NVIDIA CORP, 10-K filed on 3/17/2016
Annual Report
Document and Entity Information Document (USD $)
12 Months Ended
Jan. 31, 2016
Mar. 11, 2016
Jul. 24, 2015
Document Information [Line Items]
 
 
 
Entity Registrant Name
NVIDIA CORP 
 
 
Entity Central Index Key
0001045810 
 
 
Current Fiscal Year End Date
--01-31 
 
 
Entity Filer Category
Large Accelerated Filer 
 
 
Document Type
10-K 
 
 
Document Period End Date
Jan. 31, 2016 
 
 
Document Fiscal Year Focus
2016 
 
 
Document Fiscal Period Focus
FY 
 
 
Amendment Flag
false 
 
 
Entity Common Stock, Shares Outstanding
 
541,641,088 
 
Entity Well-known Seasoned Issuer
Yes 
 
 
Entity Voluntary Filers
No 
 
 
Entity Current Reporting Status
Yes 
 
 
Entity Public Float
 
 
$ 9,918,351,568 
CONSOLIDATED STATEMENTS OF INCOME (USD $)
In Millions, except Per Share data, unless otherwise specified
12 Months Ended
Jan. 31, 2016
Jan. 25, 2015
Jan. 26, 2014
Revenue
$ 5,010 
$ 4,682 
$ 4,130 
Cost of revenue
2,199 
2,083 
1,862 
Gross profit
2,811 
2,599 
2,268 
Operating expenses
 
 
 
Research and development
1,331 
1,360 
1,336 
Sales, general and administrative
602 
480 
436 
Restructuring and other charges
131 
0 
0 
Total operating expenses
2,064 
1,840 
1,772 
Income from operations
747 
759 
496 
Interest income
39 
28 
17 
Interest expense
(47)
(46)
(10)
Other income, net
4 
14 
7 
Income before income tax expense
743 
755 
510 
Income tax expense
129 
124 
70 
Net income
$ 614 
$ 631 
$ 440 
Basic net income per share
$ 1.13 
$ 1.14 
$ 0.75 
Diluted net income per share
$ 1.08 
$ 1.12 
$ 0.74 
Weighted average shares used in basic per share computation (in shares)
543 
552 
588 
Weighted average shares used in diluted per share computation (in shares)
569 
563 
595 
Cash dividends declared and paid per common share
$ 0.3950 
$ 0.3400 
$ 0.3100 
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (USD $)
In Millions, unless otherwise specified
12 Months Ended
Jan. 31, 2016
Jan. 25, 2015
Jan. 26, 2014
Net income
$ 614 
$ 631 
$ 440 
Net change in unrealized gains (losses) on available-for-sale securities
(6)
3 
(4)
Net change in fair value of interest rate swap
(4)
0 
0 
Reclassification adjustments for net realized gains on available-for-sale securities included in net income
(2)
0 
(1)
Other comprehensive income (loss)
(12)
3 
(5)
Total comprehensive income
$ 602 
$ 634 
$ 435 
CONSOLIDATED BALANCE SHEETS (USD $)
In Millions, unless otherwise specified
Jan. 31, 2016
Jan. 25, 2015
Current assets:
 
 
Cash and cash equivalents
$ 596 
$ 497 
Marketable securities
4,441 
4,126 
Accounts receivable, net
505 
474 
Inventories
418 
483 
Prepaid expenses and other current assets
93 
70 
Deferred income taxes
0 
63 
Total current assets
6,053 
5,713 
Property and equipment, net
466 
557 
Goodwill
618 
618 
Intangible assets, net
166 
222 
Other assets
67 
91 
Total assets
7,370 
7,201 
Current liabilities:
 
 
Accounts payable
296 
293 
Accrued and other current liabilities
642 
603 
Convertible short-term debt
1,413 
0 
Total current liabilities
2,351 
896 
Convertible long-term debt
0 
1,384 
Other long-term liabilities
453 
489 
Capital lease obligations, long term
10 
14 
Total Liabilities
2,814 
2,783 
Commitments and Contingencies - see Note 12
   
   
Convertible debt conversion obligation
87 
0 
Shareholders' equity
 
 
Preferred stock
0 
0 
Common stock
1 
1 
Additional paid-in capital
4,170 
3,855 
Treasury stock, at cost
(4,048)
(3,395)
Accumulated other comprehensive income (loss)
(4)
8 
Retained earnings
4,350 
3,949 
Total shareholders' equity
4,469 
4,418 
Total liabilities, convertible debt conversion obligation and shareholders' equity
$ 7,370 
$ 7,201 
CONSOLIDATED BALANCE SHEETS (Parentheticals) (USD $)
In Millions, except Per Share data, unless otherwise specified
Jan. 31, 2016
Jan. 25, 2015
Allowance for Doubtful Accounts Receivable
$ 11 
$ 17 
Preferred stock, par value
$ 0.001 
$ 0.001 
Preferred Stock, Shares Authorized
2 
2 
Preferred Stock, Shares Issued
0 
0 
Common stock, par value
$ 0.001 
$ 0.001 
Common Stock, Shares Authorized
2,000 
2,000 
Common Stock, Shares, Issued
780 
759 
Common stock, Shares, outstanding
539 
545 
Treasury Stock, Shares
242 
214 
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (USD $)
In Millions, unless otherwise specified
Total
Common Stock Outstanding
Additional Paid-in Capital
Treasury Stock
Accumulated Other Comprehensive Income (Loss)
Retained Earnings
Beginning Balances, shareholders' equity at Jan. 27, 2013
$ 4,827 
$ 1 
$ 3,194 
$ (1,623)
$ 10 
$ 3,245 
Beginning common stock, shares, outstanding at Jan. 27, 2013
 
617 
 
 
 
 
Increase (Decrease) in Shareholders' Equity
 
 
 
 
 
 
Other comprehensive income (loss)
(5)
 
 
 
(5)
 
Net income
440 
 
 
 
 
440 
Issuance of common stock from stock plans, shares
 
15 
 
 
 
 
Issuance of common stock from stock plans, value
97 
 
97 
 
 
 
Tax withholding related to vesting of restricted stock units, shares
 
(2)
 
 
 
 
Tax withholding related to vesting of restricted stock units, value
(28)
 
 
(28)
 
 
Tax benefit from stock-based compensation
24 
 
24 
 
 
 
Share repurchase, shares
 
(62)
 
 
 
 
Share repurchase, value
(887)
 
 
(887)
 
 
Cash dividends declared and paid
(181)
 
 
 
 
(181)
Discount on convertible notes
 
 
126 
 
 
 
Purchase of convertible note hedges
(167)
 
(167)
 
 
 
Proceeds from the sale of common stock warrants
59 
 
59 
 
 
 
Deferred tax asset associated with convertible notes
14 
 
14 
 
 
 
Stock-based compensation
136 
 
136 
 
 
 
Ending Balances, shareholders' equity at Jan. 26, 2014
4,455 
1 
3,483 
(2,538)
5 
3,504 
Ending common stock, shares, outstanding at Jan. 26, 2014
 
568 
 
 
 
 
Increase (Decrease) in Shareholders' Equity
 
 
 
 
 
 
Other comprehensive income (loss)
3 
 
 
 
3 
 
Net income
631 
 
 
 
 
631 
Issuance of common stock from stock plans, shares
 
24 
 
 
 
 
Issuance of common stock from stock plans, value
197 
 
197 
 
 
 
Tax withholding related to vesting of restricted stock units, shares
 
(3)
 
 
 
 
Tax withholding related to vesting of restricted stock units, value
(43)
 
 
(43)
 
 
Tax benefit from stock-based compensation
17 
 
17 
 
 
 
Share repurchase, shares
 
(44)
 
 
 
 
Share repurchase, value
(814)
 
 
(814)
 
 
Cash dividends declared and paid
(186)
 
 
 
 
(186)
Purchase of convertible note hedges
0 
 
 
 
 
 
Proceeds from the sale of common stock warrants
0 
 
 
 
 
 
Stock-based compensation
158 
 
158 
 
 
 
Ending Balances, shareholders' equity at Jan. 25, 2015
4,418 
1 
3,855 
(3,395)
8 
3,949 
Ending common stock, shares, outstanding at Jan. 25, 2015
545 
545 
 
 
 
 
Increase (Decrease) in Shareholders' Equity
 
 
 
 
 
 
Other comprehensive income (loss)
(12)
 
 
 
(12)
 
Net income
614 
 
 
 
 
614 
Issuance of common stock from stock plans, shares
 
22 
 
 
 
 
Issuance of common stock from stock plans, value
186 
 
186 
 
 
 
Tax withholding related to vesting of restricted stock units, shares
 
(3)
 
 
 
 
Tax withholding related to vesting of restricted stock units, value
(66)
 
 
(66)
 
 
Tax benefit from stock-based compensation
10 
 
10 
 
 
 
Share repurchase, shares
 
(25)
 
 
 
 
Share repurchase, value
(587)
 
 
(587)
 
 
Cash dividends declared and paid
(213)
 
 
 
 
(213)
Purchase of convertible note hedges
0 
 
 
 
 
 
Proceeds from the sale of common stock warrants
0 
 
 
 
 
 
Stock-based compensation
206 
 
206 
 
 
 
Reclassification of convertible debt conversion obligation
(87)
 
(87)
 
 
 
Ending Balances, shareholders' equity at Jan. 31, 2016
$ 4,469 
$ 1 
$ 4,170 
$ (4,048)
$ (4)
$ 4,350 
Ending common stock, shares, outstanding at Jan. 31, 2016
539 
539 
 
 
 
 
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
In Millions, unless otherwise specified
12 Months Ended
Jan. 31, 2016
Jan. 25, 2015
Jan. 26, 2014
Cash flows from operating activities:
 
 
 
Net income
$ 614 
$ 631 
$ 440 
Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
197 
220 
239 
Stock-based compensation expense
204 
158 
136 
Restructuring and other charges
45 
0 
0 
Amortization of debt discount
29 
28 
5 
Net gain on sale and disposal of long-lived assets and investments
(6)
(17)
(8)
Deferred income taxes
134 
83 
15 
Tax benefit from stock-based compensation
(10)
(18)
(26)
Other
19 
24 
21 
Changes in operating assets and liabilities, net of effects of acquisitions:
 
 
 
Accounts receivable
(32)
(49)
29 
Inventories
66 
(95)
25 
Prepaid expenses and other assets
(16)
4 
12 
Accounts payable
(11)
(27)
(20)
Accrued and other current liabilities
39 
5 
5 
Other long-term liabilities
97 
41 
38 
Net cash provided by operating activities
1,175 
906 
835 
Cash flows from investing activities:
 
 
 
Purchases of marketable securities
(3,477)
(2,862)
(3,066)
Proceeds from sales of marketable securities
2,102 
1,372 
1,927 
Proceeds from maturities of marketable securities
1,036 
865 
585 
Purchases of property and equipment and intangible assets
(86)
(122)
(255)
Proceeds from sale of long-lived assets and investments
7 
21 
25 
Acquisition of businesses, net of cash and cash equivalents
0 
0 
(17)
Reimbursement of headquarters building development costs from banks
24 
0 
0 
Other
(6)
(1)
(5)
Net cash used in investing activities
(400)
(727)
(806)
Cash flows from financing activities:
 
 
 
Proceeds from issuance of convertible notes, net
0 
0 
1,480 
Purchase of convertible note hedges
0 
0 
(167)
Proceeds from the sale of common stock warrants
0 
0 
59 
Proceeds from issuance of common stock under employee stock plans
120 
154 
69 
Payments related to repurchases of common stock
(587)
(814)
(887)
Dividends paid
(213)
(186)
(181)
Tax benefit from stock-based compensation
10 
18 
26 
Payments under capital lease obligations
(3)
(3)
(2)
Other
(3)
(3)
(5)
Net cash (used in) provided by financing activities
(676)
(834)
390 
Change in cash and cash equivalents
99 
(655)
419 
Cash and cash equivalents at beginning of period
497 
1,152 
733 
Cash and cash equivalents at end of period
596 
497 
1,152 
Supplemental disclosures of cash flow information:
 
 
 
Cash paid for income taxes, net
14 
14 
15 
Cash paid for interest
17 
17 
3 
Non-cash investing and financing activities:
 
 
 
Assets acquired by assuming related liabilities
19 
10 
3 
Goodwill adjustment related to previously acquired business
$ 0 
$ (25)
$ 0 
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies
Organization and Summary of Significant Accounting Policies
 
Our Company

NVIDIA is dedicated to advancing visual computing. NVIDIA has transformed into a specialized platform company that targets four large markets - Gaming, Professional Visualization, Datacenter and Automotive - where visual computing is essential and valued.

Our two reportable segments - GPU and Tegra Processor - are based on a single underlying graphics architecture. From our proprietary processors, we have created platforms that address the four large markets where our visual computing expertise is critically important. We are focused on delivering value through PC, mobile and cloud architectures. Our vertical integration enables us to bring together hardware, system software, programmable algorithms, systems and services to create unique value for the markets we serve.

Our GPU product brands are aimed at specialized markets including GeForce for gamers; Quadro for designers; Tesla for researchers and analysts focused on artificial intelligence, deep learning and big-data; and GRID for cloud-based visual computing users. We also integrate our GPUs into powerful mobile system-on-a-chip (SOC) processors, which drive supercomputing capabilities for tablets and online gaming and entertainment devices, as well as autonomous robots, drones and cars. Our Tegra brand integrates an entire computer onto a single chip, incorporating GPUs and multi-core CPUs with audio, video and input/output capabilities.

Headquartered in Santa Clara, California, NVIDIA was incorporated in California in April 1993 and reincorporated in Delaware in April 1998.
   
All references to “NVIDIA,” “we,” “us,” “our” or the “Company” mean NVIDIA Corporation and its subsidiaries, except where it is made clear that the term means only the parent company.

Fiscal Year
 
We operate on a 52- or a 53-week year, ending on the last Sunday in January. Fiscal year 2016 was a 53-week year with the extra week in the fiscal fourth quarter and fiscal years 2015 and 2014 were 52-week years.

Principles of Consolidation
 
Our consolidated financial statements include the accounts of NVIDIA Corporation and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates
 
The preparation of financial statements in conformity with accounting principles generally accepted in the United States, or 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 from those 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, and other contingencies. These estimates are based on historical facts and various other assumptions that we believe are reasonable.

Revenue Recognition
 
Product Revenue

We recognize revenue from product sales when persuasive evidence of an arrangement exists, the product has been delivered, the price is fixed or determinable and collection of the related receivable is reasonably assured. For most sales, we use a binding purchase order and in certain cases we use a contractual agreement as evidence of an arrangement. We consider delivery to occur upon shipment provided title and risk of loss have passed to the customer. At the point of sale, we assess whether the arrangement fee is fixed or determinable and whether collection is reasonably assured. If we determine that collection of a fee is not reasonably assured, we defer the fee and recognize revenue at the time collection becomes reasonably assured, which is generally upon receipt of payment.

For sales to certain distributors with rights of return for which the level of returns cannot be reasonably estimated, our policy is to defer recognition of revenue and related cost of revenue until the distributors resell the product and, in some cases, when customer return rights lapse.

Our customer programs primarily involve rebates, which are designed to serve as sales incentives to resellers of our products in various target markets. We account for rebates as a reduction of revenue and recognize a liability for these rebates at the later of the date at which we record the related revenue or the date at which we offer the rebate. Unclaimed rebates are reversed to revenue.

Our customer programs also include marketing development funds, or MDFs.  MDFs represent monies paid to retailers, system builders, original equipment manufacturers, or OEMs, distributors, add-in card partners and other channel partners that are earmarked for market segment development and expansion and typically are designed to support our partners’ activities while also promoting NVIDIA products. We account for MDFs as a reduction of revenue and apply a breakage factor to certain types of MDF programs.

We also record a reduction to revenue by establishing a sales return allowance for estimated product returns at the time revenue is recognized, based primarily on historical return rates. However, if product returns for a particular fiscal period exceed historical return rates we may determine that additional sales return allowances are required to properly reflect our estimated exposure for product returns.

License and Development Revenue

For license arrangements that require significant customization of our intellectual property components, we generally recognize the related revenue over the period that services are performed. For most license and service arrangements, we determine progress to completion based on actual cost incurred to date as a percentage of the estimated total cost required to complete the project. A provision for estimated losses on contracts is made in the period in which the loss becomes probable and can be reasonably estimated. Costs incurred in advance of revenue recognized are recorded as deferred costs on uncompleted contracts. If the amount billed exceeds the amount of revenue recognized, the excess amount is recorded as deferred revenue.

For license arrangements that do not require significant customization but where we are obligated to provide further deliverables over the term of the license agreement, we record revenue over the life of the license term, with consideration received in advance of the performance period classified as deferred revenue.

Royalty revenue is recognized related to the distribution or sale of products that use our technologies under license agreements with third parties.  We recognize royalty revenue upon receipt of a confirmation of earned royalties and when collectability is reasonably assured from the applicable licensee.

Restructuring and Other Charges

Our restructuring and other charges include employee severance and related costs, the write-down of assets, and other exit costs. The severance and related costs include one-time termination benefits as well as certain statutory termination benefits or employee terminations under ongoing benefit arrangements. One-time termination benefits are recognized as a liability at estimated fair value when the approved plan of termination has been communicated to employees, unless employees must provide future service, in which case the benefits are recognized ratably over the future service period. Ongoing termination benefits arrangements are recognized as a liability at estimated fair value when the amount of such benefits becomes estimable and payment is probable. Any contract termination costs are recognized at estimated fair value when we terminate the contract in accordance with the contract terms. Other associated costs are recognized in the period the liability is incurred.

Advertising Expenses

We expense advertising costs in the period in which they are incurred. Advertising expenses for fiscal years 2016, 2015 and 2014 were $17 million, $15 million and $13 million, respectively. 

Rent Expense
 
We recognize rent expense on a straight-line basis over the lease period and accrue for rent expense incurred, but not paid.
 
Product Warranties
 
We generally offer limited warranty to end-users that ranges from one to three years for products in order to repair or replace products for any manufacturing defects or hardware component failures. Cost of revenue includes the estimated cost of product warranties that are calculated at the point of revenue recognition. Under limited circumstances, we may offer an extended limited warranty to customers for certain products. We also accrue for known warranty and indemnification issues if a loss is probable and can be reasonably estimated.

Stock-based Compensation
      
We estimate the fair value of employee stock options on the date of grant using a binomial model and recognize the expense using a straight-line attribution method over the requisite employee service period. We use the closing trading price of our common stock on the date of grant, minus a dividend yield discount, as the fair value of awards of restricted stock units, or RSUs, and performance stock units that are based on our corporate financial performance targets, or PSUs, and we use a Monte Carlo simulation on the date of grant to estimate the fair value of performance stock units that are based on market conditions, or market-based PSUs. The compensation expense for stock options, RSUs and market-based PSUs is recognized using a straight-line attribution method over the requisite employee service period while compensation expense for PSUs is recognized using an accelerated amortization model. We estimate the fair value of shares to be issued under our employee stock purchase plan, or ESPP, using the Black-Scholes model at the commencement of an offering period in March and September of each year. Stock-based compensation for our ESPP is expensed using an accelerated amortization model.

Litigation, Investigation and Settlement Costs

From time to time, we are involved in legal actions and/or investigations by regulatory bodies. We are aggressively defending our current litigation matters. However, there are many uncertainties associated with any litigation or investigation, and we cannot be certain that these actions or other third-party claims against us will be resolved without litigation, fines and/or substantial settlement payments. If that occurs, our business, financial condition and results of operations could be materially and adversely affected. If information becomes available that causes us to determine that a loss in any of our pending litigation, investigations or settlements is probable, and we can reasonably estimate the loss associated with such events, we will record the loss in accordance with U.S. GAAP. However, the actual liability in any such litigation or investigation may be materially different from our estimates, which could require us to record additional costs.

Foreign Currency Remeasurement
 
We use the United States dollar as our functional currency for all of our subsidiaries. Foreign currency monetary assets and liabilities are remeasured into United States dollars at end-of-period exchange rates. Non-monetary assets and liabilities such as property and equipment, and equity are remeasured at historical exchange rates. Revenue and expenses are remeasured at average exchange rates in effect during each period, except for those expenses related to the previously noted balance sheet amounts, which are remeasured at historical exchange rates. Gains or losses from foreign currency remeasurement are included in “Other income, net” in our Consolidated Statements of Income and to date have not been significant.

The impact of gain or loss from foreign currency remeasurement included in determining other income, net was not significant for both fiscal year 2016 and 2015, and was a gain of $5 million for fiscal year 2014. 

Income Taxes
 
We recognize federal, state and foreign current tax liabilities or assets based on our estimate of taxes payable or refundable in the current fiscal year by tax jurisdiction. We recognize federal, state and foreign deferred tax assets or liabilities, as appropriate, for our estimate of future tax effects attributable to temporary differences and carryforwards; and we record a valuation allowance to reduce any deferred tax assets by the amount of any tax benefits that, based on available evidence and judgment, are not expected to be realized.

United States income tax has not been provided on a portion of earnings of our non-U.S. subsidiaries to the extent that such earnings are considered to be indefinitely reinvested.

Our calculation of deferred tax assets and liabilities is based on certain estimates and judgments and involves dealing with uncertainties in the application of complex tax laws. Our estimates of deferred tax assets and liabilities may change based, in part, on added certainty or finality to an anticipated outcome, changes in accounting standards or tax laws in the United States, or foreign jurisdictions where we operate, or changes in other facts or circumstances. In addition, we recognize liabilities for potential United States and foreign income tax contingencies based on our estimate of whether, and the extent to which, additional taxes may be due. If we determine that payment of these amounts is unnecessary or if the recorded tax liability is less than our current assessment, we may be required to recognize an income tax benefit or additional income tax expense in our financial statements accordingly.

As of January 31, 2016, we had a valuation allowance of $272 million related to state and certain foreign deferred tax assets that management determined are not likely to be realized due, in part, to projections of future taxable income and potential utilization limitations of tax attributes acquired as a result of stock ownership changes. To the extent realization of the deferred tax assets becomes more-likely-than-not, we would recognize such deferred tax asset as an income tax benefit during the period.

We recognize excess tax benefit related to stock-based compensation as a credit to shareholders' equity if and when realized. In determining if and when excess tax benefits have been realized, we have elected to utilize the with-and-without approach with respect to such excess tax benefits. We have also elected to ignore the indirect tax effects of stock-based compensation deductions for financial and accounting reporting purposes, and specifically to recognize the full effect of the research tax credit in income from operations.

We recognize the benefit from a tax position only if it is more-likely-than-not that the position would be sustained upon audit based solely on the technical merits of the tax position. Our policy is to include interest and penalties related to unrecognized tax benefits as a component of income tax expense. Please refer to Note 13 of these Notes to the Consolidated Financial Statements for additional information.

Comprehensive Income
 
Comprehensive income consists of net income and other comprehensive income (loss). Other comprehensive income (loss) components include unrealized gains (losses) on available-for-sale securities and the net change in fair value of our interest rate swap, net of tax.

Net Income Per Share
 
Basic net income per share is computed using the weighted average number of common shares outstanding during the period. 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. Under the treasury stock method, the effect of stock options outstanding is not included in the computation of diluted net income per share for periods when their effect is anti-dilutive. Additionally, we issued convertible notes with a net settlement feature that requires us, upon conversion, to settle the principal amount of debt for cash and the conversion premium for cash or shares of our common stock. Our convertible notes, note hedges, and related warrants contain various conversion features, which are further described in Note 11 of these Notes to the Consolidated Financial Statements. The potentially dilutive shares resulting from the convertible notes and warrants under the treasury stock method will be included in the calculation of diluted income per share when their inclusion is dilutive. However, unless actually exercised, the note hedges will not be included in the calculation of diluted net income per share, as their pre-exercised effect would be anti-dilutive under the treasury stock method.

Cash and Cash Equivalents
 
We consider all highly liquid investments that are readily convertible into cash and have an original maturity of three months or less at the time of purchase to be cash equivalents. As of January 31, 2016 and January 25, 2015, our cash and cash equivalents were $596 million and $497 million, respectively, including $43 million and $132 million, respectively, invested in money market funds.

Marketable Securities
 
Marketable securities consist primarily of highly liquid investments with maturities of greater than three months when purchased. We generally classify our marketable securities at the date of acquisition as available-for-sale. These securities are reported at fair value with the related unrealized gains and losses included in accumulated other comprehensive income (loss), a component of shareholders’ equity, net of tax. The fair value of interest-bearing securities includes accrued interest. Any unrealized losses which are considered to be other-than-temporary impairments are recorded in the other income and expense section of our Consolidated Statements of Income. Realized gains and losses on the sale of marketable securities are determined using the specific-identification method and recorded in the other income and expense section of our Consolidated Statements of Income.

All of our available-for-sale investments are subject to a periodic impairment review. We record a charge to earnings when a decline in fair value is significantly below cost basis and judged to be other-than-temporary, or have other indicators of impairments. If the fair value of an available-for-sale debt instrument is less than its amortized cost basis, an other-than-temporary impairment is triggered in circumstances where (1) we intend to sell the instrument, (2) it is more likely than not that we will be required to sell the instrument before recovery of its amortized cost basis, or (3) a credit loss exists where we do not expect to recover the entire amortized cost basis of the instrument. In these situations, we recognize an other-than-temporary impairment in earnings equal to the entire difference between the debt instruments’ amortized cost basis and its fair value. For available-for-sale debt instruments that are considered other-than-temporarily impaired due to the existence of a credit loss, if we do not intend to sell and it is not more likely than not that we will not be required to sell the instrument before recovery of its remaining amortized cost basis (amortized cost basis less any current-period credit loss), we separate the amount of the impairment into the amount that is credit related and the amount due to all other factors. The credit loss component is recognized in earnings while loss related to all other factors is recorded in accumulated other comprehensive income (loss).
 
Fair Value of Financial Instruments
 
The carrying value of cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate their fair values due to their relatively short maturities as of January 31, 2016 and January 25, 2015. Marketable securities are comprised of available-for-sale securities that are reported at fair value with the related unrealized gains (losses) included in accumulated other comprehensive income (loss), a component of shareholders’ equity, net of tax. Fair value of the marketable securities is determined based on quoted market prices. Derivative instruments are recognized as either assets or liabilities and are measured at fair value. The accounting for changes in the fair value of a derivative depends on the intended use of the derivative and the resulting designation. For derivative instruments designated as fair value hedges, the gains (losses) are recognized in earnings in the periods of change together with the offsetting losses (gains) on the hedged items attributed to the risk being hedged. For derivative instruments designated as cash-flow hedges, the effective portion of the gains (losses) on the derivatives is initially reported as a component of other comprehensive income (loss) and is subsequently recognized in earnings when the hedged exposure is recognized in earnings.

Concentration of Credit Risk
 
Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash equivalents, marketable securities, accounts receivable, note hedge and interest rate swap. Our investment policy requires the purchase of high grade investment securities, the diversification of asset type and includes certain limits on our portfolio duration. All marketable securities are held in our name, managed by several investment managers and held by one major financial institution under a custodial arrangement. Accounts receivable from significant customers, those representing 10% or more of total accounts receivable, aggregated approximately 21% of our accounts receivable balance from one customer as of January 31, 2016 and 30% of our account receivable balance from two customers as of January 25, 2015. We perform ongoing credit evaluations of our customers’ financial condition and maintain an allowance for potential credit losses. This allowance consists of an amount identified for specific customers and an amount based on overall estimated exposure. Our overall estimated exposure excludes amounts covered by credit insurance and letters of credit.

Accounts Receivable
 
We maintain an allowance for doubtful accounts receivable for estimated losses resulting from the inability of our customers to make required payments. We determine this allowance, which consists of an amount identified for specific customer issues as well as an amount based on overall estimated exposure. Factors impacting the allowance include the level of gross receivables, the financial condition of our customers and the extent to which balances are covered by credit insurance or letters of credit.

Inventories

Inventory cost is computed on an adjusted standard basis, which approximates actual cost on an average or first-in, first-out basis. Inventory costs consist primarily of the cost of semiconductors purchased from subcontractors, including wafer fabrication, assembly, testing and packaging, manufacturing support costs, including labor and overhead associated with such purchases, final test yield fallout, and shipping costs, as well as the cost of purchased memory products and other component parts. We charge cost of sales for inventory provisions to write down our inventory to the lower of cost or estimated market value or to completely write off obsolete or excess inventory. Most of our inventory provisions relate to the write-off of excess quantities of products, based on our inventory levels and future product purchase commitments compared to assumptions about future demand and market conditions. Once inventory has been written-off or written-down, it creates a new cost basis for the inventory that is not subsequently written-up.

Property and Equipment
 
Property and equipment are stated at cost. Depreciation of property and equipment is computed using the straight-line method based on the estimated useful lives of the assets, generally three to five years. Once an asset is identified for retirement or disposition, the related cost and accumulated depreciation or amortization are removed, and a gain or loss is recorded. The estimated useful lives of our buildings are up to twenty five years. Depreciation expense includes the amortization of assets recorded under capital leases. Leasehold improvements and assets recorded under capital leases are amortized over the shorter of the expected lease term or the estimated useful life of the asset.

Goodwill

Goodwill is subject to our annual impairment test during the fourth quarter of our fiscal year, or earlier if indicators of potential impairment exist.  For the purposes of completing our impairment test, we perform either a qualitative or a quantitative analysis on a reporting unit basis. 

For those reporting units where a significant change or event has occurred, where potential impairment indicators exist, or for which we have not performed a quantitative assessment recently, we utilize a two-step quantitative assessment to testing goodwill for impairment. The first step tests for possible impairment by applying a fair value-based test by weighing the results from the income approach and the market approach. The second step, if necessary, measures the amount of such impairment by applying fair value-based tests to individual assets and liabilities. Please refer to Note 4 of these Notes to the Consolidated Financial Statements for additional information. 

Intangible Assets

Intangible assets primarily represent rights acquired under technology licenses, patents, acquired intellectual property, trademarks and customer relationships and are subject to an annual impairment test. We currently amortize our intangible assets with definitive lives over periods ranging from one to ten years using a method that reflects the pattern in which the economic benefits of the intangible asset are consumed or otherwise used up or, if that pattern cannot be reliably determined, using a straight-line amortization method.

Impairment of Long-Lived Assets
 
Long-lived assets, such as property and equipment and intangible assets subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset, or asset group may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset, or asset group to estimated undiscounted future cash flows expected to be generated by the asset, or asset group. If the carrying amount of an asset or asset group exceeds its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset or asset group exceeds the estimated fair value of the asset or asset group. Fair value is determined based on the estimated discounted future cash flows expected to be generated by the asset or asset group. Assets and liabilities to be disposed of would be separately presented in the Consolidated Balance Sheet and the assets would be reported at the lower of the carrying amount or fair value less costs to sell, and would no longer be depreciated.

Accounting for Asset Retirement Obligations
 
We account for asset retirement obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. As of January 31, 2016 and January 25, 2015, our asset retirement obligations to return the leasehold improvements at our headquarters facility and certain laboratories at our domestic and international facilities to their original condition upon lease termination were $2 million and $7 million, respectively.

Adoption of New and Recently Issued Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board, or FASB, issued an accounting standards update regarding the accounting for leases. The objective of the update is to increase transparency and comparability among organizations by recognizing lease assets and liabilities on the balance sheet for leases with a lease term of more than 12 months. In addition, the update will require additional disclosures regarding key information about leasing arrangements. Under existing guidance, operating leases are not recorded as lease assets and lease liabilities on the balance sheet. The update will be effective for us beginning in our first quarter of fiscal year 2020, with early adoption permitted. We are currently evaluating the impact of the adoption of this accounting guidance on our consolidated financial statements, however, we expect the adoption of this accounting guidance to result in an increase in lease assets and a corresponding increase in lease liabilities on our Consolidated Balance Sheets.

In November 2015, the FASB issued an accounting standards update to simplify the presentation of deferred income taxes. The new guidance requires that all deferred tax assets and liabilities, along with any related valuation allowance, be classified as noncurrent on the balance sheet. The update is effective for fiscal years beginning after December 15, 2016, including interim periods within that reporting period. Early adoption is permitted and may be applied either prospectively or retrospectively. We adopted this update in the fourth quarter of fiscal year 2016 on a prospective basis. Prior reporting periods were not retrospectively adjusted. The adoption of this guidance had no impact on our Consolidated Statements of Income.

In July 2015, the FASB issued an accounting standards update for the subsequent measurement of inventory. The amended guidance requires entities to measure inventory at the lower of cost or net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. The requirement would replace the current lower of cost or market evaluation. The update is effective for us beginning in our first quarter of fiscal year 2018, with early adoption permitted to be applied prospectively. The adoption of this accounting guidance is not currently expected to have a material impact on our consolidated financial statements.

In April 2015, the FASB issued an accounting standards update that requires an entity to present debt issuance costs on the balance sheet as a direct deduction from the related debt liability as opposed to an asset. Amortization of the costs will continue to be reported as interest expense. The update is effective for annual reporting periods (including interim reporting periods within those periods) beginning after December 15, 2015. Early adoption is permitted for financial statements that have not been previously issued, and the new guidance would be applied retrospectively to all prior periods presented. The update will be effective for us beginning in our first quarter of fiscal year 2017. The adoption of this accounting guidance is not currently expected to have a material impact on our consolidated financial statements.

In April 2015, the FASB issued an accounting standards update that provides clarification on whether a cloud computing arrangement includes a software license. If a software license is included, the customer should account for the license consistent with its accounting for other software licenses. If a software license is not included, the arrangement should be accounted for as a service contract. The update is effective for reporting periods beginning after December 15, 2015, with early adoption permitted. Companies can elect to adopt the standard update prospectively or retrospectively to arrangements entered into, or materially modified, after the effective date. The update will be effective for us beginning in our first quarter of fiscal year 2017. We expect the adoption of this accounting guidance to result in an increase in software license assets and related depreciation expense, and a corresponding decrease in prepaid service contract assets and related service contract expense in our consolidated financial statements.

In May 2014, the FASB issued an accounting standards update that creates a single source of revenue guidance under U.S. GAAP for all companies, in all industries, effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. On July 9, 2015, the FASB voted to defer the effective date by one year, such that the new standard will be effective for us beginning in our first quarter of fiscal year 2019. The FASB will also permit entities to adopt the standard one year earlier if they choose (i.e., the original effective date). We will adopt this guidance either by using a full retrospective approach for all periods presented in the period of adoption or a modified retrospective approach. We are currently evaluating the impact of this accounting guidance on our consolidated financial statements and have not yet determined which transition method we will apply.
Stock Based Compensation
Stock-Based Compensation
Stock-Based Compensation

Our stock-based compensation expense is associated with stock options, 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 consolidated statements of income include stock-based compensation expense, net of amounts capitalized as inventory, as follows:
 
Year Ended
 
January 31,
2016
 
January 25,
2015
 
January 26,
2014
 
(In millions)
Cost of revenue
$
15

 
$
12

 
$
11

Research and development
115

 
88

 
83

Sales, general and administrative
74

 
58

 
42

Total
$
204

 
$
158

 
$
136



Stock-based compensation capitalized in inventories was not significant during fiscal years 2016, 2015 and 2014.

The following is a summary of equity awards granted under our equity incentive plans:
 
Year Ended
 
January 31,

January 25,
 
January 26,
2016

2015
 
2014
 
(In millions, except per share data)
Stock Options
 
 
 
 
 
Awards granted
—


—


6

Estimated total grant-date fair value
$
—

 
$
—

 
$
21

Weighted average grant-date fair value (per share)
$
—

 
$
—

 
$
3.47

 
 
 
 
 
 
RSUs, PSUs and Market-based PSUs
 
 
 
 
 
Awards granted
13

 
13

 
11

Estimated total grant-date fair value
$
296

 
$
228

 
$
145

Weighted average grant-date fair value (per share)
$
22.01

 
$
17.68

 
$
13.46

 
 
 
 
 
 
ESPP
 
 
 
 
 
Shares purchased
6

 
7

 
6

Weighted average price (per share)
$
13.67

 
$
10.99

 
$
10.79

Weighted average grant-date fair value (per share)
$
4.53

 
$
4.99

 
$
5.60



Beginning fiscal year 2015, we shifted away from granting stock options and toward granting RSUs, PSUs and market-based PSUs to reflect changing market trends for equity incentives at our peer companies. The number of PSUs that will ultimately vest is contingent on the Company’s level of achievement versus the corporate financial performance target established by our Compensation Committee in the beginning of each fiscal year.

Of the total fair value of equity awards, we estimated that the stock-based compensation expense related to the equity awards that are not expected to vest for fiscal years 2016, 2015 and 2014 was $46 million, $37 million and $30 million, respectively. 
 
January 31,
 
January 25,
 
2016
 
2015
 
(In millions)
Unearned stock-based compensation expense
$
381

 
$
291

 
 
 
 
Estimated weighted average remaining amortization period
(In years)
Stock Options
1.1

 
1.8

RSUs, PSUs and Market-based PSUs
2.7

 
2.8

ESPP
0.7

 
0.5



The fair value of stock options granted under our stock option plans and shares issued under our ESPP have been estimated with the following assumptions:
 
Year Ended
 
January 31,
2016
 
January 25,
2015
 
January 26,
2014
 
(Using a binomial model)
Stock Options
 
 
 
 
 
Weighted average expected life (in years)
—

 
—

 
2.4-3.5
Risk-free interest rate
—

 
—

 
1.8%-3.0%
Volatility
—

 
—

 
28%-37%
Dividend yield
—

 
—

 
1.9%-2.4%

 
Year Ended
 
January 31,
2016
 
January 25,
2015
 
January 26,
2014
 
(Using the Black-Scholes model)
ESPP
 
 
 
 
 
Weighted average expected life (in years)
0.5-2.0
 
0.5-2.0
 
0.5-2.0
Risk-free interest rate
0.1%-0.7%
 
0.1%-0.5%
 
0.1%-0.4%
Volatility
24%-34%
 
23%-31%
 
32%-37%
Dividend yield
1.5%-1.8%
 
1.7%-1.9%
 
2.0%-2.4%


The expected life of employee stock options is a derived output of our valuation model and is impacted by the underlying assumptions of our company. For ESPP shares, the expected term represents the average term from the first day of the offering period to the purchase date. The risk-free interest rate assumption used to value stock options and ESPP is based upon observed interest rates on Treasury bills appropriate for the expected term of the award. Our expected stock price volatility assumption for ESPP is estimated using historical volatility. For awards granted subsequent to November 7, 2012, we use the dividend yield at grant date. Our RSU, PSU and market-based PSU awards are not eligible for cash dividends prior to vesting; therefore, the fair values of RSUs, PSUs and market-based PSUs are discounted for the dividend yield.

Additionally, for employee stock option, RSU, PSU and market-based PSU awards, we estimate forfeitures annually and revise the estimates of forfeiture in subsequent periods if actual forfeitures differ from those estimates. Forfeitures are estimated based on historical experience.

Equity Incentive Program
 
We grant stock options, RSUs, PSUs, market-based PSUs and stock purchase rights under the following equity incentive plans.

Amended and Restated 2007 Equity Incentive Plan
 
In 2007, our shareholders approved the NVIDIA Corporation 2007 Equity Incentive Plan, which was subsequently amended and restated in 2012, 2013 and 2014, or the 2007 Plan.
The 2007 Plan authorizes the issuance of incentive stock options, non-statutory stock options, restricted stock, restricted stock unit, stock appreciation rights, performance stock awards, performance cash awards, and other stock-based awards to employees, directors and consultants. Only our employees may receive incentive stock options. Up to 187,767,766 shares of our common stock may be issued pursuant to stock awards granted under the 2007 Plan. Currently, we grant RSUs, PSUs and market-based PSUs under the 2007 Plan, under which, as of January 31, 2016, there were 13,538,400 shares available for future issuance.
Stock options previously granted to employees, subject to certain exceptions, vest over a four year period, subject to continued service, with 25% vesting on the anniversary of the hire date in the case of new hires or the anniversary of the date of grant in the case of grants to existing employees and 6.25% vesting at the end of each quarterly period thereafter. Stock options previously granted under the 2007 Plan generally expire ten years from the date of grant.
Subject to certain exceptions, RSUs granted to employees vest over a four year period, subject to continued service, with 25% vesting on a pre-determined date that is close to the anniversary of the date of grant and 12.5% vesting semi-annually thereafter until fully vested.
PSUs vest on a similar schedule as our RSUs. Market-based PSUs vest 100% on approximately the three-year anniversary of the date of grant. However, the number of shares subject to both PSUs and market-based PSUs that are eligible to vest is generally determined by the Compensation Committee based on achievement of pre-determined criteria.
Unless terminated sooner, the 2007 Plan is scheduled to terminate on March 21, 2022. Our Board may suspend or terminate the 2007 Plan at any time. No awards may be granted under the 2007 Plan while the 2007 Plan is suspended or after it is terminated. The Board may also amend the 2007 Plan at any time. However, if legal, regulatory or listing requirements require shareholder approval, the amendment will not go into effect until the shareholders have approved the amendment.
 
2012 Employee Stock Purchase Plan
 
In 2012, our shareholders approved the 2012 Employee Stock Purchase Plan, which was subsequently amended and restated in 2014, or the 2012 Plan, as the successor to the 1998 Employee Stock Purchase Plan.
Up to 65,235,816 shares of our common stock may be issued pursuant to purchases under the 2012 Plan. As of January 31, 2016, we had issued 18,459,901 shares and reserved 46,775,915 shares for future issuance under the 2012 Plan.
The 2012 Plan is intended to qualify as an “employee stock purchase plan” under Section 423 of the Internal Revenue Code. Under the current offerings adopted pursuant to the 2012 Plan, each offering period is 24 months, which is divided into four purchase periods of six months.
Employees are eligible to participate if they are employed by us or an affiliate of us as designated by the Board. Employees who participate in an offering may have up to 10% of their earnings withheld up to certain limitations and applied on specified dates determined by the Board to the purchase of shares of common stock. The Board may increase this percentage at its discretion, up to 15%. The price of common stock purchased under our ESPP will be equal to 85% of the lower of the fair market value of the common stock on the commencement date of each offering period and the purchase date of each offering period. Employees may end their participation in the ESPP at any time during the offering period, and participation ends automatically on termination of employment with us. In each case, the employee’s contributions are refunded.

The following is a summary of our equity award transactions under our equity incentive plans: 
 
RSUs, PSUs and Market-based PSUs Outstanding
 
Options Outstanding
 
Number of
Shares
 
Weighted
Average
Grant-Date
Fair Value
 
Number of
Shares
 
Weighted
Average
Exercise Price
Per Share
 
Weighted
Average
Remaining  
Contractual
Life
 
Aggregate
Intrinsic
Value (3)
 
(In millions, except years and per share data)
Balances, January 25, 2015
23

 
$
15.94

 
21

 
$
14.61

 
 
 
 
Granted (1)(2)
13

 
$
22.01

 
—

 
$
—

 
 
 
 
Exercised
—

 
—

 
(7
)
 
$
14.60

 
 
 
 
Vested restricted stock
(8
)
 
$
15.56

 
—

 
—

 
 
 
 
Canceled and forfeited
(2
)
 
$
16.63

 
(1
)
 
$
17.28

 
 
 
 
Balances, January 31, 2016
26

 
$
19.12

 
13

 
$
14.49

 
5.9
 
$
197

Exercisable as of January 31, 2016
 
 
 
 
11

 
$
14.51

 
5.6
 
$
159

Vested and expected to vest after January 31, 2016
22

 
$
19.14

 
13

 
$
14.50

 
5.8
 
$
191




(1)
Includes the total number of PSUs that became eligible to vest based on the corporate financial performance level achieved for fiscal year 2016.

(2)
Includes the market-based PSUs that become eligible to vest if the maximum target for total shareholder return, or TSR, over the 3-year measurement period is achieved. Depending on the ranking of our TSR compared to the respective TSRs of the companies comprising the Standard & Poor’s 500 Index during a 3-year measurement period, the market-based PSUs that become eligible to vest could range from 0 to 0.4 million shares. We granted market-based PSUs during the first quarter of fiscal year 2016 to our CEO and senior management as approved by our Compensation Committee.

(3)
The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value for in-the-money options at January 31, 2016, based on the $29.29 closing price of our common stock on January 29, 2016.

As of January 31, 2016 and January 25, 2015, there were 14 million and 25 million shares, respectively, of common stock reserved for future issuance under our equity incentive plans.

The total intrinsic value of options exercised was $75 million, $62 million and $14 million for fiscal years 2016, 2015 and 2014, respectively. Upon exercise of an option, we issue new shares of stock. The total fair value of options vested was $17 million, $33 million and $35 million for fiscal years 2016, 2015 and 2014, respectively.
Net Income Per Share
Net Income Per Share
Net Income Per Share
 
The following is a reconciliation of the numerators and denominators of the basic and diluted net income per share computations for the periods presented:
 
Year Ended
 
January 31,
2016
 
January 25,
2015
 
January 26,
2014
 
(In millions, except per share data)
Numerator:
 
 
 
 
 
Net income
$
614

 
$
631

 
$
440

Denominator:
 
 
 
 
 
Denominator for basic net income per share, weighted average shares
543

 
552

 
588

Effect of dilutive securities:
 
 
 
 
 
Equity awards outstanding
13

 
11

 
7

Assumed conversion of 1% Convertible Senior Notes Due 2018
13

 
—

 
—

Denominator for diluted net income per share, weighted average shares
569

 
563

 
595

Net income per share:
 
 
 
 
 
Basic
$
1.13

 
$
1.14

 
$
0.75

Diluted
$
1.08

 
$
1.12

 
$
0.74

Potentially dilutive securities excluded from income per diluted share because their effect would have been anti-dilutive
10

 
12

 
26



The 1.00% Convertible Senior Notes, or the Notes, are included in the calculation of diluted net income per share if their inclusion is dilutive. The Notes will generally have a dilutive impact on net income per share if our average stock price for the reporting period exceeds the adjusted conversion price of $20.1204 per share. For the fiscal year ended January 31, 2016, our average stock price exceeded the conversion price, causing the Notes to have a dilutive impact for this period.

The denominator for diluted net income per share does not include any effect from the convertible note hedge transaction, or the Note Hedges, that we entered into concurrently with the issuance of the Notes, as its effect would be anti-dilutive. In the event an actual conversion of any or all of the Notes occurs, the shares that would be delivered to us under the Note Hedges are designed to neutralize the dilutive effect of the shares that we would issue under the Notes.

The denominator for diluted net income per share will not include any effect from the warrants, which we entered into concurrently with the issuance of the Notes, unless our average stock price for the reporting period exceeds the adjusted strike price of $27.0851 per share.

Please refer to Note 11 of these Notes to the Consolidated Financial Statements for additional discussion regarding the Notes.
Goodwill
Goodwill
Goodwill
 
The carrying amount of goodwill is as follows:
 
January 31,
2016
 
January 25,
2015
 
(In millions)
Icera
$
271

 
$
271

PortalPlayer
105

 
105

3dfx
50

 
50

Mental Images
59

 
59

MediaQ
35

 
35

ULi
31

 
31

Hybrid Graphics
28

 
28

Ageia
19

 
19

Portland Group Inc.
2

 
2

Other
18

 
18

Total goodwill
$
618

 
$
618


 
The amount of goodwill allocated to our GPU and Tegra Processor segments was $210 million and $408 million, respectively, as of both January 31, 2016 and January 25, 2015. Please refer to Note 16 of these Notes to the Consolidated Financial Statements for further discussion regarding segments.

We utilized a two-step quantitative analysis to complete our annual impairment test during the fourth quarter of fiscal year 2016 and concluded that there was no impairment, as the fair value of our reporting units exceeded their carrying values. The first step tests for possible impairment by applying a fair value-based test by weighing the results from the income approach and the market approach. The second step, if necessary, measures the amount of such impairment by applying fair value-based tests to individual assets and liabilities.

These income and market valuation approaches consider a number of factors that include, but are not limited to, prospective financial information, growth rates, residual values, discount rates and comparable multiples from publicly traded companies in our industry and require us to make certain assumptions and estimates regarding industry economic factors and the future profitability of our business. When performing an income approach valuation, we incorporate the use of projected financial information and a discount rate that are developed using market participant based assumptions to our discounted cash flow model. Our estimates of discounted cash flow were based upon, among other things, certain assumptions about our expected future operating performance, such as revenue growth rates, operating margins, risk-adjusted discount rates, and future economic and market conditions. The market method of determining the fair value of our reporting units requires us to use judgment in the selection of appropriate market comparables.
Intangible Assets
Intangible Assets
Amortizable Intangible Assets
 
The components of our amortizable intangible assets are as follows:
 
January 31, 2016
 
January 25, 2015
 
Gross 
Carrying
Amount
 
Accumulated
Amortization
 
Net 
Carrying
Amount
 
Weighted Average
Useful Life
 
Gross 
Carrying
Amount
 
Accumulated
Amortization
 
Net 
Carrying
Amount
 
Weighted Average
Useful Life
 
(In millions)
 
(In years)
 
(In millions)
 
(In years)
Acquisition-related intangible assets
$
193

 
$
(152
)
 
$
41

 
7.0
 
$
189

 
$
(134
)
 
$
55

 
6.8
Patents and licensed technology
462

 
(337
)
 
125

 
7.0
 
449

 
(282
)
 
167

 
7.2
Total intangible assets
$
655

 
$
(489
)
 
$
166

 
 
 
$
638

 
$
(416
)
 
$
222

 
 


Amortization expense associated with intangible assets for fiscal years 2016, 2015 and 2014 was $73 million, $77 million and $73 million, respectively. Future amortization expense for the net carrying amount of intangible assets as of January 31, 2016 is estimated to be $67 million in fiscal year 2017, $52 million in fiscal year 2018, $24 million in fiscal year 2019, $16 million in fiscal year 2020, and $7 million in fiscal year 2021 until fully amortized.
Marketable Securities
Marketable Securities
Marketable Securities
 
All of our cash equivalents and marketable securities are classified as “available-for-sale” securities. These securities are reported at fair value with the related unrealized gains and losses included in accumulated other comprehensive income (loss), a component of shareholders’ equity, net of tax, and net realized gains and losses recorded in other income, net, on the Consolidated Statements of Income.

The following is a summary of cash equivalents and marketable securities as of January 31, 2016 and January 25, 2015:
 
January 31, 2016
 
Amortized
Cost
 
Unrealized
Gain
 
Unrealized
Loss
 
Estimated
Fair Value
 
(In millions)
Corporate debt securities
$
1,903

 
$
1

 
$
(3
)
 
$
1,901

Debt securities of United States government agencies
1,170

 
1

 
(1
)
 
1,170

Debt securities issued by United States Treasury
800

 
1

 
—

 
801

Asset-backed securities
435

 
—

 
—

 
435

Mortgage backed securities issued by United States government-sponsored enterprises
229

 
3

 
(1
)
 
231

Foreign government bonds
92

 
—

 
—

 
92

Money market funds
43

 
—

 
—

 
43

Total
$
4,672

 
$
6

 
$
(5
)
 
$
4,673

Classified as:
 
 
 
 
 
 
 
Cash equivalents
 
 
 
 
 
 
$
232

Marketable securities
 
 
 
 
 
 
4,441

Total
 
 
 
 
 
 
$
4,673

 
 
January 25, 2015
 
Amortized
Cost
 
Unrealized
Gain
 
Unrealized
Loss
 
Estimated
Fair Value
 
(In millions)
Corporate debt securities
$
2,185

 
$
3

 
$
(2
)
 
$
2,186

Debt securities of United States government agencies
750

 
—

 
—

 
750

Debt securities issued by United States Treasury
534

 
3

 
—

 
537

Asset-backed securities
453

 
—

 
—

 
453

Mortgage backed securities issued by United States government-sponsored enterprises
274

 
5

 
(1
)
 
278

Money market funds
132

 
—

 
—

 
132

Foreign government bonds
85

 
—

 
—

 
85

Total
$
4,413

 
$
11

 
$
(3
)
 
$
4,421

Classified as:
 
 
 
 
 
 
 
Cash equivalents
 
 
 
 
 
 
$
295

Marketable securities
 
 
 
 
 
 
4,126

Total
 
 
 
 
 
 
$
4,421

  
The following table provides the breakdown of the investments with unrealized losses as of January 31, 2016:
 
Less than 12 Months
 
12 Months or Greater
 
Total
 
Fair Value
 
Gross
Unrealized
Losses
 
Fair Value
 
Gross
Unrealized
Losses
 
Fair Value
 
Gross
Unrealized
Losses
 
(In millions)
Corporate debt securities
$
950

 
$
(3
)
 
$
80

 
$
—

 
$
1,030

 
$
(3
)
Debt securities issued by United States government agencies
692

 
(1
)
 
—

 
—

 
692

 
(1
)
Mortgage backed securities issued by United States government-sponsored enterprises
97

 
(1
)
 
31

 
—

 
128

 
(1
)
Total
$
1,739

 
$
(5
)
 
$
111

 
$
—

 
$
1,850

 
$
(5
)

 
We performed an impairment review of our investment portfolio as of January 31, 2016. Factors considered included general market conditions, the duration and extent to which fair value is below cost, and our intent and ability to hold an investment for a sufficient period of time to allow for recovery in value. We also consider specific adverse conditions related to the financial health of and business outlook for an investee, including industry and sector performance, changes in technology, operational and financing cash flow factors, and changes in an investee’s credit rating. Investments that we identify as having an indicator of impairment are subject to further analysis to determine if the investment was other than temporarily impaired. Based on our quarterly impairment review and having considered the guidance in the relevant accounting literature, we concluded that our investments were appropriately valued and that no other-than-temporary impairment charges were necessary on our portfolio of available-for-sale investments as of January 31, 2016. 
 
As of January 31, 2016, we had nine investments that were in an unrealized loss position with total unrealized losses amounting to $5 million and with a duration of less than one year. The gross unrealized losses related to fixed income securities were due to changes in interest rates. We have determined that the gross unrealized losses on investment securities as of January 31, 2016 are temporary in nature. Currently, we have the intent and ability to hold our investments with impairment indicators until maturity.

Net realized gains were $2 million for both fiscal year 2016 and 2014 and were not significant for fiscal year 2015.  As of January 31, 2016, net unrealized gain was not significant. As of January 25, 2015, we had a net unrealized gain of $8 million, which was comprised of gross unrealized gains of $11 million, offset by $3 million of gross unrealized losses.

The amortized cost and estimated fair value of cash equivalents and marketable securities, which are primarily debt instruments, are classified as available-for-sale as of January 31, 2016 and January 25, 2015 and are shown below by contractual maturity.

 
January 31, 2016
 
January 25, 2015
 
Amortized
Cost
 
Estimated
Fair Value
 
Amortized
Cost
 
Estimated
Fair Value
 
(In millions)
Less than one year
$
1,619

 
$
1,619

 
$
1,570

 
$
1,570

Due in 1 - 5 years
3,019

 
3,020

 
2,720

 
2,726

Mortgage-backed securities issued by government-sponsored enterprises not due at a single maturity date
34

 
34

 
123

 
125

Total
$
4,672

 
$
4,673

 
$
4,413

 
$
4,421

Fair Value of Financial Assets and Liabilities
Fair Value of Financial Assets and Liabilities
Fair Value of Financial Assets and Liabilities

We measure our cash equivalents and marketable securities at fair value. 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. Our Level 1 assets consist of our money market funds. We classify securities within Level 1 assets when the fair value is obtained from real time quotes for transactions in active exchange markets involving identical assets. Our available-for-sale securities are classified as having Level 2 inputs. Our Level 2 assets are valued utilizing a market approach where the market prices of similar assets are provided by a variety of independent industry standard data providers to our investment custodian. We review the fair value hierarchy classification on a quarterly basis. Changes in the observability of valuation inputs may result in a reclassification of levels for certain securities within the fair value hierarchy. There were no significant transfers between Levels 1 and 2 assets for the year ended January 31, 2016. Level 3 assets are based on unobservable inputs to the valuation methodology and include our own data about assumptions market participants would use in pricing the asset or liability based on the best information available under the circumstances. Most of our cash equivalents and marketable securities are valued based on Level 2 inputs. We did not have any investments classified as Level 3 as of January 31, 2016.
 
 
Fair Value at
 
Pricing Category
 
January 31, 2016
 
January 25, 2015
 
 
 
(In millions)
Assets
 
 
 
 
 
Cash equivalents and Marketable securities:
 
 
 
 
 
Corporate debt securities (1)
Level 2
 
$
1,901

 
$
2,186

Debt securities of U.S. government agencies (2)
Level 2
 
$
1,170

 
$
750

Debt securities issued by the U.S. Treasury (3)
Level 2
 
$
801

 
$
537

Asset-backed securities (4)
Level 2
 
$
435

 
$
453

Mortgage-backed securities issued by government-sponsored enterprises (3)
Level 2
 
$
231

 
$
278

Foreign government bonds (3)
Level 2
 
$
92

 
$
85

Money market funds (5)
Level 1
 
$
43

 
$
132

 
 
 
 
 
 
Liabilities
 
 
 
 
 
Current liability:
 
 
 
 
 
1.00% Convertible Senior Notes Due 2018 (6)
Level 2
 
$
2,273

 
$
1,680

Other noncurrent liability:
 
 
 
 
 
Interest rate swap (7)
Level 2
 
$
(7
)
 
$
—


(1)
Includes $51 million and $147 million in cash equivalents as of January 31, 2016 and January 25, 2015, respectively, and $1.85 billion and $2.04 billion in marketable securities as of January 31, 2016 and January 25, 2015, respectively, on the Consolidated Balance Sheets.
(2)
Includes $90 million and $15 million in cash equivalents as of January 31, 2016 and January 25, 2015, respectively, and $1.08 billion and $735 million in marketable securities as of January 31, 2016 and January 25, 2015, respectively, on the Consolidated Balance Sheets.
(3)
In marketable securities on the Consolidated Balance Sheets.
(4)
Includes $435 million and $453 million in marketable securities as of January 31, 2016 and January 25, 2015, respectively, on the Consolidated Balance Sheets.
(5)
In cash equivalents on the Consolidated Balance Sheets.
(6)
The Notes are carried on our Consolidated Balance Sheets at their original issuance value, net of unamortized debt discount, and are not marked to fair value each period. Please refer to Note 11 of these Notes to the Consolidated Financial Statements for additional information on the Notes.
(7)
Please refer to Note 9 of these Notes to the Consolidated Financial Statements for a discussion regarding our interest rate swap.
Balance Sheet Components
Balance Sheet Components
Balance Sheet Components
 
Certain balance sheet components are as follows:
 
January 31,
2016
 
January 25,
2015
 
(In millions)
Inventories:
 
 
 
Raw materials
$
105

 
$
157

Work in-process
103

 
92

Finished goods
210

 
234

     Total inventories
$
418

 
$
483



As of January 31, 2016, we had outstanding inventory purchase obligations totaling $391 million.

 
January 31,
2016
 
January 25,
2015
 
Estimated
Useful Life
 
(In millions)
 
(In years)
Property and Equipment:
 
 
 
 
 
Land
$
218

 
$
218

 
(A)
Building
13

 
19

 
25
Test equipment
354

 
397

 
3-5
Software and licenses
98

 
113

 
3-5
Leasehold improvements
174

 
174

 
(B)
Computer equipment
155

 
153

 
3-5
Office furniture and equipment
48

 
49

 
5
Capital leases
28

 
28

 
(B)
Construction in process
12

 
28

 
(C)
Total property and equipment, gross
1,100

 
1,179

 
 
Accumulated depreciation and amortization
(634
)
 
(622
)
 
 
     Total property and equipment, net
$
466

 
$
557

 
 
(A) Land is a non-depreciable asset.
(B) Leasehold improvements and capital leases are amortized based on the lesser of either the asset’s estimated useful life or the remaining expected lease term.
(C) Construction in process represents assets that are not in service as of the balance sheet date.

Depreciation expense for fiscal years 2016, 2015 and 2014 was $124 million, $143 million and $164 million, respectively.

Accumulated amortization of leasehold improvements and capital leases was $155 million and $140 million as of January 31, 2016 and January 25, 2015, respectively. Amortization of leasehold improvements and capital leases is included in depreciation and amortization expense.
 
January 31,
2016
 
January 25,
2015
 
(In millions)
Accrued Liabilities:
 
 
 
Deferred revenue
$
322

 
$
296

Customer related liabilities (1)
160

 
143

Accrued payroll and related expenses
79

 
112

Accrued restructuring and other charges (2)
23

 
—

Professional service fees
23

 
17

Warranty accrual (3)
11

 
8

Coupon interest on Notes
3

 
3

Taxes payable, short- term
2

 
3

Facilities related liabilities
1

 
8

Other
18

 
13

Total accrued liabilities and other
$
642

 
$
603


(1)  Customer related liabilities primarily includes accrued customer programs, such as rebates and MDFs.
(2) Please refer to Note 17 of these Notes to the Consolidated Financial Statements for a discussion regarding restructuring and other charges.
(3)  Please refer to Note 10 of these Notes to the Consolidated Financial Statements for a discussion regarding warranties.
 
January 31,
2016
 
January 25,
2015
 
(In millions)
Other Long Term Liabilities:
 
 
 
Deferred income tax liability
$
301

 
$
232

Income tax payable
78

 
121

Deferred revenue (1)
44

 
108

Interest rate swap (2)
7

 
—

Asset retirement obligations
1

 
7

Other
22

 
21

Total other long-term liabilities
$
453

 
$
489



(1)  Consists primarily of consideration received in advance of our performance obligations under the patent cross licensing agreement that we entered into with Intel Corporation in January 2011. The decrease in deferred revenue, long-term, is a result of revenue recognized during fiscal year 2016.
(2)  Please refer to Note 9 of these Notes to the Consolidated Financial Statements for a discussion regarding our interest rate swap.
Derivative Financial Instrument (Notes)
Derivative Instruments and Hedging Activities Disclosure
Derivative Financial Instrument

In August 2015, we entered into an interest rate swap for a portion of the operating lease financing arrangement for our new headquarters building, which entitles us to pay amounts based on a fixed interest rate in exchange for receipt of amounts based on variable interest rates. The objective of this interest rate swap is to mitigate variability in the benchmark interest rate on the first $200 million of existing operating lease financing payments.

This interest rate swap, designated as a cash flow hedge, will have settlements beginning in the second quarter of fiscal year 2019, and will terminate in the fourth quarter of fiscal year 2023. Gains or losses on this swap are currently recorded in accumulated other comprehensive income (loss) and will subsequently be recorded in earnings at the point when the related operating lease financing expense begins to affect earnings or if ineffectiveness of the swap should occur. As of January 31, 2016, accumulated other comprehensive income (loss) includes a $7 million loss due to the decrease in fair value of the interest rate swap.

A summary of the notional amount and fair value of the interest rate swap recorded on the Consolidated Balance Sheets at January 31, 2016 and January 25, 2015 is as follows (in millions):
 
Notional Amount
 
Fair Value Asset (Liability)
 
January 31, 2016
 
January 25, 2015
 
January 31, 2016
 
January 25, 2015
Cash Flow Hedge
 
 
 
 
 
 
 
Interest rate swap
$
200

 
$
—

 
$
(7
)
 
$
—



We formally assess, both at inception and on an ongoing basis, whether the interest rate swap is highly effective. For the year ended January 31, 2016, the interest rate swap was determined to be highly effective and there were no gains or losses associated with ineffectiveness.

The effect of the interest rate swap on other comprehensive income (loss), net of tax, is as follows (in millions):
 
January 31, 2016
 
January 25, 2015
Cash Flow Hedge
 
 
 
Gain (loss) on interest rate swap
$
(4
)
 
$
—



Over the next twelve months, we do not expect to reclassify any amount from accumulated other comprehensive income (loss) to income as the underlying operating lease financing payments for our new headquarters building will not start within the next twelve months.
Guarantees
Guarantees
Guarantees
 
U.S. GAAP requires that upon issuance of a guarantee, the guarantor must recognize a liability for the fair value of the obligation it assumes under that guarantee. In addition, U.S. GAAP requires disclosures about the guarantees that an entity has issued, including a tabular reconciliation of the changes of the entity’s product warranty liabilities.
 
Accrual for Product Warranty Liabilities

We record a reduction to revenue for estimated product returns at the time revenue is recognized primarily based on historical return rates. Cost of revenue includes the estimated cost of product warranties. Under limited circumstances, we may offer an extended limited warranty to customers for certain products. Additionally, we accrue for known warranty and indemnification issues if a loss is probable and can be reasonably estimated.

On July 31, 2015, we announced a voluntary recall and replacement of our SHIELD 8-inch tablets that were sold between July 2014 and July 2015. We had determined that the battery in these tablets can overheat, posing a fire hazard. The recall did not affect any other NVIDIA products. During fiscal year 2016, we recorded a $26 million charge against cost of revenue to cover anticipated customer warranty, repair, return, replacement and other associated costs.

The estimated product returns and estimated product warranty liabilities for fiscal years 2016, 2015 and 2014 are as follows:
 
January 31,
2016
 
January 25,
2015
 
January 26,
2014
 
(In millions)
Balance at beginning of period
$
8

 
$
8

 
$
15

Additions
27

 
5

 
7

Deductions
(24
)
 
(5
)
 
(14
)
Balance at end of period 
$
11

 
$
8

 
$
8

 
In connection with certain agreements that we have executed in the past, we have at times provided indemnities to cover the indemnified party for matters such as tax, product and employee liabilities. We have also on occasion 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. As such, we have not recorded any liability in our Consolidated Financial Statements for such indemnifications.
Convertible Debt (Notes)
Debt Disclosure
Convertible Debt

1.00 % Convertible Senior Notes Due 2018

On December 2, 2013, we issued $1.50 billion in Notes. The Notes are unsecured, unsubordinated obligations of the Company, which pay interest in cash semi-annually at a rate of 1.00% per annum. The Notes will mature on December 1, 2018 unless repurchased or converted prior to such date. The Notes were initially convertible at a rate of 49.5958 shares of common stock per $1,000 principal amount of Notes (equivalent to an initial conversion price of $20.1630 per share of common stock). The conversion rate and conversion price are adjusted upon the occurrence of certain events, including our cash dividends or distributions exceeding $0.085 per share. Accordingly, as of January 31, 2016, the initial conversion rate has been adjusted to 49.7009 shares of common stock per $1,000 principal amount of Notes (equivalent to an adjusted conversion price of $20.1204 per share of common stock) for dividend increases made to that date.

Holders may convert all or any portion of their Notes at their option at any time prior to August 1, 2018 only under the following circumstances: (1) during any fiscal quarter (and only during such fiscal quarter), if the last reported sale price of the common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (2) during the five business day period after any five consecutive trading day period (the measurement period) in which the trading price per $1,000 principal amount of notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of our common stock and the conversion rate on each such trading day; or (3) upon the occurrence of specified corporate events. On or after August 1, 2018 to the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert all or any portion of their Notes regardless of the foregoing conditions.

The price of our common stock was greater than or equal to 130% of the conversion price for at least 20 trading days during the 30 consecutive trading days ending on the last trading day of our fiscal quarter ended January 31, 2016. Therefore, as of January 31, 2016, the conversion threshold had been met and the Notes became convertible at the holders’ option beginning on February 1, 2016 and ending May 1, 2016. As such, the $1.41 billion carrying value of the Notes was classified as a current liability and the $87 million difference between the principal amount and the carrying value of the Notes was reclassified from shareholders’ equity to convertible debt conversion obligation in the mezzanine equity section of our Consolidated Balance Sheet as of January 31, 2016, and will remain there for as long as the Notes are convertible. The determination of whether or not the Notes are convertible must continue to be performed on a quarterly basis. Consequently, the Notes may be reclassified as long-term debt and the convertible debt conversion obligation may be reclassified within shareholders' equity if the conversion threshold is not met in future quarters.

If the notes are converted, we will pay cash up to the aggregate principal amount of the Notes. We may pay or deliver cash, shares of our common stock or a combination of cash and shares of our common stock, at our election, in respect of the remainder, if any, of our conversion obligation in excess of the aggregate principal amount of the Notes being converted. Based on the $29.29 closing price of our common stock on January 29, 2016, the last trading day of fiscal year 2016, the if-converted value of our Notes exceeded their principal amount by approximately $684 million.

Concurrently with the issuance of the Notes, we entered into a convertible note hedge transaction, or the Note Hedges, structured to offset the potential common stock dilution, and/or offset potential cash payments to settle our excess conversion obligation. Cash-settled convertible debt is separated into debt and equity components at issuance and is assigned a fair value. The value assigned to the debt component is the estimated fair value, as of the issuance date, of a similar debt without the conversion feature. The difference between the net cash proceeds and this estimated fair value, represents the value assigned to the equity component and is recorded as a debt discount. The debt discount is amortized using the effective interest method from the origination date through its stated contractual maturity date.

The initial debt component of the Notes was valued at $1.35 billion based on the contractual cash flows discounted at an appropriate market rate for a non-convertible debt at the date of issuance, which was determined to be 3.15%. The carrying value of the permanent equity component reported in additional paid-in-capital was valued at $126 million and recorded as a debt discount. This amount, together with the $23 million purchaser's discount to the par value of the Notes, represents the total unamortized debt discount of $148 million we recorded at the time of issuance of the Notes. The aggregate debt discount is amortized as interest expense over the contractual term of the Notes using the effective interest method using an interest rate of 3.15%. As of January 31, 2016, after reclassifying $87 million from the shareholders’ equity section of our Consolidated Balance Sheet to convertible debt conversion obligation in the mezzanine equity section of our Consolidated Balance Sheet, the remaining carrying value of the equity component in the shareholders’ equity section of our Consolidated Balance Sheet was $39 million.

The following table presents the carrying amounts of the liability and equity components:
 
January 31, 2016
 
January 25, 2015
 
(In millions)
Amount of the equity component
$
39

 
$
126

 
 
 
 
1.00% Convertible Senior Notes Due 2018
$
1,500

 
$
1,500

Unamortized debt discount (1)
(87
)
 
(116
)
Net carrying amount
$
1,413

 
$
1,384

(1) As of January 31, 2016, the remaining period over which the unamortized debt discount will be amortized is 2.8 years.
The following table presents the interest expense for the contractual interest and the accretion of debt discount:
 
Year Ended
 
January 31, 2016
 
January 25, 2015
 
January 26, 2014
 
(In millions)
 
 
Contractual coupon interest expense
$
15

 
$
15

 
$
2

Amortization of debt discount
29

 
28

 
5

Total interest expense related to Notes
$
44

 
$
43

 
$
7


Note Hedges and Warrants

The net proceeds from the Notes were approximately $1.48 billion after payment of the initial purchaser's discount. Concurrently with the offering of the Notes, we entered into Note Hedges with a strike price equal to the initial conversion price of the Notes, or $20.1630 per share. Adjusting for dividends paid through January 31, 2016, the conversion price of the Notes has been adjusted to $20.1204 per share. The Note Hedges allow us to receive shares of our common stock and/or cash related to the excess conversion value that we would deliver and/or pay, respectively, to the holders of the Notes upon conversion. We paid $167 million for the Note Hedges.

In addition, concurrent with the offering of the Notes and the purchase of the Note Hedges, we entered into a separate warrant transaction, or the Warrants, with an initial strike price to the holders of the Warrants of $27.1425 per share. Under the terms of the Warrants, the strike price is adjusted upon the occurrence of certain events, including our cash dividends or distributions that deviate from $0.085 per share. Accordingly, as of January 31, 2016, the strike price was adjusted to $27.0851 per share, reflecting adjustments for our dividend increases made to that date. The Warrants are net share settled and cover, subject to customary antidilution adjustments, 74 million shares of our common stock. We received $59 million for the Warrants transaction.

The $108 million net cost of the Note Hedges offset by the proceeds from the Warrants was included as a net reduction to additional paid-in capital in the shareholders’ equity section of our Consolidated Balance Sheets.
Commitments and Contingencies
Commitments and Contingencies
Commitments and Contingencies
 
Inventory Purchase Obligations
 
As of January 31, 2016, we had outstanding inventory purchase obligations totaling $391 million.

Capital Purchase Obligations
 
As of January 31, 2016, we had outstanding capital purchase obligations totaling $36 million.
 
Lease Obligations

Our headquarters complex is located in Santa Clara, California and includes eight buildings that are leased properties. Future minimum lease payments related to headquarters operating leases total $69 million over the remaining terms of the leases, including predetermined rent escalations, and are included in the future minimum lease payment schedule below.
    
In addition to the commitment of our headquarters, we have other domestic and international office facilities under operating leases expiring through fiscal year 2026. We also include non-cancelable obligations under certain software licensing arrangements as operating leases.

Future minimum lease payments under our non-cancelable operating leases as of January 31, 2016, are as follows:   

 
Future Minimum Lease Obligations
 
(In millions)
Fiscal Year:
 
2017
$
75

2018
65

2019
58

2020
35

2021
11

2022 and thereafter
20

Total
$
264


 
Rent expense for the years ended January 31, 2016, January 25, 2015 and January 26, 2014 was $45 million, $47 million and $44 million, respectively.

Capital lease obligations include building and office equipment lease obligations. The building lease relates to our datacenter in Santa Clara, California. Future minimum lease payments under the building capital lease total $17 million over the remaining lease term, including predetermined rent escalations, and are included in the future minimum lease payment schedule below:

 
Future Capital Lease Obligations
 
(In millions)
Fiscal Year:
 

2017
$
5

2018
6

2019
6

Total
$
17

Present value of minimum lease payments
$
14

 
 
Current portion
$
4

Long-term portion
$
10


 
Operating Lease Financing Arrangement

In fiscal year 2016, we began to construct a new headquarters building in Santa Clara, California, which is currently targeted for completion in the fourth quarter of fiscal year 2018. We are financing this construction under an off-balance sheet, build-to-suit operating lease arrangement. As a part of this arrangement, we leased the real property we own where the building will be constructed under a 99 year ground lease to a syndicate of banks and concurrently leased back the building under a real property lease.

Under the real property lease, we pay rent, taxes, maintenance costs, utilities, insurance and other property related costs. The lease has an initial 7.5 year term expiring on December 19, 2022, consisting of an approximately 2.5 year construction period followed by a 5 year lease term. We have the option to renew this lease for up to three additional 5 year periods, subject to approval by the banks.

We will oversee the construction of the headquarters building. The banks have committed to fund up to $380 million of costs relating to construction. Advances will be made periodically to reimburse us for construction costs we incur. Once construction is complete, the lease balance will remain static at the completed cost for the remaining duration of the lease term. During construction, accrued interest will be capitalized into the lease balance. Following construction, we will pay rent in the form of interest. We have guaranteed the obligations under the lease held by our subsidiary.

During the term of the lease, we may elect to purchase the headquarters building for the amount of the banks’ investment in the building and any accrued but unpaid rent. At the end of the lease term, we may elect to buy the building for the outstanding balance on the maturity date or arrange for the cash sale of the building to an unaffiliated third party. The aggregate guarantee made by us under the lease is no more than 87.5% of the costs incurred in connection with the construction of the building. However, under certain default circumstances, the lease guarantee may be 100% of the banks’ investment in the building plus any and all accrued but unpaid interest and all other rent due and payable under the operative agreements.

The operative agreements are subject to customary default provisions, including, for example, those relating to payment and performance defaults, and events of bankruptcy. We are also subject to financial covenants including a covenant to maintain a maximum total leverage ratio not to exceed 3.0 to 1.0 and a minimum interest coverage ratio in excess of 3.5 to 1.0 during the term. If certain events of default occur and are continuing under the operative agreements, the banks may accelerate repayment of their investment under the lease.

Litigation

Patent Infringement Cases

On September 4, 2014, NVIDIA filed complaints against Qualcomm, Inc., or Qualcomm, and various Samsung entities in both the United States International Trade Commission, or ITC, and the United States District Court for the District of Delaware alleging infringement of seven patents relating to graphics processing. In the ITC action, NVIDIA seeks to exclude importation of Samsung Galaxy mobile phones and tablets and other consumer electronics and display devices containing Qualcomm’s Adreno, ARM’s Mali or Imagination’s PowerVR graphics architectures, or the Accused Products. On October 6, 2014, the ITC instituted an investigation of NVIDIA’s claim. In June 2015, NVIDIA moved to terminate all asserted claims on four patents and these motions were granted. The ITC held an evidentiary hearing on certain asserted claims of the three remaining patents from June 22 through June 26, 2015. On October 9, 2015, the ITC Administrative Law Judge, or ALJ, rendered an initial determination that importation of the Samsung Accused Products did not violate U.S. law. NVIDIA petitioned for review of the ALJ’s determination and Samsung and Qualcomm filed contingent petitions for review of the ALJ’s determination. On December 14, 2015, the ITC decided not to review the ALJ’s determination and terminated the Investigation. On February 11, 2016, NVIDIA petitioned the United States Court of Appeals for the Federal Circuit to review the ITC’s decision not to review the ALJ’s determination. The petition is currently pending.

In the Delaware action, NVIDIA seeks unspecified damages for Samsung and Qualcomm’s alleged patent infringement. On October 22, 2014, Samsung and Qualcomm exercised their statutory right to stay the Delaware proceedings in light of the pending ITC action and the court granted the motion to stay on October 23, 2014.

On November 10, 2014, Samsung filed a complaint against NVIDIA and Velocity Micro, Inc., in the United States District Court for the Eastern District of Virginia, alleging that NVIDIA infringed six patents and falsely advertised that the Tegra K1 processor is the world’s fastest mobile processor. Samsung amended its complaint twice, first on December 19, 2014, and then on April 10, 2015, without changing its legal claims. Samsung seeks monetary damages and certain injunctive relief as to some of the asserted patents. NVIDIA answered the second amended complaint on April 16, 2015, and asserted counter-claims against Samsung for infringing four of NVIDIA’s patents and for non-infringement and invalidity of the six patents asserted in Samsung’s second amended complaint. On April 24, 2015, Samsung moved to sever NVIDIA’s counter-claims for patent infringement and its motion was granted on May 19, 2015. NVIDIA voluntarily withdrew its counter-claims on May 19, 2015. On June 17, 2015, Velocity Micro, Inc. voluntarily agreed to a permanent injunction regarding two of the asserted patents and those patents were dismissed from the case with prejudice. Samsung’s false advertising claim was dismissed with prejudice on July 30, 2015. On October 15, 2015, NVIDIA’s Motion for Entry of Judgment of Noninfringement was granted as to one of Samsung’s patents. On January 6, 2016, the Court dismissed plaintiff Samsung Electronics America, Inc. due to lack of subject matter jurisdiction.  On January 20, 2016, the Court dismissed with prejudice defendants Old Micro, Inc. and Velocity Holdings, LLC. On January 26, 2016, the Court dismissed with prejudice Samsung’s infringement claims as to one of the four remaining patents. Beginning January 26, 2016, a jury trial was held regarding Samsung’s patent infringement claims as to the three remaining patents. On February 1, 2016, the Court declared a mistrial as to two of the three remaining patents as a sanction based on Samsung’s failure to comply with its obligation to produce all materials its experts relied on in forming the experts’ opinions in the case. The trial continued as to the last patent. On February 5, 2016, the jury returned a verdict of non-infringement of that patent, that one of the four claims of that patent was invalid, and that Samsung was not entitled to any damages. The re-trial of Samsung’s infringement claims on the two remaining patents is scheduled to begin May 4, 2016.

On November 23, 2014, Samsung filed a complaint against NVIDIA, among others, in the ITC claiming infringement of four United States patents and seeking exclusion and cease and desist orders barring importation of NVIDIA products alleged to infringe Samsung’s patents. On December 23, 2014, the ITC instituted an investigation of Samsung’s claims. On June 5, 2015, Samsung withdrew one patent from the case. A hearing on Samsung’s three remaining patents was held from August 18 through August 21, 2015. On December 22, 2015, the ALJ issued an Initial Determination, or ID, finding that NVIDIA and the other Respondents infringed the asserted claims of the three remaining asserted patents and had violated Section 337. On January 4, 2016, NVIDIA and the other Respondents filed a Petition for Review of the ALJ’s ID seeking review and reversal of his findings that the asserted claims were valid and infringed and that Section 337 had been violated. On January 4, 2016, the Office of Unfair Import Investigations also filed a Petition for Review of the ALJ’s ID seeking review and reversal of his findings that the asserted claims of one of the patents were valid and infringed and that Section 337 had been violated as to that patent. On February 24, 2016, the ITC determined to review in part the ALJ’s ID and asked for further briefing from the parties as to certain issues and patents. As the ITC did not seek to review the findings of infringement and validity of all three patents, the ITC may issue a limited exclusion order and a cease and desist order under one or more of the patents. The innovations claimed in these patents are minor and insignificant to the performance of our products. Based on our plans to modify certain impacted products and certain distribution operations in the United States, we do not believe that the possible entry of these orders will have a significant impact to our business. The target date for the final determination by the ITC is April 25, 2016, followed by the Presidential Review Period ending June 24, 2016.

NVIDIA and Samsung have also challenged the validity of certain of each other’s patents through inter partes review before the United States Patent and Trademark Office. NVIDIA has filed eleven requests for inter partes review on eight of Samsung’s asserted patents. Samsung has filed six requests for inter partes review on six patents asserted by NVIDIA, and Qualcomm has filed three additional requests for inter partes review on two patents asserted by NVIDIA. The United States Patent and Trademark Office has, to date, decided to review four patents owned by NVIDIA, and five patents owned by Samsung. The Patent and Trademark Office has declined to review two patents owned by Samsung. All other requests are currently pending.

On December 21, 2015, Advanced Silicon Technologies LLC filed a complaint in the United States District Court for the District of Delaware alleging infringement of four patents relating to graphics processing and memory management. Advanced Silicon Technologies seeks monetary damages. On February 22, 2016, the Court granted NVIDIA’s unopposed motion to stay that lawsuit pending final resolution of Advanced Silicon Technologies’ parallel lawsuit in the ITC. On December 28, 2015, Advanced Silicon Technologies LLC filed a complaint in the ITC asserting the same four patents and seeking an exclusion order barring importation of NVIDIA products alleged to infringe those patents. On January 29, 2016, the ITC instituted an investigation of Advanced Silicon Technologies’ claims. NVIDIA responded to the ITC complaint on February 25, 2016. A hearing is scheduled for October 3 through October 7, 2016. An initial determination from the ITC ALJ is due February 2, 2017, and the target date for the final determination by the ITC is June 2, 2017.

Accounting for Loss Contingencies

While there can be no assurance of favorable outcomes, we believe the claims made by other parties in the above ongoing matters are without merit and we intend to vigorously defend the actions. As of January 31, 2016, 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, any possible range of loss in these matters cannot be reasonably estimated at this time. We are engaged in other legal actions not described above arising in the ordinary course of its 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.
Income Taxes
Income Taxes
Income Taxes
 
The income tax expense applicable to income before income taxes consists of the following:
 
Year Ended
 
January 31,
2016
 
January 25,
2015
 
January 26,
2014
 
(In millions)
Current income taxes:
 
 
 
 
 
Federal
$
(43
)
 
$
8

 
$
8

State
1

 
1

 
1

Foreign
25

 
17

 
19

Total current
(17
)
 
26

 
28

Deferred taxes:
 
 
 
 
 
Federal
134

 
84

 
17

State
—

 
—

 
—

Foreign
—

 
(1
)
 
(2
)
Total deferred
134

 
83

 
15

Charge in lieu of taxes attributable to employer stock option plans
12

 
15

 
27

Income tax expense
$
129

 
$
124

 
$
70


 
Income before income tax consists of the following:
 
Year Ended
 
January 31,
2016
 
January 25,
2015
 
January 26,
2014
 
(In millions)
Domestic
$
129

 
$
174

 
$
79

Foreign
614

 
581

 
431

Income before income tax
$
743

 
$
755

 
$
510


 
The income tax expense differs from the amount computed by applying the federal statutory income tax rate of 35% to income before income taxes as follows:
 
Year Ended
 
January 31,
2016
 
January 25,
2015
 
January 26,
2014
 
(In millions)
Tax expense computed at federal statutory rate
$
260

 
$
264

 
$
178

State income taxes, net of federal tax effect
1

 
1

 
2

Foreign tax rate differential
(95
)
 
(120
)
 
(94
)
U.S. federal R&D tax credit
(38
)
 
(34
)
 
(30
)
Stock-based compensation
13

 
4

 
9

Tax expense related to intercompany transaction
10

 
10

 
10

Restructuring and expiration of statute of limitations
(21
)
 
—

 
—

Other
(1
)
 
(1
)
 
(5
)
Income tax expense
$
129

 
$
124

 
$
70


The tax effect of temporary differences that gives rise to significant portions of the deferred tax assets and liabilities are presented below:  
 
January 31,
2016
 
January 25,
2015
 
(In millions)
Deferred tax assets:
 
Net operating loss carryforwards
$
57

 
$
72

Accruals and reserves, not currently deductible for tax purposes
58

 
109

Property, equipment and intangible assets
50

 
46

Research and other tax credit carryforwards
404

 
351

Stock-based compensation
29

 
30

Convertible debt
9

 
12

Gross deferred tax assets
607

 
620

Less valuation allowance
(272
)
 
(261
)
Total deferred tax assets
335

 
359

Deferred tax liabilities:
 
 
 
Acquired intangibles
(17
)
 
(25
)
Unremitted earnings of foreign subsidiaries
(615
)
 
(500
)
Gross deferred tax liabilities
(632
)
 
(525
)
Net deferred tax liability
$
(297
)
 
$
(166
)


We recognized income tax expense of $129 million, $124 million and $70 million during fiscal years 2016, 2015, and 2014, respectively. Our annual effective tax rate, was 17.3% in fiscal year 2016, 16.5% in fiscal year 2015 and 13.8% in fiscal year 2014. The difference in the effective tax rates amongst the three years was primarily due to an increase in the amount of earnings subject to United States tax in fiscal years 2016 and 2015, partially offset by a net income tax benefit related to the Icera modem restructuring in fiscal year 2016, and a higher percentage of research tax credit benefit in fiscal year 2014.

Our effective tax rate for each of the fiscal years was lower than the U.S. federal statutory rate of 35% due primarily to income earned in jurisdictions, including British Virgin Islands, Hong Kong, China, Taiwan and United Kingdom, where the tax rate is lower than the United States federal statutory tax rate of 35%, favorable recognition in these fiscal years of the U.S. federal research tax credit and favorable discrete events primarily attributable to the tax benefit recognized upon the expiration of the applicable statutes of limitations.

As of January 31, 2016 and January 25, 2015 we had a valuation allowance of $272 million and $261 million, respectively, related to state and certain foreign deferred tax assets that management determined not likely to be realized due, in part, to projections of future taxable income. To the extent realization of the deferred tax assets becomes more-likely-than-not, we would recognize such deferred tax asset as an income tax benefit during the period.

Our deferred tax assets do not include the excess tax benefit related to stock-based compensation that are a component of our federal and state net operating loss and research tax credit carryforwards in the amount of $416 million as of January 31, 2016. Consistent with prior years, the excess tax benefit reflected in our net operating loss and research tax credit carryforwards will be accounted for as a credit to shareholders' equity, if and when realized.

As of January 31, 2016, we had federal, state and foreign net operating loss carryforwards of $516 million, $664 million and $289 million, respectively. The federal and state carryforwards will expire beginning in fiscal year 2022 and 2017, respectively. The foreign net operating loss carryforwards of $275 million may be carried forward indefinitely and the remainder of $14 million will begin to expire in fiscal year 2017. As of January 31, 2016, we had federal research tax credit carryforwards of $476 million that will begin to expire in fiscal year 2018. We have state research tax credit carryforwards of $450 million, of which $432 million is attributable to the State of California and may be carried over indefinitely, and $18 million is attributable to various other states and will expire beginning in fiscal year 2017. We have other state tax credit carryforwards of $3 million that will expire in fiscal year 2026 and foreign tax credit carryforwards of $1 million, which may be refunded in fiscal years 2017 through 2020 if not utilized. Our tax attributes, net operating loss and tax credit carryforwards, remain subject to audit and may be adjusted for changes or modification in tax laws, other authoritative interpretations thereof, or other facts and circumstances. Utilization of federal, state, and foreign net operating losses and tax credit carryforwards may also be subject to limitations due to ownership changes and other limitations provided by the Internal Revenue Code and similar state and foreign tax provisions. If any such limitations apply, the federal, states, or foreign net operating loss and tax credit carryforwards, as applicable, may expire or be denied before utilization.

As of January 31, 2016, U.S. federal and state income taxes have not been provided on approximately $2.50 billion of undistributed earnings of non-United States subsidiaries as such earnings are considered to be indefinitely reinvested. We have not provided the amount of unrecognized deferred tax liabilities for temporary differences related to investments in our foreign subsidiaries as the determination of such amount is not practicable.

As of January 31, 2016, we had $230 million of gross unrecognized tax benefits, of which $202 million would affect our effective tax rate if recognized. However, approximately $50 million of the unrecognized tax benefits were related to state income tax positions taken, that, if recognized, would be in the form of a carryforward deferred tax asset that would likely attract a full valuation allowance. The $202 million of unrecognized tax benefits as of January 31, 2016 consisted of $67 million recorded in non-current income taxes payable and $135 million reflected as a reduction to the related deferred tax assets.

A reconciliation of gross unrecognized tax benefits is as follows:
 
January 31,
2016
 
January 25,
2015
 
January 26,
2014
 
(In millions)
Balance at beginning of period
$
254

 
$
238

 
$
221

Increases in tax positions for prior years
—

 
—

 
—

Decreases in tax positions for prior years
(1
)
 
(1
)
 
(1
)
Increases in tax positions for current year
28

 
23

 
23

Lapse in statute of limitations
(51
)
 
(6
)
 
(5
)
Balance at end of period
$
230

 
$
254

 
$
238



We classify an unrecognized tax benefit as a current liability, or amount refundable, to the extent that we anticipate payment or receipt of cash for income taxes within one year. The amount is classified as a long-term liability, or reduction of long-term deferred tax assets or amount refundable, if we anticipate payment or receipt of cash for income taxes during a period beyond a year.

Our policy is to include interest and penalties related to unrecognized tax benefits as a component of income tax expense. As of January 31, 2016, January 25, 2015, and January 26, 2014, we had accrued $11 million, $14 million, and $13 million, respectively, for the payment of interest and penalties related to unrecognized tax benefits, which is not included as a component of our unrecognized tax benefits. As of January 31, 2016, non-current income taxes payable of $78 million consisted of unrecognized tax benefits of $67 million and the related interest and penalties of $11 million.

While we believe that we have adequately provided for all tax positions, 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. As of January 31, 2016, we do not believe that our estimates, as otherwise provided for, on such tax positions will significantly increase or decrease within the next twelve months.

We are subject to taxation by a number of taxing authorities both in the United States and throughout the world. As of January 31, 2016, the material tax jurisdictions that may be subject to examination include the United States, Taiwan, Canada, China, Germany, Hong Kong, France, Japan, and India for fiscal years 2003 through 2015. As of January 31, 2016, the material tax jurisdictions for which we are currently under examination include the state of California for fiscal years 2011 through 2012, and India, Taiwan, France and Germany for fiscal years 2003 through 2015.
Stockholders' Equity
Stockholders' Equity
Shareholders’ Equity

Share Repurchase Program

Beginning August 2004, our Board of Directors authorized us, subject to certain specifications, to repurchase shares of our common stock. In May 2015, the Board extended the previously authorized repurchase program through December 2018 and authorized an additional $1.62 billion under the repurchase program.

During fiscal year 2016, we repurchased a total of 25 million shares for $587 million and paid $213 million in cash dividends to our shareholders, equivalent to $0.085 per share for the three months ended April 26, 2015, $0.0975 per share for the six months ended October 25, 2015, and $0.115 per share for the three months ended January 31, 2016. As a result, we returned $800 million to shareholders during fiscal year 2016 in the form of share repurchases and dividend payments.

Through January 31, 2016, we have repurchased an aggregate of 231 million shares under our share repurchase program for a total of $3.85 billion. All shares delivered from these repurchases have been placed into treasury stock. As of January 31, 2016, we were authorized, subject to certain specifications, to repurchase additional shares of our common stock up to $1.47 billion.

We intend to return approximately $1.00 billion to our shareholders in fiscal year 2017 through a combination of share repurchases and cash dividends. We also declared on February 17, 2016 that we would pay our next quarterly cash dividend of $0.115 per share on March 23, 2016, to all shareholders of record on March 2, 2016.

In addition to our Board authorized share repurchases, we withhold common stock shares associated with net share settlements to cover tax withholding obligations upon the vesting of RSU and PSU awards under our equity incentive program. During fiscal year 2016, we withheld approximately 3 million shares at a total cost of $66 million through net share settlements. Please refer to Note 2 of these Notes to the Consolidated Financial Statements for further information regarding stock-based compensation related to equity awards granted under our equity incentive programs.

Convertible Preferred Stock

As of January 31, 2016 and January 25, 2015, there were no shares of preferred stock outstanding.

Common Stock

We are authorized to issue up to 2.00 billion shares of our common stock at $0.001 per share par value.
Employee Retirement Plans
Pension and Other Postretirement Benefits Disclosure
Employee Retirement Plans
 
We have a 401(k) retirement plan covering substantially all of our United States employees. Under the plan, participating employees may defer up to 100% of their pre-tax earnings, subject to the Internal Revenue Service annual contribution limits. Effective January 2013, we began matching a portion of the employee contributions. Our contribution expense in fiscal years 2016, 2015 and 2014 was $8 million, $6 million and $5 million, respectively. We also have defined contribution retirement plans outside of the United States to which we contributed $21 million, $20 million and $16 million for fiscal years 2016, 2015 and 2014, respectively.
Segment Information
Segment Information
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 operating decisions and assessing financial performance. Our operating segments are equivalent to our reportable segments.

We report our business in two primary reportable segments - the GPU business and the Tegra Processor business - based on a single underlying graphics architecture.

Our GPU product brands are aimed at specialized markets include GeForce for gamers; Quadro for designers; Tesla for researchers and analysts focused on artificial intelligence, deep learning and big-data; and GRID for cloud-based visual computing users. We also integrate our GPUs into powerful mobile system-on-a-chip (SOC) processors, which drive supercomputing capabilities for tablets and online gaming and entertainment devices, as well as autonomous robots, drones and cars. Our Tegra brand integrates an entire computer onto a single chip, incorporating GPUs and multi-core CPUs with audio, video and input/output capabilities.

We have a single unifying architecture for our GPU and Tegra Processors. This architecture unification leverages our visual computing expertise by charging the operating expenses of certain core engineering functions to the GPU business, while charging the Tegra Processor business for the incremental cost of the teams working directly for that business. In instances where the operating expenses of certain functions benefit both reportable segments, our CODM assigns 100% of those expenses to the reportable segment that benefits the most.

The “All Other” category presented below represents the revenue and expenses that our CODM does not assign to either the GPU business or the Tegra Processor business for purposes of making operating decisions or assessing financial performance. The revenue includes primarily patent licensing revenue and the expenses include corporate infrastructure and support costs, stock-based compensation costs, amortization of acquisition-related intangible assets, other acquisition-related costs, product warranty charge, restructuring and other charges, 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. Reportable segments do not record intersegment revenue, and, accordingly, there is none to be reported. The accounting policies for segment reporting are the same as for NVIDIA as a whole. The table below presents details of our reportable segments and the “All Other” category.
 
GPU
 
Tegra Processor
 
All Other
 
Consolidated
 
(In millions)
Year Ended January 31, 2016:
 
 
 
 
 
 
 
Revenue
$
4,187

 
$
559

 
$
264

 
$
5,010

Depreciation and amortization expense
$
110

 
$
43

 
$
44

 
$
197

Operating income (loss)
$
1,344

 
$
(239
)
 
$
(358
)
 
$
747

Year Ended January 25, 2015:
 
 
 
 
 
 
 
Revenue
$
3,839

 
$
579

 
$
264

 
$
4,682

Depreciation and amortization expense
$
117

 
$
57

 
$
46

 
$
220

Operating income (loss)
$
1,113

 
$
(254
)
 
$
(100
)
 
$
759

Year Ended January 26, 2014:
 
 
 
 
 
 
 
Revenue
$
3,468

 
$
398

 
$
264

 
$
4,130

Depreciation and amortization expense
$
147

 
$
50

 
$
42

 
$
239

Operating income (loss)
$
835

 
$
(268
)
 
$
(71
)
 
$
496

 
 
Year Ended
 
 
January 31,
2016
 
January 25,
2015
 
January 26,
2014
 
 
(In millions)
Reconciling items included in "All Other" category:
 
 
 
 
Unallocated revenue
 
$
264

 
$
264

 
$
264

Unallocated cost of revenue and operating expenses
 
(244
)
 
(169
)
 
(167
)
Stock-based compensation
 
(204
)
 
(158
)
 
(136
)
Restructuring and other charges
 
(131
)
 
—

 
—

Acquisition-related costs
 
(22
)
 
(37
)
 
(32
)
Product warranty charges
 
(21
)
 
—

 
—

Total
 
$
(358
)
 
$
(100
)
 
$
(71
)

Revenue by geographic region is allocated to individual countries based on the location to which the products are initially billed even if our customers’ revenue is attributable to end customers that are located in a different location. The following table summarizes information pertaining to our revenue from customers based on the invoicing address by geographic regions: 
 
Year Ended
 
January 31,
2016
 
January 25,
2015
 
January 26,
2014
Revenue:
(In millions)
Taiwan
$
1,912

 
$
1,594

 
$
1,321

China
806

 
922

 
794

Other Asia Pacific
749

 
638

 
675

United States
643

 
791

 
727

Europe
482

 
369

 
295

Other Americas
418

 
368

 
318

Total revenue
$
5,010

 
$
4,682

 
$
4,130



The following table summarizes information pertaining to our revenue by each of the specialized markets we serve:
 
Year Ended
 
January 31,
2016
 
January 25,
2015
 
January 26,
2014
Revenue:
(In millions)
Gaming
$
2,818

 
$
2,058

 
$
1,511

Professional Visualization
750

 
795

 
789

Datacenter
339

 
317

 
199

Automotive
320

 
183

 
99

OEM & IP
783

 
1,329

 
1,532

Total revenue
$
5,010

 
$
4,682

 
$
4,130



The following table presents summarized information for long-lived assets by geographic region. Long-lived assets consist of property and equipment and deposits and other assets, and exclude goodwill and intangible assets.
 
January 31,
2016
 
January 25,
2015
Long-lived assets:
(In millions)
United States
$
414

 
$
467

India
45

 
48

Taiwan
39

 
52

China
25

 
28

Europe
9

 
52

Other Asia Pacific
1

 
1

Total long-lived assets
$
533

 
$
648



Revenue from significant customers, those representing 10% or more of total revenue for the respective dates, is summarized as follows:
 
Year Ended
 
January 31,
2016
 
January 25,
2015
 
January 26,
2014
Revenue:
 
 
 
 
 
Customer A
11
%
 
11
%
 
11
%
Customer B
9
%
 
9
%
 
10
%

Revenue from both customers was attributable to the GPU business.

Accounts receivable from significant customers, those representing 10% or more of total accounts receivable for the respective periods, is summarized as follows: 
 
January 31,
2016
 
January 25,
2015
Accounts Receivable:
 
 
 
Customer B
21
%
 
20
%
Customer C
8
%
 
10
%
Restructuring and Other Charges (Notes)
Restructuring and Related Activities Disclosure
Restructuring and Other Charges
 
In May 2015, we announced our intent to wind down our Icera modem operations and that we were open to a sale of the technology or operations. We pursued the sale of Icera’s technology and operations but were unable to identify a viable buyer with genuine interest. As a result, we began the wind-down of Icera modem operations in the second quarter of fiscal year 2016.

The results of any ongoing Icera modem operations were reported in the Tegra Processor reportable segment during fiscal year 2016 and previous fiscal years, however, restructuring and other charges associated with the wind-down of the Icera modem operations are separately reported with other non-recurring charges and benefits that our CODM deems to be enterprise in nature. Please refer to Note 16 of these Notes to the Consolidated Financial Statements for a discussion regarding our reportable segments.

Our operating expenses for fiscal year 2016 included $131 million of restructuring and other charges. During fiscal year 2016, we also recognized an income tax benefit of $49 million from a tax reserve release upon the expiration of applicable statutes of limitations and a $27 million income tax charge for the write-down of a deferred tax asset, both of which related to our Icera modem operations.
 
Year Ended
 
January 31,
 
2016
 
(In millions)
Employee severance and related costs
$
82

Fixed assets impairment
18

Tax subsidy impairment
17

Facilities and related costs
9

Other exit costs
5

Restructuring and other charges
$
131



We expect to incur additional restructuring charges to operating expense of approximately $1 million to $2 million per quarter for each of the first two quarters of fiscal year 2017, after which we expect the restructuring of Icera operations to be substantially complete. These restructuring activities impacted approximately 5% of our global workforce. The following table provides a summary of the restructuring activities and related liabilities recorded in accrued liabilities on our Consolidated Balance Sheets as of January 31, 2016:
 
January 31,
 
2016
 
(In millions)
Balance at beginning of period
$
—

Restructuring and other charges
131

Cash payments
(63
)
Non-cash adjustments
(45
)
Balance at end of period
$
23



The remaining balance of $23 million as of January 31, 2016 is expected to be paid during the first half of fiscal year 2017.
Quartely Summary
Quarterly Financial Information
Quarterly Summary (Unaudited)
 
The following table sets forth our unaudited consolidated financial results, for the last eight fiscal quarters:
 
Fiscal Year 2016
Quarters Ended
 
January 31,
2016
 
October 25,
2015
 
July 26,
2015
 
April 26,
2015
 
(In millions, except per share data)
Statement of Income Data:
 
 
 
 
 
 
 
Revenue
$
1,401

 
$
1,305

 
$
1,153

 
$
1,151

Cost of revenue
$
610

 
$
572

 
$
519

 
$
498

Gross profit
$
791

 
$
733

 
$
634

 
$
653

Net income
$
207

 
$
247

 
$
26

 
$
134

Net income per share:
 
 
 
 
 
 
 
Basic
$
0.38

 
$
0.45

 
$
0.05

 
$
0.24

Diluted
$
0.35

 
$
0.44

 
$
0.05

 
$
0.24


 
Fiscal Year 2015
Quarters Ended
 
January 25,
2015
 
October 26,
2014
 
July 27,
2014
 
April 27,
2014
 
(In millions, except per share data)
Statement of Income Data:
 
 
 
 
 
 
 
Revenue
$
1,251

 
$
1,225

 
$
1,103

 
$
1,103

Cost of revenue
$
552

 
$
548

 
$
484

 
$
499

Gross profit
$
699

 
$
677

 
$
619

 
$
604

Net income
$
193

 
$
173

 
$
128

 
$
137

Net income per share:
 
 
 
 
 
 
 
Basic
$
0.35

 
$
0.32

 
$
0.23

 
$
0.24

Diluted
$
0.35

 
$
0.31

 
$
0.22

 
$
0.24

Schedule II
Schedule of Valuation and Qualifying Accounts Disclosure
SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS
 
Description
 
Balance at
Beginning of Period
 
Additions
 
Deductions
 
Balance at
End of Period
 
 
(In millions)
Year ended January 31, 2016
 
 
 
 
 
 
 
 
Allowance for doubtful accounts
 
$
3

 
$
—

(1)
$
(1
)
(1)
$
2

Sales return allowance
 
$
14

 
$
9

(2)
$
(14
)
(4)
$
9

Deferred tax valuation allowance
 
$
261

 
$
11

(3)
$
—

 
$
272

Year ended January 25, 2015
 
 
 
 
 
 
 
 
Allowance for doubtful accounts
 
$
1

 
$
3

(1)
$
(1
)
(1)
$
3

Sales return allowance
 
$
14

 
$
12

(2)
$
(12
)
(4)
$
14

Deferred tax valuation allowance
 
$
244

 
$
17

(3)
$
—

 
$
261

Year ended January 26, 2014
 
 
 
 
 
 
 
 
Allowance for doubtful accounts
 
$
2


$
—

(1)
$
(1
)
(1)
$
1

Sales return allowance
 
$
15


$
16

(2)
$
(17
)
(4)
$
14

Deferred tax valuation allowance
 
$
225


$
19

(3)
$
—

 
$
244

 
(1)  Additions represent allowance for doubtful accounts charged to expense and deductions represent amounts recorded as reduction to expense upon reassessment of allowance for doubtful accounts at period end.
(2) Represents allowance for sales returns estimated at the time revenue is recognized primarily based on historical return rates and is charged as a reduction to revenue.
(3)  Represents change in valuation allowance primarily related to state and certain foreign deferred tax assets that management has determined not likely to be realized due, in part, to projections of future taxable income of the respective jurisdictions.
(4) Represents sales returns.
Summary of Significant Accounting Policies (Policies)
Nature of Operations 
Our Company

NVIDIA is dedicated to advancing visual computing. NVIDIA has transformed into a specialized platform company that targets four large markets - Gaming, Professional Visualization, Datacenter and Automotive - where visual computing is essential and valued.

Our two reportable segments - GPU and Tegra Processor - are based on a single underlying graphics architecture. From our proprietary processors, we have created platforms that address the four large markets where our visual computing expertise is critically important. We are focused on delivering value through PC, mobile and cloud architectures. Our vertical integration enables us to bring together hardware, system software, programmable algorithms, systems and services to create unique value for the markets we serve.

Our GPU product brands are aimed at specialized markets including GeForce for gamers; Quadro for designers; Tesla for researchers and analysts focused on artificial intelligence, deep learning and big-data; and GRID for cloud-based visual computing users. We also integrate our GPUs into powerful mobile system-on-a-chip (SOC) processors, which drive supercomputing capabilities for tablets and online gaming and entertainment devices, as well as autonomous robots, drones and cars. Our Tegra brand integrates an entire computer onto a single chip, incorporating GPUs and multi-core CPUs with audio, video and input/output capabilities.

Headquartered in Santa Clara, California, NVIDIA was incorporated in California in April 1993 and reincorporated in Delaware in April 1998.
   
All references to “NVIDIA,” “we,” “us,” “our” or the “Company” mean NVIDIA Corporation and its subsidiaries, except where it is made clear that the term means only the parent company.

Fiscal Period, Policy 
Fiscal Year
 
We operate on a 52- or a 53-week year, ending on the last Sunday in January. Fiscal year 2016 was a 53-week year with the extra week in the fiscal fourth quarter and fiscal years 2015 and 2014 were 52-week years.
Consolidation, Policy 
Principles of Consolidation
 
Our consolidated financial statements include the accounts of NVIDIA Corporation and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates, Policy 
Use of Estimates
 
The preparation of financial statements in conformity with accounting principles generally accepted in the United States, or 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 from those 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, and other contingencies. These estimates are based on historical facts and various other assumptions that we believe are reasonable.
Revenue Recognition 
Revenue Recognition
 
Product Revenue

We recognize revenue from product sales when persuasive evidence of an arrangement exists, the product has been delivered, the price is fixed or determinable and collection of the related receivable is reasonably assured. For most sales, we use a binding purchase order and in certain cases we use a contractual agreement as evidence of an arrangement. We consider delivery to occur upon shipment provided title and risk of loss have passed to the customer. At the point of sale, we assess whether the arrangement fee is fixed or determinable and whether collection is reasonably assured. If we determine that collection of a fee is not reasonably assured, we defer the fee and recognize revenue at the time collection becomes reasonably assured, which is generally upon receipt of payment.

For sales to certain distributors with rights of return for which the level of returns cannot be reasonably estimated, our policy is to defer recognition of revenue and related cost of revenue until the distributors resell the product and, in some cases, when customer return rights lapse.

Our customer programs primarily involve rebates, which are designed to serve as sales incentives to resellers of our products in various target markets. We account for rebates as a reduction of revenue and recognize a liability for these rebates at the later of the date at which we record the related revenue or the date at which we offer the rebate. Unclaimed rebates are reversed to revenue.

Our customer programs also include marketing development funds, or MDFs.  MDFs represent monies paid to retailers, system builders, original equipment manufacturers, or OEMs, distributors, add-in card partners and other channel partners that are earmarked for market segment development and expansion and typically are designed to support our partners’ activities while also promoting NVIDIA products. We account for MDFs as a reduction of revenue and apply a breakage factor to certain types of MDF programs.

We also record a reduction to revenue by establishing a sales return allowance for estimated product returns at the time revenue is recognized, based primarily on historical return rates. However, if product returns for a particular fiscal period exceed historical return rates we may determine that additional sales return allowances are required to properly reflect our estimated exposure for product returns.

License and Development Revenue

For license arrangements that require significant customization of our intellectual property components, we generally recognize the related revenue over the period that services are performed. For most license and service arrangements, we determine progress to completion based on actual cost incurred to date as a percentage of the estimated total cost required to complete the project. A provision for estimated losses on contracts is made in the period in which the loss becomes probable and can be reasonably estimated. Costs incurred in advance of revenue recognized are recorded as deferred costs on uncompleted contracts. If the amount billed exceeds the amount of revenue recognized, the excess amount is recorded as deferred revenue.

For license arrangements that do not require significant customization but where we are obligated to provide further deliverables over the term of the license agreement, we record revenue over the life of the license term, with consideration received in advance of the performance period classified as deferred revenue.

Royalty revenue is recognized related to the distribution or sale of products that use our technologies under license agreements with third parties.  We recognize royalty revenue upon receipt of a confirmation of earned royalties and when collectability is reasonably assured from the applicable licensee.

Restructuring and Other Charges, Policy 
Restructuring and Other Charges

Our restructuring and other charges include employee severance and related costs, the write-down of assets, and other exit costs. The severance and related costs include one-time termination benefits as well as certain statutory termination benefits or employee terminations under ongoing benefit arrangements. One-time termination benefits are recognized as a liability at estimated fair value when the approved plan of termination has been communicated to employees, unless employees must provide future service, in which case the benefits are recognized ratably over the future service period. Ongoing termination benefits arrangements are recognized as a liability at estimated fair value when the amount of such benefits becomes estimable and payment is probable. Any contract termination costs are recognized at estimated fair value when we terminate the contract in accordance with the contract terms. Other associated costs are recognized in the period the liability is incurred.

Advertising Costs, Policy 
Advertising Expenses

We expense advertising costs in the period in which they are incurred. Advertising expenses for fiscal years 2016, 2015 and 2014 were $17 million, $15 million and $13 million, respectively.
Lease, Policy 
Rent Expense
 
We recognize rent expense on a straight-line basis over the lease period and accrue for rent expense incurred, but not paid.
Commitments and Contingencies, Policy 
Product Warranties
 
We generally offer limited warranty to end-users that ranges from one to three years for products in order to repair or replace products for any manufacturing defects or hardware component failures. Cost of revenue includes the estimated cost of product warranties that are calculated at the point of revenue recognition. Under limited circumstances, we may offer an extended limited warranty to customers for certain products. We also accrue for known warranty and indemnification issues if a loss is probable and can be reasonably estimated.
Compensation Related Costs, Policy 
Stock-based Compensation
      
We estimate the fair value of employee stock options on the date of grant using a binomial model and recognize the expense using a straight-line attribution method over the requisite employee service period. We use the closing trading price of our common stock on the date of grant, minus a dividend yield discount, as the fair value of awards of restricted stock units, or RSUs, and performance stock units that are based on our corporate financial performance targets, or PSUs, and we use a Monte Carlo simulation on the date of grant to estimate the fair value of performance stock units that are based on market conditions, or market-based PSUs. The compensation expense for stock options, RSUs and market-based PSUs is recognized using a straight-line attribution method over the requisite employee service period while compensation expense for PSUs is recognized using an accelerated amortization model. We estimate the fair value of shares to be issued under our employee stock purchase plan, or ESPP, using the Black-Scholes model at the commencement of an offering period in March and September of each year. Stock-based compensation for our ESPP is expensed using an accelerated amortization model.

Legal Costs, Policy 
Litigation, Investigation and Settlement Costs

From time to time, we are involved in legal actions and/or investigations by regulatory bodies. We are aggressively defending our current litigation matters. However, there are many uncertainties associated with any litigation or investigation, and we cannot be certain that these actions or other third-party claims against us will be resolved without litigation, fines and/or substantial settlement payments. If that occurs, our business, financial condition and results of operations could be materially and adversely affected. If information becomes available that causes us to determine that a loss in any of our pending litigation, investigations or settlements is probable, and we can reasonably estimate the loss associated with such events, we will record the loss in accordance with U.S. GAAP. However, the actual liability in any such litigation or investigation may be materially different from our estimates, which could require us to record additional costs.
Foreign Currency Transactions and Translations Policy 
Foreign Currency Remeasurement
 
We use the United States dollar as our functional currency for all of our subsidiaries. Foreign currency monetary assets and liabilities are remeasured into United States dollars at end-of-period exchange rates. Non-monetary assets and liabilities such as property and equipment, and equity are remeasured at historical exchange rates. Revenue and expenses are remeasured at average exchange rates in effect during each period, except for those expenses related to the previously noted balance sheet amounts, which are remeasured at historical exchange rates. Gains or losses from foreign currency remeasurement are included in “Other income, net” in our Consolidated Statements of Income and to date have not been significant.

The impact of gain or loss from foreign currency remeasurement included in determining other income, net was not significant for both fiscal year 2016 and 2015, and was a gain of $5 million for fiscal year 2014. 

Income Tax, Policy 
Income Taxes
 
We recognize federal, state and foreign current tax liabilities or assets based on our estimate of taxes payable or refundable in the current fiscal year by tax jurisdiction. We recognize federal, state and foreign deferred tax assets or liabilities, as appropriate, for our estimate of future tax effects attributable to temporary differences and carryforwards; and we record a valuation allowance to reduce any deferred tax assets by the amount of any tax benefits that, based on available evidence and judgment, are not expected to be realized.

United States income tax has not been provided on a portion of earnings of our non-U.S. subsidiaries to the extent that such earnings are considered to be indefinitely reinvested.

Our calculation of deferred tax assets and liabilities is based on certain estimates and judgments and involves dealing with uncertainties in the application of complex tax laws. Our estimates of deferred tax assets and liabilities may change based, in part, on added certainty or finality to an anticipated outcome, changes in accounting standards or tax laws in the United States, or foreign jurisdictions where we operate, or changes in other facts or circumstances. In addition, we recognize liabilities for potential United States and foreign income tax contingencies based on our estimate of whether, and the extent to which, additional taxes may be due. If we determine that payment of these amounts is unnecessary or if the recorded tax liability is less than our current assessment, we may be required to recognize an income tax benefit or additional income tax expense in our financial statements accordingly.

As of January 31, 2016, we had a valuation allowance of $272 million related to state and certain foreign deferred tax assets that management determined are not likely to be realized due, in part, to projections of future taxable income and potential utilization limitations of tax attributes acquired as a result of stock ownership changes. To the extent realization of the deferred tax assets becomes more-likely-than-not, we would recognize such deferred tax asset as an income tax benefit during the period.

We recognize excess tax benefit related to stock-based compensation as a credit to shareholders' equity if and when realized. In determining if and when excess tax benefits have been realized, we have elected to utilize the with-and-without approach with respect to such excess tax benefits. We have also elected to ignore the indirect tax effects of stock-based compensation deductions for financial and accounting reporting purposes, and specifically to recognize the full effect of the research tax credit in income from operations.

We recognize the benefit from a tax position only if it is more-likely-than-not that the position would be sustained upon audit based solely on the technical merits of the tax position. Our policy is to include interest and penalties related to unrecognized tax benefits as a component of income tax expense. Please refer to Note 13 of these Notes to the Consolidated Financial Statements for additional information.

Comprehensive Income, Policy 
Comprehensive Income
 
Comprehensive income consists of net income and other comprehensive income (loss). Other comprehensive income (loss) components include unrealized gains (losses) on available-for-sale securities and the net change in fair value of our interest rate swap, net of tax.
Earnings Per Share, Policy 
Net Income Per Share
 
Basic net income per share is computed using the weighted average number of common shares outstanding during the period. 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. Under the treasury stock method, the effect of stock options outstanding is not included in the computation of diluted net income per share for periods when their effect is anti-dilutive. Additionally, we issued convertible notes with a net settlement feature that requires us, upon conversion, to settle the principal amount of debt for cash and the conversion premium for cash or shares of our common stock. Our convertible notes, note hedges, and related warrants contain various conversion features, which are further described in Note 11 of these Notes to the Consolidated Financial Statements. The potentially dilutive shares resulting from the convertible notes and warrants under the treasury stock method will be included in the calculation of diluted income per share when their inclusion is dilutive. However, unless actually exercised, the note hedges will not be included in the calculation of diluted net income per share, as their pre-exercised effect would be anti-dilutive under the treasury stock method.
Cash and Cash Equivalents, Policy 
Cash and Cash Equivalents
 
We consider all highly liquid investments that are readily convertible into cash and have an original maturity of three months or less at the time of purchase to be cash equivalents. As of January 31, 2016 and January 25, 2015, our cash and cash equivalents were $596 million and $497 million, respectively, including $43 million and $132 million, respectively, invested in money market funds.
Marketable Securities, Policy 
Marketable Securities
 
Marketable securities consist primarily of highly liquid investments with maturities of greater than three months when purchased. We generally classify our marketable securities at the date of acquisition as available-for-sale. These securities are reported at fair value with the related unrealized gains and losses included in accumulated other comprehensive income (loss), a component of shareholders’ equity, net of tax. The fair value of interest-bearing securities includes accrued interest. Any unrealized losses which are considered to be other-than-temporary impairments are recorded in the other income and expense section of our Consolidated Statements of Income. Realized gains and losses on the sale of marketable securities are determined using the specific-identification method and recorded in the other income and expense section of our Consolidated Statements of Income.

All of our available-for-sale investments are subject to a periodic impairment review. We record a charge to earnings when a decline in fair value is significantly below cost basis and judged to be other-than-temporary, or have other indicators of impairments. If the fair value of an available-for-sale debt instrument is less than its amortized cost basis, an other-than-temporary impairment is triggered in circumstances where (1) we intend to sell the instrument, (2) it is more likely than not that we will be required to sell the instrument before recovery of its amortized cost basis, or (3) a credit loss exists where we do not expect to recover the entire amortized cost basis of the instrument. In these situations, we recognize an other-than-temporary impairment in earnings equal to the entire difference between the debt instruments’ amortized cost basis and its fair value. For available-for-sale debt instruments that are considered other-than-temporarily impaired due to the existence of a credit loss, if we do not intend to sell and it is not more likely than not that we will not be required to sell the instrument before recovery of its remaining amortized cost basis (amortized cost basis less any current-period credit loss), we separate the amount of the impairment into the amount that is credit related and the amount due to all other factors. The credit loss component is recognized in earnings while loss related to all other factors is recorded in accumulated other comprehensive income (loss).
 
Investment, Policy 
Fair Value of Financial Instruments
 
The carrying value of cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate their fair values due to their relatively short maturities as of January 31, 2016 and January 25, 2015. Marketable securities are comprised of available-for-sale securities that are reported at fair value with the related unrealized gains (losses) included in accumulated other comprehensive income (loss), a component of shareholders’ equity, net of tax. Fair value of the marketable securities is determined based on quoted market prices. Derivative instruments are recognized as either assets or liabilities and are measured at fair value. The accounting for changes in the fair value of a derivative depends on the intended use of the derivative and the resulting designation. For derivative instruments designated as fair value hedges, the gains (losses) are recognized in earnings in the periods of change together with the offsetting losses (gains) on the hedged items attributed to the risk being hedged. For derivative instruments designated as cash-flow hedges, the effective portion of the gains (losses) on the derivatives is initially reported as a component of other comprehensive income (loss) and is subsequently recognized in earnings when the hedged exposure is recognized in earnings.
Concentration Risk, Credit Risk, Policy 
Concentration of Credit Risk
 
Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash equivalents, marketable securities, accounts receivable, note hedge and interest rate swap. Our investment policy requires the purchase of high grade investment securities, the diversification of asset type and includes certain limits on our portfolio duration. All marketable securities are held in our name, managed by several investment managers and held by one major financial institution under a custodial arrangement. Accounts receivable from significant customers, those representing 10% or more of total accounts receivable, aggregated approximately 21% of our accounts receivable balance from one customer as of January 31, 2016 and 30% of our account receivable balance from two customers as of January 25, 2015. We perform ongoing credit evaluations of our customers’ financial condition and maintain an allowance for potential credit losses. This allowance consists of an amount identified for specific customers and an amount based on overall estimated exposure. Our overall estimated exposure excludes amounts covered by credit insurance and letters of credit.
Receivables, Policy 
Accounts Receivable
 
We maintain an allowance for doubtful accounts receivable for estimated losses resulting from the inability of our customers to make required payments. We determine this allowance, which consists of an amount identified for specific customer issues as well as an amount based on overall estimated exposure. Factors impacting the allowance include the level of gross receivables, the financial condition of our customers and the extent to which balances are covered by credit insurance or letters of credit.
Inventories 
Inventories

Inventory cost is computed on an adjusted standard basis, which approximates actual cost on an average or first-in, first-out basis. Inventory costs consist primarily of the cost of semiconductors purchased from subcontractors, including wafer fabrication, assembly, testing and packaging, manufacturing support costs, including labor and overhead associated with such purchases, final test yield fallout, and shipping costs, as well as the cost of purchased memory products and other component parts. We charge cost of sales for inventory provisions to write down our inventory to the lower of cost or estimated market value or to completely write off obsolete or excess inventory. Most of our inventory provisions relate to the write-off of excess quantities of products, based on our inventory levels and future product purchase commitments compared to assumptions about future demand and market conditions. Once inventory has been written-off or written-down, it creates a new cost basis for the inventory that is not subsequently written-up.

Property, Plant and Equipment, Policy 
Property and Equipment
 
Property and equipment are stated at cost. Depreciation of property and equipment is computed using the straight-line method based on the estimated useful lives of the assets, generally three to five years. Once an asset is identified for retirement or disposition, the related cost and accumulated depreciation or amortization are removed, and a gain or loss is recorded. The estimated useful lives of our buildings are up to twenty five years. Depreciation expense includes the amortization of assets recorded under capital leases. Leasehold improvements and assets recorded under capital leases are amortized over the shorter of the expected lease term or the estimated useful life of the asset.
Goodwill and Intangible Assets, Policy 
Goodwill

Goodwill is subject to our annual impairment test during the fourth quarter of our fiscal year, or earlier if indicators of potential impairment exist.  For the purposes of completing our impairment test, we perform either a qualitative or a quantitative analysis on a reporting unit basis. 

For those reporting units where a significant change or event has occurred, where potential impairment indicators exist, or for which we have not performed a quantitative assessment recently, we utilize a two-step quantitative assessment to testing goodwill for impairment. The first step tests for possible impairment by applying a fair value-based test by weighing the results from the income approach and the market approach. The second step, if necessary, measures the amount of such impairment by applying fair value-based tests to individual assets and liabilities. Please refer to Note 4 of these Notes to the Consolidated Financial Statements for additional information. 

Intangible Assets

Intangible assets primarily represent rights acquired under technology licenses, patents, acquired intellectual property, trademarks and customer relationships and are subject to an annual impairment test. We currently amortize our intangible assets with definitive lives over periods ranging from one to ten years using a method that reflects the pattern in which the economic benefits of the intangible asset are consumed or otherwise used up or, if that pattern cannot be reliably determined, using a straight-line amortization method.
Impairment or Disposal of Long-Lived Assets, Policy 
Impairment of Long-Lived Assets
 
Long-lived assets, such as property and equipment and intangible assets subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset, or asset group may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset, or asset group to estimated undiscounted future cash flows expected to be generated by the asset, or asset group. If the carrying amount of an asset or asset group exceeds its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset or asset group exceeds the estimated fair value of the asset or asset group. Fair value is determined based on the estimated discounted future cash flows expected to be generated by the asset or asset group. Assets and liabilities to be disposed of would be separately presented in the Consolidated Balance Sheet and the assets would be reported at the lower of the carrying amount or fair value less costs to sell, and would no longer be depreciated.
Asset Retirement Obligations and Environmental Cost, Policy 
Accounting for Asset Retirement Obligations
 
We account for asset retirement obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. As of January 31, 2016 and January 25, 2015, our asset retirement obligations to return the leasehold improvements at our headquarters facility and certain laboratories at our domestic and international facilities to their original condition upon lease termination were $2 million and $7 million, respectively.
New Accounting Pronouncements, Policy 
Adoption of New and Recently Issued Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board, or FASB, issued an accounting standards update regarding the accounting for leases. The objective of the update is to increase transparency and comparability among organizations by recognizing lease assets and liabilities on the balance sheet for leases with a lease term of more than 12 months. In addition, the update will require additional disclosures regarding key information about leasing arrangements. Under existing guidance, operating leases are not recorded as lease assets and lease liabilities on the balance sheet. The update will be effective for us beginning in our first quarter of fiscal year 2020, with early adoption permitted. We are currently evaluating the impact of the adoption of this accounting guidance on our consolidated financial statements, however, we expect the adoption of this accounting guidance to result in an increase in lease assets and a corresponding increase in lease liabilities on our Consolidated Balance Sheets.

In November 2015, the FASB issued an accounting standards update to simplify the presentation of deferred income taxes. The new guidance requires that all deferred tax assets and liabilities, along with any related valuation allowance, be classified as noncurrent on the balance sheet. The update is effective for fiscal years beginning after December 15, 2016, including interim periods within that reporting period. Early adoption is permitted and may be applied either prospectively or retrospectively. We adopted this update in the fourth quarter of fiscal year 2016 on a prospective basis. Prior reporting periods were not retrospectively adjusted. The adoption of this guidance had no impact on our Consolidated Statements of Income.

In July 2015, the FASB issued an accounting standards update for the subsequent measurement of inventory. The amended guidance requires entities to measure inventory at the lower of cost or net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. The requirement would replace the current lower of cost or market evaluation. The update is effective for us beginning in our first quarter of fiscal year 2018, with early adoption permitted to be applied prospectively. The adoption of this accounting guidance is not currently expected to have a material impact on our consolidated financial statements.

In April 2015, the FASB issued an accounting standards update that requires an entity to present debt issuance costs on the balance sheet as a direct deduction from the related debt liability as opposed to an asset. Amortization of the costs will continue to be reported as interest expense. The update is effective for annual reporting periods (including interim reporting periods within those periods) beginning after December 15, 2015. Early adoption is permitted for financial statements that have not been previously issued, and the new guidance would be applied retrospectively to all prior periods presented. The update will be effective for us beginning in our first quarter of fiscal year 2017. The adoption of this accounting guidance is not currently expected to have a material impact on our consolidated financial statements.

In April 2015, the FASB issued an accounting standards update that provides clarification on whether a cloud computing arrangement includes a software license. If a software license is included, the customer should account for the license consistent with its accounting for other software licenses. If a software license is not included, the arrangement should be accounted for as a service contract. The update is effective for reporting periods beginning after December 15, 2015, with early adoption permitted. Companies can elect to adopt the standard update prospectively or retrospectively to arrangements entered into, or materially modified, after the effective date. The update will be effective for us beginning in our first quarter of fiscal year 2017. We expect the adoption of this accounting guidance to result in an increase in software license assets and related depreciation expense, and a corresponding decrease in prepaid service contract assets and related service contract expense in our consolidated financial statements.

In May 2014, the FASB issued an accounting standards update that creates a single source of revenue guidance under U.S. GAAP for all companies, in all industries, effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. On July 9, 2015, the FASB voted to defer the effective date by one year, such that the new standard will be effective for us beginning in our first quarter of fiscal year 2019. The FASB will also permit entities to adopt the standard one year earlier if they choose (i.e., the original effective date). We will adopt this guidance either by using a full retrospective approach for all periods presented in the period of adoption or a modified retrospective approach. We are currently evaluating the impact of this accounting guidance on our consolidated financial statements and have not yet determined which transition method we will apply.
Stock Based Compensation (Tables)
Stock-based compensation expense, net of amounts capitalized as inventory 
 
Year Ended
 
January 31,
2016
 
January 25,
2015
 
January 26,
2014
 
(In millions)
Cost of revenue
$
15

 
$
12

 
$
11

Research and development
115

 
88

 
83

Sales, general and administrative
74

 
58

 
42

Total
$
204

 
$
158

 
$
136

Summary of equity awards granted under equity incentive plans 
 
Year Ended
 
January 31,

January 25,
 
January 26,
2016

2015
 
2014
 
(In millions, except per share data)
Stock Options
 
 
 
 
 
Awards granted
—


—


6

Estimated total grant-date fair value
$
—

 
$
—

 
$
21

Weighted average grant-date fair value (per share)
$
—

 
$
—

 
$
3.47

 
 
 
 
 
 
RSUs, PSUs and Market-based PSUs
 
 
 
 
 
Awards granted
13

 
13

 
11

Estimated total grant-date fair value
$
296

 
$
228

 
$
145

Weighted average grant-date fair value (per share)
$
22.01

 
$
17.68

 
$
13.46

 
 
 
 
 
 
ESPP
 
 
 
 
 
Shares purchased
6

 
7

 
6

Weighted average price (per share)
$
13.67

 
$
10.99

 
$
10.79

Weighted average grant-date fair value (per share)
$
4.53

 
$
4.99

 
$
5.60

Summary of unearned stock-based compensation expense 
 
January 31,
 
January 25,
 
2016
 
2015
 
(In millions)
Unearned stock-based compensation expense
$
381

 
$
291

 
 
 
 
Estimated weighted average remaining amortization period
(In years)
Stock Options
1.1

 
1.8

RSUs, PSUs and Market-based PSUs
2.7

 
2.8

ESPP
0.7

 
0.5

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions 
 
Year Ended
 
January 31,
2016
 
January 25,
2015
 
January 26,
2014
 
(Using a binomial model)
Stock Options
 
 
 
 
 
Weighted average expected life (in years)
—

 
—

 
2.4-3.5
Risk-free interest rate
—

 
—

 
1.8%-3.0%
Volatility
—

 
—

 
28%-37%
Dividend yield
—

 
—

 
1.9%-2.4%

 
Year Ended
 
January 31,
2016
 
January 25,
2015
 
January 26,
2014
 
(Using the Black-Scholes model)
ESPP
 
 
 
 
 
Weighted average expected life (in years)
0.5-2.0
 
0.5-2.0
 
0.5-2.0
Risk-free interest rate
0.1%-0.7%
 
0.1%-0.5%
 
0.1%-0.4%
Volatility
24%-34%
 
23%-31%
 
32%-37%
Dividend yield
1.5%-1.8%
 
1.7%-1.9%
 
2.0%-2.4%
Schedule of Share-based Compensation, Activity 
 
RSUs, PSUs and Market-based PSUs Outstanding
 
Options Outstanding
 
Number of
Shares
 
Weighted
Average
Grant-Date
Fair Value
 
Number of
Shares
 
Weighted
Average
Exercise Price
Per Share
 
Weighted
Average
Remaining  
Contractual
Life
 
Aggregate
Intrinsic
Value (3)
 
(In millions, except years and per share data)
Balances, January 25, 2015
23

 
$
15.94

 
21

 
$
14.61

 
 
 
 
Granted (1)(2)
13

 
$
22.01

 
—

 
$
—

 
 
 
 
Exercised
—

 
—

 
(7
)
 
$
14.60

 
 
 
 
Vested restricted stock
(8
)
 
$
15.56

 
—

 
—

 
 
 
 
Canceled and forfeited
(2
)
 
$
16.63

 
(1
)
 
$
17.28

 
 
 
 
Balances, January 31, 2016
26

 
$
19.12

 
13

 
$
14.49

 
5.9
 
$
197

Exercisable as of January 31, 2016
 
 
 
 
11

 
$
14.51

 
5.6
 
$
159

Vested and expected to vest after January 31, 2016
22

 
$
19.14

 
13

 
$
14.50

 
5.8
 
$
191




(1)
Includes the total number of PSUs that became eligible to vest based on the corporate financial performance level achieved for fiscal year 2016.

(2)
Includes the market-based PSUs that become eligible to vest if the maximum target for total shareholder return, or TSR, over the 3-year measurement period is achieved. Depending on the ranking of our TSR compared to the respective TSRs of the companies comprising the Standard & Poor’s 500 Index during a 3-year measurement period, the market-based PSUs that become eligible to vest could range from 0 to 0.4 million shares. We granted market-based PSUs during the first quarter of fiscal year 2016 to our CEO and senior management as approved by our Compensation Committee.

(3)
The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value for in-the-money options at January 31, 2016, based on the $29.29 closing price of our common stock on January 29, 2016.

Net Income Per Share (Tables)
Reconciliation of numerators and denominators of basic and diluted net income (loss) per share computations
 
Year Ended
 
January 31,
2016
 
January 25,
2015
 
January 26,
2014
 
(In millions, except per share data)
Numerator:
 
 
 
 
 
Net income
$
614

 
$
631

 
$
440

Denominator:
 
 
 
 
 
Denominator for basic net income per share, weighted average shares
543

 
552

 
588

Effect of dilutive securities:
 
 
 
 
 
Equity awards outstanding
13

 
11

 
7

Assumed conversion of 1% Convertible Senior Notes Due 2018
13

 
—

 
—

Denominator for diluted net income per share, weighted average shares
569

 
563

 
595

Net income per share:
 
 
 
 
 
Basic
$
1.13

 
$
1.14

 
$
0.75

Diluted
$
1.08

 
$
1.12

 
$
0.74

Potentially dilutive securities excluded from income per diluted share because their effect would have been anti-dilutive
10

 
12

 
26

Goodwill (Tables)
Goodwill
 
January 31,
2016
 
January 25,
2015
 
(In millions)
Icera
$
271

 
$
271

PortalPlayer
105

 
105

3dfx
50

 
50

Mental Images
59

 
59

MediaQ
35

 
35

ULi
31

 
31

Hybrid Graphics
28

 
28

Ageia
19

 
19

Portland Group Inc.
2

 
2

Other
18

 
18

Total goodwill
$
618

 
$
618

Intangible Assets (Tables)
Amortizable Intangible Assets Components
 
January 31, 2016
 
January 25, 2015
 
Gross 
Carrying
Amount
 
Accumulated
Amortization
 
Net 
Carrying
Amount
 
Weighted Average
Useful Life
 
Gross 
Carrying
Amount
 
Accumulated
Amortization
 
Net 
Carrying
Amount
 
Weighted Average
Useful Life
 
(In millions)
 
(In years)
 
(In millions)
 
(In years)
Acquisition-related intangible assets
$
193

 
$
(152
)
 
$
41

 
7.0
 
$
189

 
$
(134
)
 
$
55

 
6.8
Patents and licensed technology
462

 
(337
)
 
125

 
7.0
 
449

 
(282
)
 
167

 
7.2
Total intangible assets
$
655

 
$
(489
)
 
$
166

 
 
 
$
638

 
$
(416
)
 
$
222

 
 
Marketable Securities (Tables)
Cash Equivalents and Marketable Securities 
 
January 31, 2016
 
Amortized
Cost
 
Unrealized
Gain
 
Unrealized
Loss
 
Estimated
Fair Value
 
(In millions)
Corporate debt securities
$
1,903

 
$
1

 
$
(3
)
 
$
1,901

Debt securities of United States government agencies
1,170

 
1

 
(1
)
 
1,170

Debt securities issued by United States Treasury
800

 
1

 
—

 
801

Asset-backed securities
435

 
—

 
—

 
435

Mortgage backed securities issued by United States government-sponsored enterprises
229

 
3

 
(1
)
 
231

Foreign government bonds
92

 
—

 
—

 
92

Money market funds
43

 
—

 
—

 
43

Total
$
4,672

 
$
6

 
$
(5
)
 
$
4,673

Classified as:
 
 
 
 
 
 
 
Cash equivalents
 
 
 
 
 
 
$
232

Marketable securities
 
 
 
 
 
 
4,441

Total
 
 
 
 
 
 
$
4,673

 
 
January 25, 2015
 
Amortized
Cost
 
Unrealized
Gain
 
Unrealized
Loss
 
Estimated
Fair Value
 
(In millions)
Corporate debt securities
$
2,185

 
$
3

 
$
(2
)
 
$
2,186

Debt securities of United States government agencies
750

 
—

 
—

 
750

Debt securities issued by United States Treasury
534

 
3

 
—

 
537

Asset-backed securities
453

 
—

 
—

 
453

Mortgage backed securities issued by United States government-sponsored enterprises
274

 
5

 
(1
)
 
278

Money market funds
132

 
—

 
—

 
132

Foreign government bonds
85

 
—

 
—

 
85

Total
$
4,413

 
$
11

 
$
(3
)
 
$
4,421

Classified as:
 
 
 
 
 
 
 
Cash equivalents
 
 
 
 
 
 
$
295

Marketable securities
 
 
 
 
 
 
4,126

Total
 
 
 
 
 
 
$
4,421

  
The following table provides the breakdown of the investments with unrealized losses as of January 31, 2016:
 
Less than 12 Months
 
12 Months or Greater
 
Total
 
Fair Value
 
Gross
Unrealized
Losses
 
Fair Value
 
Gross
Unrealized
Losses
 
Fair Value
 
Gross
Unrealized
Losses
 
(In millions)
Corporate debt securities
$
950

 
$
(3
)
 
$
80

 
$
—

 
$
1,030

 
$
(3
)
Debt securities issued by United States government agencies
692

 
(1
)
 
—

 
—

 
692

 
(1
)
Mortgage backed securities issued by United States government-sponsored enterprises
97

 
(1
)
 
31

 
—

 
128

 
(1
)
Total
$
1,739

 
$
(5
)
 
$
111

 
$
—

 
$
1,850

 
$
(5
)
Schedule of Cash Equivalents and Marketable Securities Available for Sale 
 
January 31, 2016
 
January 25, 2015
 
Amortized
Cost
 
Estimated
Fair Value
 
Amortized
Cost
 
Estimated
Fair Value
 
(In millions)
Less than one year
$
1,619

 
$
1,619

 
$
1,570

 
$
1,570

Due in 1 - 5 years
3,019

 
3,020

 
2,720

 
2,726

Mortgage-backed securities issued by government-sponsored enterprises not due at a single maturity date
34

 
34

 
123

 
125

Total
$
4,672

 
$
4,673

 
$
4,413

 
$
4,421

Fair Value of Cash Equivalents and Marketable Securities (Tables)
Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Table Text Block]
 
 
Fair Value at
 
Pricing Category
 
January 31, 2016
 
January 25, 2015
 
 
 
(In millions)
Assets
 
 
 
 
 
Cash equivalents and Marketable securities:
 
 
 
 
 
Corporate debt securities (1)
Level 2
 
$
1,901

 
$
2,186

Debt securities of U.S. government agencies (2)
Level 2
 
$
1,170

 
$
750

Debt securities issued by the U.S. Treasury (3)
Level 2
 
$
801

 
$
537

Asset-backed securities (4)
Level 2
 
$
435

 
$
453

Mortgage-backed securities issued by government-sponsored enterprises (3)
Level 2
 
$
231

 
$
278

Foreign government bonds (3)
Level 2
 
$
92

 
$
85

Money market funds (5)
Level 1
 
$
43

 
$
132

 
 
 
 
 
 
Liabilities
 
 
 
 
 
Current liability:
 
 
 
 
 
1.00% Convertible Senior Notes Due 2018 (6)
Level 2
 
$
2,273

 
$
1,680

Other noncurrent liability:
 
 
 
 
 
Interest rate swap (7)
Level 2
 
$
(7
)
 
$
—


(1)
Includes $51 million and $147 million in cash equivalents as of January 31, 2016 and January 25, 2015, respectively, and $1.85 billion and $2.04 billion in marketable securities as of January 31, 2016 and January 25, 2015, respectively, on the Consolidated Balance Sheets.
(2)
Includes $90 million and $15 million in cash equivalents as of January 31, 2016 and January 25, 2015, respectively, and $1.08 billion and $735 million in marketable securities as of January 31, 2016 and January 25, 2015, respectively, on the Consolidated Balance Sheets.
(3)
In marketable securities on the Consolidated Balance Sheets.
(4)
Includes $435 million and $453 million in marketable securities as of January 31, 2016 and January 25, 2015, respectively, on the Consolidated Balance Sheets.
(5)
In cash equivalents on the Consolidated Balance Sheets.
(6)
The Notes are carried on our Consolidated Balance Sheets at their original issuance value, net of unamortized debt discount, and are not marked to fair value each period. Please refer to Note 11 of these Notes to the Consolidated Financial Statements for additional information on the Notes.
(7)
Please refer to Note 9 of these Notes to the Consolidated Financial Statements for a discussion regarding our interest rate swap.
Balance Sheet Components (Tables)
Inventories 
 
January 31,
2016
 
January 25,
2015
 
(In millions)
Inventories:
 
 
 
Raw materials
$
105

 
$
157

Work in-process
103

 
92

Finished goods
210

 
234

     Total inventories
$
418

 
$
483

Property, Plant and Equipment 
 
January 31,
2016
 
January 25,
2015
 
Estimated
Useful Life
 
(In millions)
 
(In years)
Property and Equipment:
 
 
 
 
 
Land
$
218

 
$
218

 
(A)
Building
13

 
19

 
25
Test equipment
354

 
397

 
3-5
Software and licenses
98

 
113

 
3-5
Leasehold improvements
174

 
174

 
(B)
Computer equipment
155

 
153

 
3-5
Office furniture and equipment
48

 
49

 
5
Capital leases
28

 
28

 
(B)
Construction in process
12

 
28

 
(C)
Total property and equipment, gross
1,100

 
1,179

 
 
Accumulated depreciation and amortization
(634
)
 
(622
)
 
 
     Total property and equipment, net
$
466

 
$
557

 
 
(A) Land is a non-depreciable asset.
(B) Leasehold improvements and capital leases are amortized based on the lesser of either the asset’s estimated useful life or the remaining expected lease term.
(C) Construction in process represents assets that are not in service as of the balance sheet date.
Accrued Liabilities 
 
January 31,
2016
 
January 25,
2015
 
(In millions)
Accrued Liabilities:
 
 
 
Deferred revenue
$
322

 
$
296

Customer related liabilities (1)
160

 
143

Accrued payroll and related expenses
79

 
112

Accrued restructuring and other charges (2)
23

 
—

Professional service fees
23

 
17

Warranty accrual (3)
11

 
8

Coupon interest on Notes
3

 
3

Taxes payable, short- term
2

 
3

Facilities related liabilities
1

 
8

Other
18

 
13

Total accrued liabilities and other
$
642

 
$
603


(1)  Customer related liabilities primarily includes accrued customer programs, such as rebates and MDFs.
(2) Please refer to Note 17 of these Notes to the Consolidated Financial Statements for a discussion regarding restructuring and other charges.
(3)  Please refer to Note 10 of these Notes to the Consolidated Financial Statements for a discussion regarding warranties.
Other Long-term Liabilities 
 
January 31,
2016
 
January 25,
2015
 
(In millions)
Other Long Term Liabilities:
 
 
 
Deferred income tax liability
$
301

 
$
232

Income tax payable
78

 
121

Deferred revenue (1)
44

 
108

Interest rate swap (2)
7

 
—

Asset retirement obligations
1

 
7

Other
22

 
21

Total other long-term liabilities
$
453

 
$
489



(1)  Consists primarily of consideration received in advance of our performance obligations under the patent cross licensing agreement that we entered into with Intel Corporation in January 2011. The decrease in deferred revenue, long-term, is a result of revenue recognized during fiscal year 2016.
(2)  Please refer to Note 9 of these Notes to the Consolidated Financial Statements for a discussion regarding our interest rate swap.
Derivative Financial Instrument (Tables)
Schedule of Interest Rate Derivatives 
 
Notional Amount
 
Fair Value Asset (Liability)
 
January 31, 2016
 
January 25, 2015
 
January 31, 2016
 
January 25, 2015
Cash Flow Hedge
 
 
 
 
 
 
 
Interest rate swap
$
200

 
$
—

 
$
(7
)
 
$
—

Derivative Instruments, Gain (Loss) 
 
January 31, 2016
 
January 25, 2015
Cash Flow Hedge
 
 
 
Gain (loss) on interest rate swap
$
(4
)
 
$
—

Guarantees (Tables)
Estimated Product Warranty Liabilities
 
January 31,
2016
 
January 25,
2015
 
January 26,
2014
 
(In millions)
Balance at beginning of period
$
8

 
$
8

 
$
15

Additions
27

 
5

 
7

Deductions
(24
)
 
(5
)
 
(14
)
Balance at end of period 
$
11

 
$
8

 
$
8

 
Long-term debt (Tables)
Schedule of Long-term Debt Instruments
 
January 31, 2016
 
January 25, 2015
 
(In millions)
Amount of the equity component
$
39

 
$
126

 
 
 
 
1.00% Convertible Senior Notes Due 2018
$
1,500

 
$
1,500

Unamortized debt discount (1)
(87
)
 
(116
)
Net carrying amount
$
1,413

 
$
1,384

(1) As of January 31, 2016, the remaining period over which the unamortized debt discount will be amortized is 2.8 years.
The following table presents the interest expense for the contractual interest and the accretion of debt discount:
 
Year Ended
 
January 31, 2016
 
January 25, 2015
 
January 26, 2014
 
(In millions)
 
 
Contractual coupon interest expense
$
15

 
$
15

 
$
2

Amortization of debt discount
29

 
28

 
5

Total interest expense related to Notes
$
44

 
$
43

 
$
7

Commitments and Contingencies (Tables)
Schedule of Future Minimum Rental Payments for Operating Leases 
 
Future Minimum Lease Obligations
 
(In millions)
Fiscal Year:
 
2017
$
75

2018
65

2019
58

2020
35

2021
11

2022 and thereafter
20

Total
$
264

Schedule of Future Minimum Lease Payments for Capital Leases 
 
Future Capital Lease Obligations
 
(In millions)
Fiscal Year:
 

2017
$
5

2018
6

2019
6

Total
$
17

Present value of minimum lease payments
$
14

 
 
Current portion
$
4

Long-term portion
$
10

Income Taxes Income Taxes (Tables)
Schedule of Components of Income Tax Expense (Benefit) 
 
Year Ended
 
January 31,
2016
 
January 25,
2015
 
January 26,
2014
 
(In millions)
Current income taxes:
 
 
 
 
 
Federal
$
(43
)
 
$
8

 
$
8

State
1

 
1

 
1

Foreign
25

 
17

 
19

Total current
(17
)
 
26

 
28

Deferred taxes:
 
 
 
 
 
Federal
134

 
84

 
17

State
—

 
—

 
—

Foreign
—

 
(1
)
 
(2
)
Total deferred
134

 
83

 
15

Charge in lieu of taxes attributable to employer stock option plans
12

 
15

 
27

Income tax expense
$
129

 
$
124

 
$
70

Schedule of Income before Income Tax, Domestic and Foreign 
 
Year Ended
 
January 31,
2016
 
January 25,
2015
 
January 26,
2014
 
(In millions)
Domestic
$
129

 
$
174

 
$
79

Foreign
614

 
581

 
431

Income before income tax
$
743

 
$
755

 
$
510

Schedule of Effective Income Tax Rate Reconciliation 
 
Year Ended
 
January 31,
2016
 
January 25,
2015
 
January 26,
2014
 
(In millions)
Tax expense computed at federal statutory rate
$
260

 
$
264

 
$
178

State income taxes, net of federal tax effect
1

 
1

 
2

Foreign tax rate differential
(95
)
 
(120
)
 
(94
)
U.S. federal R&D tax credit
(38
)
 
(34
)
 
(30
)
Stock-based compensation
13

 
4

 
9

Tax expense related to intercompany transaction
10

 
10

 
10

Restructuring and expiration of statute of limitations
(21
)
 
—

 
—

Other
(1
)
 
(1
)
 
(5
)
Income tax expense
$
129

 
$
124

 
$
70

Schedule of Deferred Tax Assets and Liabilities 
 
January 31,
2016
 
January 25,
2015
 
(In millions)
Deferred tax assets:
 
Net operating loss carryforwards
$
57

 
$
72

Accruals and reserves, not currently deductible for tax purposes
58

 
109

Property, equipment and intangible assets
50

 
46

Research and other tax credit carryforwards
404

 
351

Stock-based compensation
29

 
30

Convertible debt
9

 
12

Gross deferred tax assets
607

 
620

Less valuation allowance
(272
)
 
(261
)
Total deferred tax assets
335

 
359

Deferred tax liabilities:
 
 
 
Acquired intangibles
(17
)
 
(25
)
Unremitted earnings of foreign subsidiaries
(615
)
 
(500
)
Gross deferred tax liabilities
(632
)
 
(525
)
Net deferred tax liability
$
(297
)
 
$
(166
)
Summary of Income Tax Contingencies 
 
January 31,
2016
 
January 25,
2015
 
January 26,
2014
 
(In millions)
Balance at beginning of period
$
254

 
$
238

 
$
221

Increases in tax positions for prior years
—

 
—

 
—

Decreases in tax positions for prior years
(1
)
 
(1
)
 
(1
)
Increases in tax positions for current year
28

 
23

 
23

Lapse in statute of limitations
(51
)
 
(6
)
 
(5
)
Balance at end of period
$
230

 
$
254

 
$
238

Segment Information (Tables)
Schedule of Segment Reporting Information, by Segment 
 
GPU
 
Tegra Processor
 
All Other
 
Consolidated
 
(In millions)
Year Ended January 31, 2016:
 
 
 
 
 
 
 
Revenue
$
4,187

 
$
559

 
$
264

 
$
5,010

Depreciation and amortization expense
$
110

 
$
43

 
$
44

 
$
197

Operating income (loss)
$
1,344

 
$
(239
)
 
$
(358
)
 
$
747

Year Ended January 25, 2015:
 
 
 
 
 
 
 
Revenue
$
3,839

 
$
579

 
$
264

 
$
4,682

Depreciation and amortization expense
$
117

 
$
57

 
$
46

 
$
220

Operating income (loss)
$
1,113

 
$
(254
)
 
$
(100
)
 
$
759

Year Ended January 26, 2014:
 
 
 
 
 
 
 
Revenue
$
3,468

 
$
398

 
$
264

 
$
4,130

Depreciation and amortization expense
$
147

 
$
50

 
$
42

 
$
239

Operating income (loss)
$
835

 
$
(268
)
 
$
(71
)
 
$
496

 
 
Year Ended
 
 
January 31,
2016
 
January 25,
2015
 
January 26,
2014
 
 
(In millions)
Reconciling items included in "All Other" category:
 
 
 
 
Unallocated revenue
 
$
264

 
$
264

 
$
264

Unallocated cost of revenue and operating expenses
 
(244
)
 
(169
)
 
(167
)
Stock-based compensation
 
(204
)
 
(158
)
 
(136
)
Restructuring and other charges
 
(131
)
 
—

 
—

Acquisition-related costs
 
(22
)
 
(37
)
 
(32
)
Product warranty charges
 
(21
)
 
—

 
—

Total
 
$
(358
)
 
$
(100
)
 
$
(71
)
Schedule of Revenue from External Customers and Long-Lived Assets, by Geographical Areas 
 
January 31,
2016
 
January 25,
2015
Long-lived assets:
(In millions)
United States
$
414

 
$
467

India
45

 
48

Taiwan
39

 
52

China
25

 
28

Europe
9

 
52

Other Asia Pacific
1

 
1

Total long-lived assets
$
533

 
$
648

 
Year Ended
 
January 31,
2016
 
January 25,
2015
 
January 26,
2014
Revenue:
(In millions)
Taiwan
$
1,912

 
$
1,594

 
$
1,321

China
806

 
922

 
794

Other Asia Pacific
749

 
638

 
675

United States
643

 
791

 
727

Europe
482

 
369

 
295

Other Americas
418

 
368

 
318

Total revenue
$
5,010

 
$
4,682

 
$
4,130

Schedule of Revenue by Markets 
 
Year Ended
 
January 31,
2016
 
January 25,
2015
 
January 26,
2014
Revenue:
(In millions)
Gaming
$
2,818

 
$
2,058

 
$
1,511

Professional Visualization
750

 
795

 
789

Datacenter
339

 
317

 
199

Automotive
320

 
183

 
99

OEM & IP
783

 
1,329

 
1,532

Total revenue
$
5,010

 
$
4,682

 
$
4,130

Schedule of Revenue by Major Customers by Reporting Segments 
 
Year Ended
 
January 31,
2016
 
January 25,
2015
 
January 26,
2014
Revenue:
 
 
 
 
 
Customer A
11
%
 
11
%
 
11
%
Customer B
9
%
 
9
%
 
10
%

Schedule Of Accounts Receivable, Major Customers 
 
January 31,
2016
 
January 25,
2015
Accounts Receivable:
 
 
 
Customer B
21
%
 
20
%
Customer C
8
%
 
10
%
Restructuring and Other Charges (Tables)
Restructuring and Other Charges 
 
Year Ended
 
January 31,
 
2016
 
(In millions)
Employee severance and related costs
$
82

Fixed assets impairment
18

Tax subsidy impairment
17

Facilities and related costs
9

Other exit costs
5

Restructuring and other charges
$
131

Summary of the restructuring activities and related accrued liabilities 
 
January 31,
 
2016
 
(In millions)
Balance at beginning of period
$
—

Restructuring and other charges
131

Cash payments
(63
)
Non-cash adjustments
(45
)
Balance at end of period
$
23

Quartely Summary (Tables)
Schedule of Quarterly Financial Information
 
Fiscal Year 2016
Quarters Ended
 
January 31,
2016
 
October 25,
2015
 
July 26,
2015
 
April 26,
2015
 
(In millions, except per share data)
Statement of Income Data:
 
 
 
 
 
 
 
Revenue
$
1,401

 
$
1,305

 
$
1,153

 
$
1,151

Cost of revenue
$
610

 
$
572

 
$
519

 
$
498

Gross profit
$
791

 
$
733

 
$
634

 
$
653

Net income
$
207

 
$
247

 
$
26

 
$
134

Net income per share:
 
 
 
 
 
 
 
Basic
$
0.38

 
$
0.45

 
$
0.05

 
$
0.24

Diluted
$
0.35

 
$
0.44

 
$
0.05

 
$
0.24


 
Fiscal Year 2015
Quarters Ended
 
January 25,
2015
 
October 26,
2014
 
July 27,
2014
 
April 27,
2014
 
(In millions, except per share data)
Statement of Income Data:
 
 
 
 
 
 
 
Revenue
$
1,251

 
$
1,225

 
$
1,103

 
$
1,103

Cost of revenue
$
552

 
$
548

 
$
484

 
$
499

Gross profit
$
699

 
$
677

 
$
619

 
$
604

Net income
$
193

 
$
173

 
$
128

 
$
137

Net income per share:
 
 
 
 
 
 
 
Basic
$
0.35

 
$
0.32

 
$
0.23

 
$
0.24

Diluted
$
0.35

 
$
0.31

 
$
0.22

 
$
0.24



Summary of Significant Accounting Policies (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Jan. 31, 2016
Jan. 25, 2015
Jan. 26, 2014
Jan. 27, 2013
Accounting Policies [Abstract]
 
 
 
 
Advertising Expense
$ 17 
$ 15 
$ 13 
 
Foreign Currency Transaction Gain, Realized
 
 
5 
 
Deferred Tax Assets, Valuation Allowance
(272)
(261)
 
 
Cash and cash equivalents
596 
497 
1,152 
733 
Accounts receivable from significant customers (in percent)
21.00% 
30.00% 
 
 
Number of Customers Exceeded 10 Percent of Total Consolidated Accounts Receivable
1 
2 
 
 
Asset Retirement Obligation
2 
7 
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
 
 
Available-for-sale Securities, Amortized Cost
4,672 
4,413 
 
 
Money Market Funds
 
 
 
 
Schedule of Available-for-sale Securities [Line Items]
 
 
 
 
Available-for-sale Securities, Amortized Cost
$ 43 
$ 132 
 
 
Stock Based Compensation (Details) (USD $)
In Millions, except Per Share data, unless otherwise specified
12 Months Ended
Jan. 31, 2016
Jan. 25, 2015
Jan. 26, 2014
Stock based compensation
 
 
 
Cost of revenue
$ 15 
$ 12 
$ 11 
Research and development
115 
88 
83 
Sales, general and administrative
74 
58 
42 
Stock-based compensation expense
204 
158 
136 
Summary of equity awards granted
 
 
 
Stock Options granted (in shares)
0 
0 
6 
Estimated total grant-date fair value of stock options
0 
0 
21 
Weighted average grant-date fair value per option
$ 0.00 
$ 0.00 
$ 3.47 
RSUs, PSUs and Market-based PSUs, granted (in shares)
13 
13 
11 
Estimated total grant-date fair value of RSUs, PSUs and Market-based PSUs
296 
228 
145 
Weighted average grant date fair value, RSUs, PSUs, and Market-based PSUs, granted
$ 22.01 
$ 17.68 
$ 13.46 
Shares purchased under ESPP
6 
7 
6 
Weighted Average Price (Per Share), ESPP
$ 13.67 
$ 10.99 
$ 10.79 
Weighted average grant date fair value of ESPP
$ 4.53 
$ 4.99 
$ 5.60 
Share Based Compensation Expense Related To Equity Awards Not Expected To Vest
46 
37 
30 
Summary of unearned SBC expense
 
 
 
Unearned stock-based compensation expense
$ 381 
$ 291 
 
Stock Options
 
 
 
Summary of unearned SBC expense
 
 
 
Estimated weighted average amortization period
1 year 1 month 6 days 
1 year 9 months 18 days 
 
Fair Value Assumptions
 
 
 
Expected life, minimum
 
 
2 years 4 months 24 days 
Expected life, maximum
 
 
3 years 6 months 0 days 
Risk free interest rate, minimum
 
 
1.80% 
Risk free interest rate, maximum
 
 
3.00% 
Volatility rate, minimum
 
 
28.00% 
Volatility rate, maximum
 
 
37.00% 
Dividend yield minimum
 
 
1.90% 
Dividend Yield maximum
 
 
2.40% 
RSUs, PSUs and Market-based PSUs
 
 
 
Summary of unearned SBC expense
 
 
 
Estimated weighted average amortization period
2 years 8 months 12 days 
2 years 9 months 17 days 
 
Employee Stock Purchase Plan
 
 
 
Summary of unearned SBC expense
 
 
 
Estimated weighted average amortization period
0 years 8 months 12 days 
0 years 6 months 0 days 
 
Fair Value Assumptions
 
 
 
Expected life, minimum
0 years 6 months 0 days 
0 years 6 months 0 days 
0 years 6 months 0 days 
Expected life, maximum
2 years 0 months 0 days 
2 years 0 months 0 days 
2 years 0 months 0 days 
Risk free interest rate, minimum
0.10% 
0.10% 
0.10% 
Risk free interest rate, maximum
0.70% 
0.50% 
0.40% 
Volatility rate, minimum
24.00% 
23.00% 
32.00% 
Volatility rate, maximum
34.00% 
31.00% 
37.00% 
Dividend yield minimum
1.50% 
1.70% 
2.00% 
Dividend Yield maximum
1.80% 
1.90% 
2.40% 
Stock Based Compensation Equity Incentive Plans (Details) (USD $)
In Millions, except Share data, unless otherwise specified
12 Months Ended
Jan. 31, 2016
Jan. 25, 2015
Jan. 26, 2014
Amended and Restated 2007 Equity Incentive Plan
 
 
 
Number of shares may be issued under the Restated 2007 Plan
187,767,766 
 
 
Number of Shares Available for Grant
13,538,400 
25,000,000 
 
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage
25.00% 
 
 
Quarterly vesting schedule - options
6.25% 
 
 
Semi-annual vesting schedule - RSUs
12.50% 
 
 
Maximum issuable shares of Market-based PSUs, percentage
100.00% 
 
 
2012 employee Stock Purchase Plan
 
 
 
Maximum Aggregated Number of Shares under 2012 ESPP
65,235,816 
 
 
Total shares purchased under ESPP
18,459,901 
 
 
Shares reserved for future issuance under 2012 Plan
46,775,915 
 
 
Maximum employee subscription rate
10.00% 
 
 
Potential maximum employee subscription rate by BOD approval
15.00% 
 
 
Purchase price of ESPP, percent
85.00% 
 
 
Stock Options
 
 
 
Options, Outstanding, Number
13,000,000 
21,000,000 
 
Options, Exercises in Period
(7,000,000)
 
 
Options, Forfeitures in Period
(1,000,000)
 
 
Options, Outstanding, Weighted Average Exercise Price
$ 14.49 
$ 14.61 
 
Options, Exercises in Period, Weighted Average Exercise Price
$ 14.60 
 
 
Options, Forfeitures in Period, Weighted Average Exercise Price
$ 17.28 
 
 
Options, Exercisable, Number
11,000,000 
 
 
Options, Exercisable, Weighted Average Exercise Price
$ 14.51 
 
 
Options, Vested and Expected to Vest, Outstanding, Number
13,000,000 
 
 
Options, Vested and Expected to Vest, Outstanding, Weighted Average Exercise Price
$ 14.50 
 
 
Options, Outstanding, Weighted Average Remaining Contractual Term
5 years 10 months 24 days 
 
 
Options,Exercisable Options, Weighted Average Remaining Contractual Term
5 years 7 months 5 days 
 
 
Options, Vested and Expected to Vest, Outstanding, Weighted Average Remaining Contractual Term
5 years 9 months 17 days 
 
 
Options, Outstanding, Intrinsic Value
$ 197 
 
 
Options, Exercisable, Intrinsic Value
159 
 
 
Options, Vested and Expected to Vest, Outstanding, Aggregate Intrinsic Value
191 
 
 
RSUs, PSUs, and Market-Based PSUs
 
 
 
RSUs, PSUs and Market-based PSUs, outstanding, Number
26,000,000 
23,000,000 
 
RSUs, PSUs and Market-based PSUs, granted (in shares)
13,000,000 
13,000,000 
11,000,000 
RSUs, PSUs and Market-based PSUs, Vested in Period
(8,000,000)
 
 
RSUs, PSUs and Market-based PSUs, Forfeited in Period
(2,000,000)
 
 
Weighted Average Grant Date Fair Value, RSUs, PSUs and Market-based PSUs, Outstanding
$ 19.12 
$ 15.94 
 
Weighted average grant date fair value, RSUs, PSUs, and Market-based PSUs, granted
$ 22.01 
$ 17.68 
$ 13.46 
RSUs, PSUs and Market-based PSUs, Vested in Period, Weighted Average Grant Date Fair Value
$ 15.56 
 
 
RSUs, PSUs and Market-based PSUs, Forfeited in Period, Weighted Average Grant Date Fair Value
$ 16.63 
 
 
Aggregate Intrinsic value of RSUs, PSUs and Market-based PSUs, vested and expected to vest
22 
 
 
Weighted Average Grant Date Fair Value, RSUs, PSUs and Market-based PSUs, Vested and expected to vest
$ 19.14 
 
 
Minimum number of Market-based PSUs issuable
0 
 
 
Maximum number of market-based PSUs issuable
400,000 
 
 
Closing Share Price
$ 29.29 
 
 
Number of Shares Available for Grant
13,538,400 
25,000,000 
 
Options, Exercises in Period, Total Intrinsic Value
75 
62 
14 
Total fair value of Options, Vested in Period
$ 17 
$ 33 
$ 35 
Net Income Per Share (Details) (USD $)
In Millions, except Per Share data, unless otherwise specified
3 Months Ended 12 Months Ended
Jan. 31, 2016
Oct. 25, 2015
Jul. 26, 2015
Apr. 26, 2015
Jan. 25, 2015
Oct. 26, 2014
Jul. 27, 2014
Apr. 27, 2014
Jan. 31, 2016
Jan. 25, 2015
Jan. 26, 2014
Notes to financial statements [Abstract]
 
 
 
 
 
 
 
 
 
 
 
Debt Instrument, Interest Rate, Stated Percentage
1.00% 
 
 
 
 
 
 
 
1.00% 
 
 
Debt Instrument, Convertible, Conversion Price
$ 20.1204 
 
 
 
 
 
 
 
$ 20.1204 
 
$ 20.1630 
Warrant Strike Price
 
 
 
 
 
 
 
 
$ 27.0851 
 
$ 27.1425 
Numerator:
 
 
 
 
 
 
 
 
 
 
 
Net income
$ 207 
$ 247 
$ 26 
$ 134 
$ 193 
$ 173 
$ 128 
$ 137 
$ 614 
$ 631 
$ 440 
Denominator:
 
 
 
 
 
 
 
 
 
 
 
Denominator for basic net income per share, weighted average shares (in shares)
 
 
 
 
 
 
 
 
543 
552 
588 
Effect of dilutive securities:
 
 
 
 
 
 
 
 
 
 
 
Equity awards outstanding (in shares)
 
 
 
 
 
 
 
 
13 
11 
7 
Incremental Common Shares Attributable to Dilutive Effect of Conversion of Debt Securities
 
 
 
 
 
 
 
 
13 
0 
0 
Denominator for diluted net income per share, weighted average shares (in shares)
 
 
 
 
 
 
 
 
569 
563 
595 
Net income per share:
 
 
 
 
 
 
 
 
 
 
 
Basic net income per share
$ 0.38 
$ 0.45 
$ 0.05 
$ 0.24 
$ 0.35 
$ 0.32 
$ 0.23 
$ 0.24 
$ 1.13 
$ 1.14 
$ 0.75 
Diluted net income per share
$ 0.35 
$ 0.44 
$ 0.05 
$ 0.24 
$ 0.35 
$ 0.31 
$ 0.22 
$ 0.24 
$ 1.08 
$ 1.12 
$ 0.74 
Anti-dilutive common equivalent shares from stock options and RSUs (in shares)
 
 
 
 
 
 
 
 
10 
12 
26 
Goodwill (Details) (USD $)
In Millions, unless otherwise specified
Jan. 31, 2016
Jan. 25, 2015
Goodwill [Line Items]
 
 
Goodwill
$ 618 
$ 618 
Icera
 
 
Goodwill [Line Items]
 
 
Goodwill
271 
271 
Portal Player
 
 
Goodwill [Line Items]
 
 
Goodwill
105 
105 
3dfx
 
 
Goodwill [Line Items]
 
 
Goodwill
50 
50 
Mental Images
 
 
Goodwill [Line Items]
 
 
Goodwill
59 
59 
MediaQ
 
 
Goodwill [Line Items]
 
 
Goodwill
35 
35 
ULi
 
 
Goodwill [Line Items]
 
 
Goodwill
31 
31 
Hybrid Graphics
 
 
Goodwill [Line Items]
 
 
Goodwill
28 
28 
Ageia
 
 
Goodwill [Line Items]
 
 
Goodwill
19 
19 
Portland Group, Inc.
 
 
Goodwill [Line Items]
 
 
Goodwill
2 
2 
Other
 
 
Goodwill [Line Items]
 
 
Goodwill
18 
18 
GPU
 
 
Goodwill [Line Items]
 
 
Goodwill
210 
210 
Tegra processor
 
 
Goodwill [Line Items]
 
 
Goodwill
$ 408 
$ 408 
Intangible Assets (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Jan. 31, 2016
Jan. 25, 2015
Jan. 26, 2014
Amortizable intangible assets components [Line Items]
 
 
 
Gross Carrying Amount
$ 655 
$ 638 
 
Accumulated Amortization
(489)
(416)
 
Net Carrying Amount
166 
222 
 
Amortization expense associated with intangible assets
 
 
 
Amortization expense
73 
77 
73 
Future amortization expense associated with intangible assets
 
 
 
Fiscal 2017
67 
 
 
Fiscal 2018
52 
 
 
Fiscal 2019
24 
 
 
Fiscal 2020
16 
 
 
Fiscal 2021
7 
 
 
Acquisition-related intangible assets
 
 
 
Amortizable intangible assets components [Line Items]
 
 
 
Gross Carrying Amount
193 
189 
 
Accumulated Amortization
(152)
(134)
 
Net Carrying Amount
41 
55 
 
Weighted Average Useful Life
7 years 0 months 0 days 
6 years 9 months 17 days 
 
Patents and Licensed Technology [Member]
 
 
 
Amortizable intangible assets components [Line Items]
 
 
 
Gross Carrying Amount
462 
449 
 
Accumulated Amortization
(337)
(282)
 
Net Carrying Amount
$ 125 
$ 167 
 
Weighted Average Useful Life
7 years 0 months 0 days 
7 years 2 months 12 days 
 
Marketable Securities (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Jan. 31, 2016
Jan. 25, 2015
Jan. 26, 2014
Classified as:
 
 
 
Cash equivalents
$ 232 
$ 295 
 
Marketable securities
4,441 
4,126 
 
Estimated Fair Value
4,673 
4,421 
 
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions
9 
 
 
Available-for-sale Securities, Amortized Cost
4,672 
4,413 
 
Available-for-sale Debt Securities, Unrealized Gain
6 
11 
 
Available-for-sale Debt Securities, Unrealized Loss
(5)
(3)
 
Net realized gain
2 
 
2 
Available For Sale Securities Net Unrealized Gain Loss
 
8 
 
Amortized Cost Basis
 
 
 
Less than one year
1,619 
1,570 
 
Due in 1-5 years
3,019 
2,720 
 
Mortgage-backed securities issued by government-sponsored enterprises not due to a single maturity date
34 
123 
 
Total
4,672 
4,413 
 
Estimated Fair Value
 
 
 
Less than one year
1,619 
1,570 
 
Due in 1-5 years
3,020 
2,726 
 
Mortgage-backed securities issued by government-sponsored enterprises not due to a single maturity date
34 
125 
 
Total
4,673 
4,421 
 
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value
 
 
 
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value
1,739 
 
 
Available-for-sale Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value
111 
 
 
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value
1,850 
 
 
Available-for-sale Securities, Continuous Unrealized Loss Position, Accumulated Losses
 
 
 
Available-for-sale Securities, Gross Unrealized Losses, Less than 12 Months
(5)
 
 
Available-for-sale Securities, Gross Unrealized Losses,12 Months or Longer
0 
 
 
Available-for-sale Securities, Gross Unrealized Losses
(5)
 
 
Corporate Debt Securities
 
 
 
Classified as:
 
 
 
Estimated Fair Value
1,901 
2,186 
 
Available-for-sale Securities, Amortized Cost
1,903 
2,185 
 
Available-for-sale Debt Securities, Unrealized Gain
1 
3 
 
Available-for-sale Debt Securities, Unrealized Loss
(3)
(2)
 
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value
 
 
 
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value
950 
 
 
Available-for-sale Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value
80 
 
 
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value
1,030 
 
 
Available-for-sale Securities, Continuous Unrealized Loss Position, Accumulated Losses
 
 
 
Available-for-sale Securities, Gross Unrealized Losses, Less than 12 Months
(3)
 
 
Available-for-sale Securities, Gross Unrealized Losses,12 Months or Longer
0 
 
 
Available-for-sale Securities, Gross Unrealized Losses
(3)
 
 
US Government Agencies Debt Securities
 
 
 
Classified as:
 
 
 
Estimated Fair Value
1,170 
750 
 
Available-for-sale Securities, Amortized Cost
1,170 
750 
 
Available-for-sale Debt Securities, Unrealized Gain
1 
0 
 
Available-for-sale Debt Securities, Unrealized Loss
(1)
0 
 
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value
 
 
 
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value
692 
 
 
Available-for-sale Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value
0 
 
 
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value
692 
 
 
Available-for-sale Securities, Continuous Unrealized Loss Position, Accumulated Losses
 
 
 
Available-for-sale Securities, Gross Unrealized Losses, Less than 12 Months
(1)
 
 
Available-for-sale Securities, Gross Unrealized Losses,12 Months or Longer
0 
 
 
Available-for-sale Securities, Gross Unrealized Losses
(1)
 
 
US Treasury Securities
 
 
 
Classified as:
 
 
 
Estimated Fair Value
801 
537 
 
Available-for-sale Securities, Amortized Cost
800 
534 
 
Available-for-sale Debt Securities, Unrealized Gain
1 
3 
 
Available-for-sale Debt Securities, Unrealized Loss
0 
0 
 
Asset-backed Securities
 
 
 
Classified as:
 
 
 
Estimated Fair Value
435 
453 
 
Available-for-sale Securities, Amortized Cost
435 
453 
 
Available-for-sale Debt Securities, Unrealized Gain
0 
0 
 
Available-for-sale Debt Securities, Unrealized Loss
0 
0 
 
Mortgage backed securities issued by United Sates government-sponsored enterprises
 
 
 
Classified as:
 
 
 
Estimated Fair Value
231 
278 
 
Available-for-sale Securities, Amortized Cost
229 
274 
 
Available-for-sale Debt Securities, Unrealized Gain
3 
5 
 
Available-for-sale Debt Securities, Unrealized Loss
(1)
(1)
 
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value
 
 
 
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value
97 
 
 
Available-for-sale Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value
31 
 
 
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value
128 
 
 
Available-for-sale Securities, Continuous Unrealized Loss Position, Accumulated Losses
 
 
 
Available-for-sale Securities, Gross Unrealized Losses, Less than 12 Months
(1)
 
 
Available-for-sale Securities, Gross Unrealized Losses,12 Months or Longer
0 
 
 
Available-for-sale Securities, Gross Unrealized Losses
(1)
 
 
Money Market Funds
 
 
 
Classified as:
 
 
 
Estimated Fair Value
43 
132 
 
Available-for-sale Securities, Amortized Cost
43 
132 
 
Available-for-sale Debt Securities, Unrealized Gain
0 
0 
 
Available-for-sale Debt Securities, Unrealized Loss
0 
0 
 
Foreign Government Debt
 
 
 
Classified as:
 
 
 
Estimated Fair Value
92 
85 
 
Available-for-sale Securities, Amortized Cost
92 
85 
 
Available-for-sale Debt Securities, Unrealized Gain
0 
0 
 
Available-for-sale Debt Securities, Unrealized Loss
$ 0 
$ 0 
 
Fair Value of Financial Assets and Liabilities (Details) (USD $)
In Millions, unless otherwise specified
Jan. 31, 2016
Jan. 25, 2015
Financial assets and liabilities measured at fair value
 
 
Interest Rate Swap, at Fair Value
$ (7)1
$ 0 1
Corporate Debt Securities
 
 
Financial assets and liabilities measured at fair value
 
 
Cash and Cash Equivalents, Fair Value Disclosure
51 
147 
Marketable Securities
1,850 
2,040 
US Government Agencies Debt Securities
 
 
Financial assets and liabilities measured at fair value
 
 
Cash and Cash Equivalents, Fair Value Disclosure
90 
15 
Marketable Securities
1,080 
735 
Fair Value, Inputs, Level 1 |
Money Market Funds
 
 
Financial assets and liabilities measured at fair value
 
 
Estimated Fair Value
43 2
132 2
Fair Value, Inputs, Level 2
 
 
Financial assets and liabilities measured at fair value
 
 
Convertible Debt, Fair Value Disclosures
2,273 3
1,680 3
Interest Rate Swap, at Fair Value
(7)1
0 1
Fair Value, Inputs, Level 2 |
Corporate Debt Securities
 
 
Financial assets and liabilities measured at fair value
 
 
Estimated Fair Value
1,901 4
2,186 4
Fair Value, Inputs, Level 2 |
US Government Agencies Debt Securities
 
 
Financial assets and liabilities measured at fair value
 
 
Estimated Fair Value
1,170 5
750 5
Fair Value, Inputs, Level 2 |
US Treasury Securities
 
 
Financial assets and liabilities measured at fair value
 
 
Estimated Fair Value
801 6
537 6
Fair Value, Inputs, Level 2 |
Asset-backed Securities
 
 
Financial assets and liabilities measured at fair value
 
 
Estimated Fair Value
435 7
453 7
Fair Value, Inputs, Level 2 |
Mortgage backed securities issued by United Sates government-sponsored enterprises
 
 
Financial assets and liabilities measured at fair value
 
 
Estimated Fair Value
231 6
278 6
Fair Value, Inputs, Level 2 |
Foreign Government Debt Securities
 
 
Financial assets and liabilities measured at fair value
 
 
Estimated Fair Value
$ 92 6
$ 85 6
Balance Sheet Components (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Jan. 31, 2016
Jan. 25, 2015
Jan. 26, 2014
Jan. 27, 2013
Inventories
 
 
 
 
Raw Materials
$ 105 
$ 157 
 
 
Work in-process
103 
92 
 
 
Finished goods
210 
234 
 
 
Total inventories
418 
483 
 
 
Property, Plant and Equipment [Line Items]
 
 
 
 
Property, Plant and Equipment, Gross
1,100 
1,179 
 
 
Accumulated Depreciation, Depletion and Amortization, Property, Plant, and Equipment
(634)
(622)
 
 
Property, Plant and Equipment, Net
466 
557 
 
 
Outstanding Inventory Purchase Obligation
391 
 
 
 
Depreciation Expenses
124 
143 
164 
 
Accumulated amortization of LHI and capital lease
155 
140 
 
 
Accrued Liabilities
 
 
 
 
Deferred revenue
322 
296 
 
 
Customer related liabilities
160 1
143 1
 
 
Accrued payroll and related expenses
79 
112 
 
 
Accrued restructuring and other charges
23 2
0 2
 
 
Professional service fees
23 
17 
 
 
Warranty Accrual
11 3
8 3
8 
15 
Coupon interest on Notes
3 
3 
 
 
Taxes payable, short-term
2 
3 
 
 
Facilities related liabilities
1 
8 
 
 
Other
18 
13 
 
 
Total accrued liabilities and other
642 
603 
 
 
Other Long-term Liabilities
 
 
 
 
Deferred income tax liability
301 
232 
 
 
Income taxes payable
78 
121 
 
 
Deferred Revenue
44 4
108 4
 
 
Interest Rate Swap
7 5
0 5
 
 
Asset retirement obligation
1 
7 
 
 
Other
22 
21 
 
 
Total other long-term liabilities
453 
489 
 
 
Land
 
 
 
 
Property, Plant and Equipment [Line Items]
 
 
 
 
Property, Plant and Equipment, Gross
218 6
218 6
 
 
Property, Plant and Equipment, Estimated Useful Lives
(A) 
 
 
 
Building
 
 
 
 
Property, Plant and Equipment [Line Items]
 
 
 
 
Property, Plant and Equipment, Gross
13 
19 
 
 
Property, Plant and Equipment, Estimated Useful Lives
25 
 
 
 
Test equipment
 
 
 
 
Property, Plant and Equipment [Line Items]
 
 
 
 
Property, Plant and Equipment, Gross
354 
397 
 
 
Property, Plant and Equipment, Estimated Useful Lives
3-5 
 
 
 
Software and licenses
 
 
 
 
Property, Plant and Equipment [Line Items]
 
 
 
 
Property, Plant and Equipment, Gross
98 
113 
 
 
Property, Plant and Equipment, Estimated Useful Lives
3-5 
 
 
 
Leasehold improvements
 
 
 
 
Property, Plant and Equipment [Line Items]
 
 
 
 
Property, Plant and Equipment, Gross
174 7
174 7
 
 
Property, Plant and Equipment, Estimated Useful Lives
(B) 
 
 
 
Computer equipment
 
 
 
 
Property, Plant and Equipment [Line Items]
 
 
 
 
Property, Plant and Equipment, Gross
155 
153 
 
 
Property, Plant and Equipment, Estimated Useful Lives
3-5 
 
 
 
Office furniture and equipment
 
 
 
 
Property, Plant and Equipment [Line Items]
 
 
 
 
Property, Plant and Equipment, Gross
48 
49 
 
 
Property, Plant and Equipment, Estimated Useful Lives
5 
 
 
 
Capital leases
 
 
 
 
Property, Plant and Equipment [Line Items]
 
 
 
 
Property, Plant and Equipment, Gross
28 7
28 7
 
 
Property, Plant and Equipment, Estimated Useful Lives
(B) 
 
 
 
Construction in process
 
 
 
 
Property, Plant and Equipment [Line Items]
 
 
 
 
Property, Plant and Equipment, Gross
$ 12 8
$ 28 8
 
 
Property, Plant and Equipment, Estimated Useful Lives
(C) 
 
 
 
Derivative Financial Instrument (Details) (USD $)
In Millions, unless otherwise specified
Jan. 31, 2016
Jan. 25, 2015
Summary of Derivative Instruments [Abstract]
 
 
Interest rate swap, Notional Amount
$ 200 
$ 0 
Interest Rate Swap, at Fair Value
(7)1
0 1
Gain (loss) on interest rate swap
$ (4)
$ 0 
Guarantees (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Jan. 31, 2016
Jan. 25, 2015
Jan. 26, 2014
Notes to financial statements [Abstract]
 
 
 
SHIELD warranty charge
$ 26 
 
 
Estimated product warranty liabilities
 
 
 
Balance at beginning of period
8 1
8 
15 
Additions
27 
5 
7 
Deductions
(24)
(5)
(14)
Balance at end of period
$ 11 1
$ 8 1
$ 8 
Convertible Debt (Details) (USD $)
Share data in Millions, except Per Share data, unless otherwise specified
3 Months Ended 6 Months Ended 12 Months Ended
Jan. 31, 2016
Apr. 27, 2014
Oct. 25, 2015
Jan. 31, 2016
Jan. 25, 2015
Jan. 26, 2014
Debt Instrument [Line Items]
 
 
 
 
 
 
1.00% Convertible Senior Notes Due 2018
$ 1,500,000,000 
 
 
$ 1,500,000,000 
$ 1,500,000,000 
 
Debt Instrument, Convertible, Conversion Ratio
49.7009 
 
 
 
 
49.5958 
Principal amount of Notes
1,000 
 
 
1,000 
 
 
Debt Instrument, Convertible, Conversion Price
$ 20.1204 
 
 
$ 20.1204 
 
$ 20.1630 
Common Stock, Dividends, Per Share, Declared
 
$ 0.085 
$ 0.0975 
$ 0.115 
 
 
Debt Instrument, Convertible, Terms of Conversion Feature
 
 
 
(1) during any fiscal quarter (and only during such fiscal quarter), if the last reported sale price of the common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (2) during the five business day period after any five consecutive trading day period (the measurement period) in which the trading price per $1,000 principal amount of notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of our common stock and the conversion rate on each such trading day; or (3) upon the occurrence of specified corporate events. On or after August 1, 2018 to the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert all or any portion of their Notes regardless of the foregoing conditions. 
 
 
Debt Instrument, Convertible, Threshold Percentage of Stock Price Trigger
 
 
 
130.00% 
 
 
Convertible short-term debt
1,413,000,000 
 
 
1,413,000,000 
0 
 
Convertible debt conversion obligation
87,000,000 
 
 
87,000,000 
0 
 
Debt Instrument, Convertible, If-converted Value in Excess of Principal
 
 
 
684,000,000 
 
 
Debt Instrument, Convertible, Initial Liability Amount
 
 
 
 
 
1,350,000,000 
Debt Instrument, Convertible, Effective Interest Rate
 
 
 
 
 
3.15% 
Carrying Amount of Equity Component
39,000,000 
 
 
39,000,000 
126,000,000 
126,000,000 
Purchaser's Discount of Convertible Notes
 
 
 
 
 
23,000,000 
Initial unamortized debt discount at issuance
 
 
 
 
 
148,000,000 
Unamortized debt discount
(87,000,000)
 
 
(87,000,000)
(116,000,000)
 
Net carrying amount, long-term debt
1,413,000,000 
 
 
1,413,000,000 
1,384,000,000 
 
Debt Instrument, Convertible, Remaining Discount Amortization Period
 
 
 
2 years 9 months 17 days 
 
 
Contractual coupon interest expense
 
 
 
15,000,000 
15,000,000 
2,000,000 
Amortization of debt discount
 
 
 
29,000,000 
28,000,000 
5,000,000 
Total interest expense related to Notes
 
 
 
44,000,000 
43,000,000 
7,000,000 
Proceeds from issuance of convertible notes, net
 
 
 
0 
0 
1,480,000,000 
Purchase of convertible note hedges
 
 
 
0 
0 
167,000,000 
Warrant Strike Price
 
 
 
$ 27.0851 
 
$ 27.1425 
Number of Shares Covered by Warrants
74 
 
 
74 
 
 
Proceeds from the sale of common stock warrants
 
 
 
0 
0 
59,000,000 
Net Cost of Hedges and Warrants Transactions
 
 
 
 
 
$ 108,000,000 
Commitments and Contingencies (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Jan. 31, 2016
Jan. 25, 2015
Jan. 26, 2014
Commitment and Contingency [Line Items]
 
 
 
GroundleasetoasyndicateofbanksSyntheticLease
99 years 0 months 0 days 
 
 
TotalSyntheticLeaseterm
7 years 6 months 0 days 
 
 
EstimatedconstructionperiodSyntheticLease
2 years 6 months 0 days 
 
 
Maximumnumberofrenewaloptions
3 
 
 
Lessee Leasing Arrangements, Operating Leases, Renewal Term
5 years 0 months 0 days 
 
 
ExpectedconstructioncostsforSyntheticleasefinancing
$ 380 
 
 
Maximumresidualvalueguaranteepercentage
87.50% 
 
 
Maximumtotalleverageratio
3.0 
 
 
Minimumtotalleverageratio
3.5 
 
 
Commitments and Contingencies Disclosure [Abstract]
 
 
 
Outstanding Inventory Purchase Obligation
391 
 
 
Outstanding Capital Purchase Obligations
36 
 
 
Operating Leases, Future Minimum Payments Due [Abstract]
 
 
 
Future minimum operating lease payments - HQ
69 
 
 
Operating Leases, Future Minimum Payments Due, Current
75 
 
 
Operating Leases, Future Minimum Payments, Due in Two Years
65 
 
 
Operating Leases, Future Minimum Payments, Due in Three Years
58 
 
 
Operating Leases, Future Minimum Payments, Due in Four Years
35 
 
 
Operating Leases, Future Minimum Payments, Due in Five Years
11 
 
 
Operating Leases, Future Minimum Payments, Due Thereafter
20 
 
 
Operating Leases, Future Minimum Payments Due
264 
 
 
Operating Leases, Rent Expense
45 
47 
44 
Capital Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract]
 
 
 
Future minimum capital lease payments - HQ
17 
 
 
Capital Leases, Future Minimum Payments Due, Current
5 
 
 
Capital Leases, Future Minimum Payments Due in Two Years
6 
 
 
Capital Leases, Future Minimum Payments Due in Three Years
6 
 
 
Capital Leases, Future Minimum Payments Due
17 
 
 
Capital Leases, Future Minimum Payments, Present Value of Net Minimum Payments
14 
 
 
Capital Lease Obligations, Current
4 
 
 
Capital Lease Obligations, Noncurrent
$ 10 
$ 14 
 
Income Taxes (Details) (USD $)
12 Months Ended
Jan. 31, 2016
Jan. 25, 2015
Jan. 26, 2014
Current Income Tax Expense
 
 
 
Federal
$ (43,000,000)
$ 8,000,000 
$ 8,000,000 
State
1,000,000 
1,000,000 
1,000,000 
Foreign
25,000,000 
17,000,000 
19,000,000 
Total current
(17,000,000)
26,000,000 
28,000,000 
Deferred Income Tax Expense (Benefit), Continuing Operations [Abstract]
 
 
 
Federal
134,000,000 
84,000,000 
17,000,000 
State
0 
0 
0 
Foreign
0 
(1,000,000)
(2,000,000)
Total deferred
134,000,000 
83,000,000 
15,000,000 
Charge in lieu of taxes attributable to employer stock option plans
12,000,000 
15,000,000 
27,000,000 
Income tax expense
129,000,000 
124,000,000 
70,000,000 
Income before Income Taxes
 
 
 
Domestic
129,000,000 
174,000,000 
79,000,000 
Foreign
614,000,000 
581,000,000 
431,000,000 
Income before income tax expense
743,000,000 
755,000,000 
510,000,000 
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate
35.00% 
 
 
Income Tax Expense (Benefit), Continuing Operations, Income Tax Reconciliation [Abstract]
 
 
 
Tax expense computed at federal statutory rate
260,000,000 
264,000,000 
178,000,000 
State income taxes, net of federal tax effect
1,000,000 
1,000,000 
2,000,000 
Foreign tax rate differential
(95,000,000)
(120,000,000)
(94,000,000)
U.S. federal R&D tax credit
(38,000,000)
(34,000,000)
(30,000,000)
Stock-based compensation
13,000,000 
4,000,000 
9,000,000 
Tax expense related to inter-company transaction
10,000,000 
10,000,000 
10,000,000 
Restructuring and expiration of statute of limitations
(21,000,000)
0 
0 
Other
(1,000,000)
(1,000,000)
(5,000,000)
Income tax expense
129,000,000 
124,000,000 
70,000,000 
Components of Deferred Tax Assets [Abstract]
 
 
 
Net operating loss carryforwards
57,000,000 
72,000,000 
 
Accruals and reserves, not currently deductible for tax purposes
58,000,000 
109,000,000 
 
Property, equipment and intangible assets
50,000,000 
46,000,000 
 
Research and other tax credit carryforwards
404,000,000 
351,000,000 
 
Stock-based compensation
29,000,000 
30,000,000 
 
Convertible debt
9,000,000 
12,000,000 
 
Gross deferred tax assets
607,000,000 
620,000,000 
 
Less valuation allowance
(272,000,000)
(261,000,000)
 
Deferred Tax Assets, Net
335,000,000 
359,000,000 
 
Components of Deferred Tax Liabilities [Abstract]
 
 
 
Acquired intangibles
(17,000,000)
(25,000,000)
 
Unremitted earnings of foreign subsidiaries
(615,000,000)
(500,000,000)
 
Deferred Tax Liabilities, Gross
(632,000,000)
(525,000,000)
 
Net deferred tax asset (liability)
(297,000,000)
(166,000,000)
 
Effective tax rate
17.30% 
16.50% 
13.80% 
Operating Loss Carryforwards [Line Items]
 
 
 
Excess Tax Benefit Related To Stock Based Compensation
416,000,000 
 
 
Deferred Tax Assets, Operating Loss Carryforwards, Foreign
275,000,000 
 
 
Foreign net operating loss carryforwards remainder
14,000,000 
 
 
Undistributed Earnings Of Non United States Subsidiaries
2,500,000,000 
 
 
UNITED STATES
 
 
 
Operating Loss Carryforwards [Line Items]
 
 
 
Operating Loss Carryforwards
516,000,000 
 
 
Deferred Tax Assets, Tax Credit Carryforwards, Research
476,000,000 
 
 
State and Local Jurisdiction
 
 
 
Operating Loss Carryforwards [Line Items]
 
 
 
Operating Loss Carryforwards
664,000,000 
 
 
Deferred Tax Assets, Tax Credit Carryforwards, Other
3,000,000 
 
 
Deferred Tax Assets, Tax Credit Carryforwards, Research
450,000,000 
 
 
CALIFORNIA
 
 
 
Operating Loss Carryforwards [Line Items]
 
 
 
Deferred Tax Assets, Tax Credit Carryforwards, Research
432,000,000 
 
 
Other states
 
 
 
Operating Loss Carryforwards [Line Items]
 
 
 
Deferred Tax Assets, Tax Credit Carryforwards, Research
18,000,000 
 
 
Foreign Country
 
 
 
Operating Loss Carryforwards [Line Items]
 
 
 
Operating Loss Carryforwards
289,000,000 
 
 
Deferred Tax Assets, Tax Credit Carryforwards, Other
$ 1,000,000 
 
 
Income Taxes Income Taxes (Unrecognized Tax Benefits) (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Jan. 31, 2016
Jan. 25, 2015
Jan. 26, 2014
Income Tax Contingency [Line Items]
 
 
 
Unrecognized Tax Benefits that Would Impact Effective Tax Rate
$ 202 
 
 
Reduction of deferred tax asset included in unrecognized tax benefit
135 
 
 
Income Tax Reconciliation, Tax Contingencies [Abstract]
 
 
 
Balance at beginning of period
254 
238 
221 
Increases in tax positions for prior years
0 
0 
0 
Decreases in tax positions for prior years
(1)
(1)
(1)
Increases in tax positions for current year
28 
23 
23 
Lapse in statute of limitations
(51)
(6)
(5)
Balance at end of period
230 
254 
238 
Unrecognized Tax Benefits, Income Tax Penalties and Interest Accrued [Abstract]
 
 
 
Unrecognized Tax Benefits, Income Tax Penalties and Interest Accrued
11 
14 
13 
Accrued Income Taxes, Noncurrent
78 
121 
 
Unrecognized tax benefit (non current)
67 
 
 
State and Local Jurisdiction
 
 
 
Income Tax Reconciliation, Tax Contingencies [Abstract]
 
 
 
Balance at end of period
$ 50 
 
 
Stockholders' Equity (Details) (USD $)
Share data in Millions, except Per Share data, unless otherwise specified
3 Months Ended 6 Months Ended 12 Months Ended
Apr. 27, 2014
Oct. 25, 2015
Jan. 31, 2016
Jan. 25, 2015
Jan. 26, 2014
Notes to financial statements [Abstract]
 
 
 
 
 
Stock repurchase program, additional authorized amount
 
 
$ 1,620,000,000 
 
 
Stock Repurchased During Period, Shares
 
 
25 
 
 
Accelerated Share Repurchases, Settlement (Payment) or Receipt
 
 
587,000,000 
 
 
Dividends paid
 
 
213,000,000 
186,000,000 
181,000,000 
Common Stock, Dividends, Per Share, Declared
$ 0.085 
$ 0.0975 
$ 0.115 
 
 
Return to shareholders in the current year
 
 
800,000,000 
 
 
Aggregate number of shares repurchased under stock repurchase program
 
 
231 
 
 
Aggregated cost of shares repurchased
 
 
3,850,000,000 
 
 
Stock Repurchase Program, Remaining Authorized Repurchase Amount
 
 
1,470,000,000 
 
 
Intended return to shareholder in FY2017
 
 
1,000,000,000 
 
 
Intended return to shareholder in the future quarter, dividend per share
 
 
$ 0.115 
 
 
Tax withholding related to vesting of restricted stock units, value
 
 
$ (66,000,000)
$ (43,000,000)
$ (28,000,000)
Common Stock, Shares Authorized
 
 
2,000 
2,000 
 
Common stock, par value
 
 
$ 0.001 
$ 0.001 
 
Employee Retirement Plans (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Jan. 31, 2016
Jan. 25, 2015
Jan. 26, 2014
Employee Retirement Plans [Abstract]
 
 
 
Employee Retirement Plans Maximum Contribution Percentage Of Earnings
100.00% 
 
 
401K Plan employer contribution expense in US
$ 8 
$ 6 
$ 5 
Defined Contribution Plan, Cost Recognized, outside US
$ 21 
$ 20 
$ 16 
Segment Information (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 12 Months Ended
Jan. 31, 2016
Oct. 25, 2015
Jul. 26, 2015
Apr. 26, 2015
Jan. 25, 2015
Oct. 26, 2014
Jul. 27, 2014
Apr. 27, 2014
Jan. 31, 2016
Jan. 25, 2015
Jan. 26, 2014
Segment Reporting
 
 
 
 
 
 
 
 
 
 
 
Depreciation and amortization expense
 
 
 
 
 
 
 
 
$ 197 
$ 220 
$ 239 
Revenue
1,401 
1,305 
1,153 
1,151 
1,251 
1,225 
1,103 
1,103 
5,010 
4,682 
4,130 
Operating income (loss)
 
 
 
 
 
 
 
 
747 
759 
496 
Reconciliation from Segment Totals to Consolidated
 
 
 
 
 
 
 
 
 
 
 
Unallocated cost of revenue and operating expenses
 
 
 
 
 
 
 
 
(244)
(169)
(167)
Stock-based compensation expense
 
 
 
 
 
 
 
 
(204)
(158)
(136)
Restructuring and other charges
 
 
 
 
 
 
 
 
(131)
0 
0 
Acquisition-related costs
 
 
 
 
 
 
 
 
(22)
(37)
(32)
Product warranty charges
 
 
 
 
 
 
 
 
21 
0 
0 
Reconciliation total in All other
 
 
 
 
 
 
 
 
(358)
(100)
(71)
GPU
 
 
 
 
 
 
 
 
 
 
 
Segment Reporting
 
 
 
 
 
 
 
 
 
 
 
Depreciation and amortization expense
 
 
 
 
 
 
 
 
110 
117 
147 
Revenue
 
 
 
 
 
 
 
 
4,187 
3,839 
3,468 
Operating income (loss)
 
 
 
 
 
 
 
 
1,344 
1,113 
835 
Tegra processor
 
 
 
 
 
 
 
 
 
 
 
Segment Reporting
 
 
 
 
 
 
 
 
 
 
 
Depreciation and amortization expense
 
 
 
 
 
 
 
 
43 
57 
50 
Revenue
 
 
 
 
 
 
 
 
559 
579 
398 
Operating income (loss)
 
 
 
 
 
 
 
 
(239)
(254)
(268)
All Other
 
 
 
 
 
 
 
 
 
 
 
Segment Reporting
 
 
 
 
 
 
 
 
 
 
 
Depreciation and amortization expense
 
 
 
 
 
 
 
 
44 
46 
42 
Revenue
 
 
 
 
 
 
 
 
264 
264 
264 
Operating income (loss)
 
 
 
 
 
 
 
 
$ (358)
$ (100)
$ (71)
Segment Information Revenue and Long-lived assets by region (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 12 Months Ended
Jan. 31, 2016
Oct. 25, 2015
Jul. 26, 2015
Apr. 26, 2015
Jan. 25, 2015
Oct. 26, 2014
Jul. 27, 2014
Apr. 27, 2014
Jan. 31, 2016
Jan. 25, 2015
Jan. 26, 2014
Revenues from External Customers and Long-Lived Assets [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Revenue
$ 1,401 
$ 1,305 
$ 1,153 
$ 1,151 
$ 1,251 
$ 1,225 
$ 1,103 
$ 1,103 
$ 5,010 
$ 4,682 
$ 4,130 
Long-Lived Assets
533 
 
 
 
648 
 
 
 
533 
648 
 
TAIWAN
 
 
 
 
 
 
 
 
 
 
 
Revenues from External Customers and Long-Lived Assets [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
 
1,912 
1,594 
1,321 
Long-Lived Assets
39 
 
 
 
52 
 
 
 
39 
52 
 
CHINA
 
 
 
 
 
 
 
 
 
 
 
Revenues from External Customers and Long-Lived Assets [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
 
806 
922 
794 
Long-Lived Assets
25 
 
 
 
28 
 
 
 
25 
28 
 
Other Asia Pacific
 
 
 
 
 
 
 
 
 
 
 
Revenues from External Customers and Long-Lived Assets [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
 
749 
638 
675 
Long-Lived Assets
1 
 
 
 
1 
 
 
 
1 
1 
 
UNITED STATES
 
 
 
 
 
 
 
 
 
 
 
Revenues from External Customers and Long-Lived Assets [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
 
643 
791 
727 
Long-Lived Assets
414 
 
 
 
467 
 
 
 
414 
467 
 
Europe
 
 
 
 
 
 
 
 
 
 
 
Revenues from External Customers and Long-Lived Assets [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
 
482 
369 
295 
Long-Lived Assets
9 
 
 
 
52 
 
 
 
9 
52 
 
INDIA
 
 
 
 
 
 
 
 
 
 
 
Revenues from External Customers and Long-Lived Assets [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Long-Lived Assets
45 
 
 
 
48 
 
 
 
45 
48 
 
Other Americas
 
 
 
 
 
 
 
 
 
 
 
Revenues from External Customers and Long-Lived Assets [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
 
$ 418 
$ 368 
$ 318 
Segment Information Revenue and Accounts Receivable by major customer (Details)
12 Months Ended
Jan. 31, 2016
Jan. 25, 2015
Jan. 26, 2014
Customer A (REV)
 
 
 
Revenue, Major Customer [Line Items]
 
 
 
Revenue from significant customers (in percent)
11.00% 
11.00% 
11.00% 
Customer B (REV)
 
 
 
Revenue, Major Customer [Line Items]
 
 
 
Revenue from significant customers (in percent)
9.00% 
9.00% 
10.00% 
Segment Information Schedule of Accounts Receivable by Major Customers (Details)
Jan. 31, 2016
Jan. 25, 2015
Accounts Receivable by Major Customers
 
 
Accounts receivable from significant customers (in percent)
21.00% 
30.00% 
Customer B (AR)
 
 
Accounts Receivable by Major Customers
 
 
Accounts receivable from significant customers (in percent)
21.00% 
20.00% 
Customer C (AR)
 
 
Accounts Receivable by Major Customers
 
 
Accounts receivable from significant customers (in percent)
8.00% 
10.00% 
Segment Information Schedule of Revenue by Market (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 12 Months Ended
Jan. 31, 2016
Oct. 25, 2015
Jul. 26, 2015
Apr. 26, 2015
Jan. 25, 2015
Oct. 26, 2014
Jul. 27, 2014
Apr. 27, 2014
Jan. 31, 2016
Jan. 25, 2015
Jan. 26, 2014
Schedule of Revenue by Markets [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Revenue
$ 1,401 
$ 1,305 
$ 1,153 
$ 1,151 
$ 1,251 
$ 1,225 
$ 1,103 
$ 1,103 
$ 5,010 
$ 4,682 
$ 4,130 
Gaming
 
 
 
 
 
 
 
 
 
 
 
Schedule of Revenue by Markets [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
 
2,818 
2,058 
1,511 
Professional Visualization
 
 
 
 
 
 
 
 
 
 
 
Schedule of Revenue by Markets [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
 
750 
795 
789 
Data Center
 
 
 
 
 
 
 
 
 
 
 
Schedule of Revenue by Markets [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
 
339 
317 
199 
Automotive
 
 
 
 
 
 
 
 
 
 
 
Schedule of Revenue by Markets [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
 
320 
183 
99 
OEM and IP
 
 
 
 
 
 
 
 
 
 
 
Schedule of Revenue by Markets [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
 
$ 783 
$ 1,329 
$ 1,532 
Restructuring and Other Charges (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Jan. 31, 2016
Jan. 25, 2015
Jan. 26, 2014
Restructuring and Other Charges [Abstract]
 
 
 
Restructuring and other charges
$ 131 
$ 0 
$ 0 
Tax Reserve Release Related to Icera
49 
 
 
Icera Deferred Tax Asset Write-off
27 
 
 
Employee severance and related costs
82 
 
 
Fixed assets impairment
18 
 
 
Tax subsidy impairment
17 
 
 
Facilities and related costs
9 
 
 
Other exit costs
5 
 
 
Additional restructuring charges minimum
1 
 
 
Additional restructuring charges maximum
2 
 
 
Restructuring impact on workforce
5.00% 
 
 
Restructuring Reserve, Beginning Balance
0 1
 
 
Cash payments
(63)
 
 
Non-cash adjustments
(45)
 
 
Restructuring Reserve, Ending Balance
$ 23 1
$ 0 1
 
Quartely Summary (Details) (USD $)
In Millions, except Per Share data, unless otherwise specified
3 Months Ended 12 Months Ended
Jan. 31, 2016
Oct. 25, 2015
Jul. 26, 2015
Apr. 26, 2015
Jan. 25, 2015
Oct. 26, 2014
Jul. 27, 2014
Apr. 27, 2014
Jan. 31, 2016
Jan. 25, 2015
Jan. 26, 2014
Selected Quarterly Financial Information [Abstract]
 
 
 
 
 
 
 
 
 
 
 
Revenue
$ 1,401 
$ 1,305 
$ 1,153 
$ 1,151 
$ 1,251 
$ 1,225 
$ 1,103 
$ 1,103 
$ 5,010 
$ 4,682 
$ 4,130 
Cost of revenue
610 
572 
519 
498 
552 
548 
484 
499 
2,199 
2,083 
1,862 
Gross profit
791 
733 
634 
653 
699 
677 
619 
604 
2,811 
2,599 
2,268 
Net income
$ 207 
$ 247 
$ 26 
$ 134 
$ 193 
$ 173 
$ 128 
$ 137 
$ 614 
$ 631 
$ 440 
Basic net income per share
$ 0.38 
$ 0.45 
$ 0.05 
$ 0.24 
$ 0.35 
$ 0.32 
$ 0.23 
$ 0.24 
$ 1.13 
$ 1.14 
$ 0.75 
Diluted net income per share
$ 0.35 
$ 0.44 
$ 0.05 
$ 0.24 
$ 0.35 
$ 0.31 
$ 0.22 
$ 0.24 
$ 1.08 
$ 1.12 
$ 0.74 
Schedule II (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Jan. 31, 2016
Jan. 25, 2015
Jan. 26, 2014
Allowance for Trade Receivables
 
 
 
Valuation and Qualifying Accounts Disclosure [Line Items]
 
 
 
Valuation Allowances and Reserves, Balance
$ 3 
$ 1 
$ 2 
Valuation Allowances and Reserves, Additions
0 1
3 1
0 1
Valuation Allowances and Reserves, Deductions
(1)1
(1)1
(1)1
Valuation Allowances and Reserves, Balance
2 
3 
1 
Allowance for Sales Returns
 
 
 
Valuation and Qualifying Accounts Disclosure [Line Items]
 
 
 
Valuation Allowances and Reserves, Balance
14 
14 
15 
Valuation Allowances and Reserves, Additions
9 2
12 2
16 2
Valuation Allowances and Reserves, Deductions
(14)3
(12)3
(17)3
Valuation Allowances and Reserves, Balance
9 
14 
14 
Valuation Allowance of Deferred Tax Assets
 
 
 
Valuation and Qualifying Accounts Disclosure [Line Items]
 
 
 
Valuation Allowances and Reserves, Balance
261 
244 
225 
Valuation Allowances and Reserves, Additions
11 4
17 4
19 4
Valuation Allowances and Reserves, Deductions
0 
0 
0 
Valuation Allowances and Reserves, Balance
$ 272 
$ 261 
$ 244