credit terms offered to customers during the most recent quarter.

The financial data indicates a period of substantial expansion in both the cost of revenue and accounts payable, reflecting a significant scaling of operational activities. Cost of revenue increased from 2,032 million USD in May 2021 to 24,079 million USD by July 2026. Concurrently, accounts payable grew from 1,218 million USD to 15,059 million USD over the same period, suggesting a proportional increase in obligations to suppliers to support the expanding volume of business.

Analysis of Payables Turnover Trends

The payables turnover ratio exhibited three distinct phases. From May 2021 to July 2022, the ratio remained relatively stable, fluctuating between 4.86 and 5.94. A period of sharp volatility occurred between October 2022 and April 2023, where the ratio peaked at 9.91. This spike indicates a temporary acceleration in the rate at which supplier obligations were settled or a reduction in the reliance on supplier credit relative to the cost of revenue.

Operational Stabilization

Following the peak in early 2023, the turnover ratio entered a phase of normalization. From July 2023 through July 2026, the ratio largely stabilized within a range of 5.00 to 7.26. This stabilization persists despite the exponential growth in absolute dollar values for both costs and payables, suggesting that the company has established a consistent and predictable cycle for managing its short-term liabilities.

Correlation Between Cost and Payables

The relationship between the cost of revenue and accounts payable suggests a strategic alignment in procurement and payment cycles. While absolute liabilities have increased more than twelve-fold, the maintenance of a turnover ratio typically between 5.0 and 6.5 in the latter half of the period indicates a disciplined approach to working capital management and consistent bargaining power with vendors.

The financial trajectory from May 2021 through July 2026 is characterized by a substantial expansion in both revenue and working capital, with the efficiency of working capital utilization demonstrating a general upward trend followed by a recent correction.

Revenue and Working Capital Scaling

Revenue grew from 5,661 million USD in May 2021 to 96,221 million USD by July 2026. During this same period, working capital increased from 14,123 million USD to 154,393 million USD. The most aggressive growth phase for both metrics commenced in the second half of 2023, marking a transition to a significantly higher scale of operations.

Working Capital Turnover Trend

The turnover ratio exhibited three distinct phases of movement. From May 2021 to May 2022, the ratio remained relatively low and stable, fluctuating between 1.03 and 1.36. A second phase of improvement occurred between July 2022 and January 2024, as the ratio climbed from 1.50 to 1.81. A third phase of peak efficiency was observed from April 2024 to April 2026, where the ratio consistently stayed above 2.0, reaching a maximum of 2.37.

Analysis of Operating Efficiency

The increase in the turnover ratio through early 2026 indicates that revenue growth significantly outpaced the growth of working capital, suggesting an increase in the efficiency with which the company utilized its short-term assets and liabilities to generate sales. This trend peaked in April 2026, reflecting optimal operating leverage.

Recent Divergence and Correction

A notable shift is observed in the final reporting period ending July 26, 2026. While revenue continued its upward trajectory to 96,221 million USD, working capital experienced a disproportionate surge to 154,393 million USD. This imbalance resulted in the working capital turnover ratio declining from 2.37 to 1.96, indicating a recent decrease in short-term operating efficiency or a strategic accumulation of liquid resources.

The analysis of inventory activity ratios reveals a cyclical pattern characterized by periods of efficiency gains followed by significant expansions in the inventory processing cycle. The relationship between inventory turnover and the average inventory processing period remains inversely correlated throughout the observed timeframe, reflecting fluctuations in operational efficiency and stock management.

Initial Efficiency Decline (May 2021 – January 2023)

An initial period of relative stability was followed by a marked deterioration in inventory velocity. While turnover began at 3.63 and peaked slightly at 3.87 in October 2021, a consistent downward trend emerged thereafter. This culminated in a low point of 2.25 in January 2023. Correspondingly, the average inventory processing period extended from 100 days to a peak of 162 days, indicating a significant slowdown in the movement of goods through the operating cycle.

Operational Recovery Phase (April 2023 – October 2024)

A period of sustained recovery is observed starting in April 2023, where inventory turnover began a steady ascent from 2.45, reaching a high of 3.57 by October 2024. This improvement in turnover is mirrored by a consistent reduction in the average inventory processing period, which fell from 149 days to 102 days. This phase represents the most efficient period of inventory management within the latter half of the dataset, suggesting optimized supply chain synchronization or increased demand velocity.

Secondary Expansion of Processing Period (January 2025 – July 2026)

A new trend of decreasing efficiency emerged in early 2025. Despite a brief peak in turnover at 3.92 and a minimum processing period of 93 days in April 2025, a subsequent decline is evident. Turnover decreased to 2.43 by July 2026, while the average inventory processing period climbed back to 150 days. This indicates a renewed increase in the time required to convert inventory into sales, mirroring the volatility seen in the 2022-2023 period.

Comparative Summary of Extremes

The most efficient operational state was recorded in April 2025, with a turnover ratio of 3.92 and a processing period of 93 days. Conversely, the least efficient state occurred in January 2023, characterized by a turnover ratio of 2.25 and a processing period of 162 days. The variance of 69 days between the minimum and maximum processing periods highlights significant volatility in short-term operating activity.

The analysis of short-term operating activity reveals significant volatility in the efficiency of receivables collection over the observed period. The average receivable collection period exhibits a non-linear trend, characterized by alternating phases of acceleration and deceleration in cash recovery from customers.

Collection Period Volatility

The collection cycle began at 57 days in May 2021 and experienced a gradual expansion to 67 days by May 2022. A marked improvement in efficiency occurred by January 2023, when the collection period reached its lowest point of 52 days. This improvement was short-lived, as the cycle spiked to its maximum of 79 days in July 2023, indicating a temporary slowdown in payment receipts or a shift in customer credit terms.

Correlation Between Turnover and Collection Days

A strict inverse correlation is observed between the receivables turnover ratio and the average collection period. The highest operational efficiency was recorded in January 2023, with a turnover ratio of 7.05 corresponding to the 52-day collection minimum. Similarly, the lowest turnover ratio of 4.63 in July 2023 aligns precisely with the 79-day collection peak, highlighting the direct impact of turnover rates on liquidity timelines.

Recent Performance and Trends

Following the volatility of 2023, a trend of improvement emerged throughout 2024, with the collection period descending to 54 days by July 2024. The period between 2025 and early 2026 remained relatively stable, fluctuating between 59 and 65 days. However, the most recent data indicates a renewed upward trend in the collection period, rising to 76 days by July 2026, which coincides with a decline in the turnover ratio to 4.80.

The analysis of the operating cycle reveals a period of significant volatility characterized by two distinct peaks in the duration required to convert inventory into cash. The overall efficiency of the operating cycle is primarily driven by fluctuations in inventory management rather than receivable collections.

Average Inventory Processing Period

A fluctuating trend is observed in the inventory processing period. From May 2021, the duration increased steadily from 100 days to a peak of 162 days in January 2023, suggesting a buildup of stock or a slowing of inventory turnover. This was followed by a period of contraction, where the processing period declined to 102 days by October 2024. However, a second upward trend emerged subsequently, with the period extending to 150 days by July 2026, indicating renewed inventory accumulation.

Average Receivable Collection Period

The collection of receivables remained relatively stable compared to inventory levels, generally oscillating between 52 and 79 days. A notable dip to 52 days occurred in January 2023, coinciding with the peak of the inventory processing period. A subsequent spike to 79 days in July 2023 represents the highest collection duration in the series. In the final periods of the analysis, the collection period exhibits moderate volatility, ending at 76 days in July 2026.

Operating Cycle

The total operating cycle mirrors the movements of the inventory processing period. The cycle expanded from 157 days in early 2021 to a peak of 215 days in July 2023. A significant improvement in efficiency was recorded between October 2023 and January 2025, with the cycle reaching a low of 147 days. This efficiency gain was reversed in the final year of the observed period, as the operating cycle climbed to its maximum value of 226 days by July 2026. This correlation indicates that inventory turnover is the primary variable impacting the company's short-term liquidity cycle.

The analysis of the average payables payment period reveals a volatile trend characterized by three distinct phases: a steady extension of payment terms, a period of aggressive settlement, and a subsequent return to longer payment cycles with periodic fluctuations.

Initial Expansion Period (May 2021 – July 2022)

An upward trend is observed during this interval, with the average payment period increasing from 61 days to a peak of 75 days. This gradual extension suggests a strategic increase in the use of supplier credit to support operational liquidity.

Accelerated Settlement Phase (October 2022 – April 2023)

A significant and rapid contraction is evident, as the payment period dropped to a low of 37 days. This correlates with a sharp increase in payables turnover, which peaked at 9.91. Such a reduction indicates a period of accelerated liability liquidation, potentially driven by a desire to capture early payment discounts or a shift in supplier contractual terms.

Recovery and Sustained Volatility (July 2023 – July 2026)

The payment period returned to higher levels, fluctuating generally between 50 and 73 days. While a temporary decrease to 50 days was recorded in April 2024, the period climbed back to 71 days by October 2024. The latter part of the observed timeframe shows a stabilization in the 56 to 73 day range, with a final reading of 72 days in July 2026, indicating a return to a more extended credit cycle compared to the 2023 lows.

Overall, the inverse correlation between payables turnover and the average payment period remains consistent. The fluctuations suggest a dynamic approach to working capital management, alternating between aggressive payment schedules and the extension of credit terms to optimize cash flow.

The operational efficiency of the cash conversion cycle over the analyzed period is characterized by significant volatility, exhibiting a marked expansion in 2023, a subsequent contraction through 2024, and a renewed upward trend leading into 2026. The overall cycle is heavily influenced by fluctuations in inventory management and changes in supplier payment terms.

Average Inventory Processing Period

A substantial increase in the time required to process inventory is observed from early 2021, peaking at 162 days in January 2023. This peak was followed by a consistent decline, reaching a low of 93 days by April 2025. However, the trend reversed in the final quarters, with the period extending to 150 days by July 2026, indicating a recurring pattern of inventory accumulation.

Average Receivable Collection Period

The collection of receivables remained relatively stable compared to other activity ratios, generally fluctuating between 52 and 79 days. A temporary peak of 79 days was recorded in July 2023, followed by a period of stability between 54 and 65 days. A gradual increase is noted toward the end of the period, concluding at 76 days in July 2026, which suggests a slight deceleration in cash inflows from customers.

Average Payables Payment Period

Significant volatility is evident in the payment of payables. Following a stable start, a sharp decline occurred between October 2022 and April 2023, with the period dropping to 37 days. This indicates a period of accelerated payments to suppliers. Subsequently, the period expanded again, reaching 73 days by April 2026, suggesting a return to longer credit terms or a shift in working capital strategy.

Cash Conversion Cycle (CCC)

The cash conversion cycle reached a peak of 177 days in January 2023, a result of the simultaneous occurrence of maximum inventory days and minimum payables payment days. A period of optimization followed, with the cycle contracting to 88 days by October 2024. The final phase shows a renewed expansion, with the CCC rising to 154 days by July 2026, primarily driven by the increase in inventory processing times and a moderate increase in receivable collection days.