Jen-Hsun Huang, president and chief executive officer of Nvidia Corp., speaks at the company’s event at Mobile World Congress Americas in Los Angeles on October 21, 2019.
Patrick T Fallon | Bloomberg | Getty Images
Nvidia reported second-quarter earnings that beat Wall Street’s expectations for revenue and earnings per share.
The report is in line with Nvidia’s preliminary results two weeks ago. The chipmaker warned it would miss Wall Street estimates and growth had slowed significantly due to disappointing gaming sales, driven by macroeconomic conditions. It also warned that gross margin would fall.
Nvidia missed revenue, but Refinitiv’s estimates didn’t change after the company warned of guidance and said it expected to report $6.7 billion in the quarter. Nvidia shares fell more than 2% during prolonged trading.
Here’s how Nvidia fared vs Refinitiv consensus estimates:
- EPS: $0.51, adjusted, versus $1.26 expected
- Revenue: $6.7 billion versus $8.10 billion expected
The chipmaker said it expected revenue of $5.9 billion in its fiscal third quarter, against Refinitiv consensus estimates of $6.95 billion.
Nvidia’s gaming division revenues fell 33% year-over-year to $2.04 billion. Nvidia said the miss was due to lower sales of its gaming products, which are primarily PC graphics cards. Nvidia said it would shift prices with its retailers to meet “challenging market conditions” for the industry it expected to continue into the current quarter.
The company’s data center operations fared slightly better. It rose 61% year-over-year to $3.8 billion, driven by what the company calls “hyperscale” customers, major cloud providers.
Nvidia also has a few smaller industries. The professional visualization business, which sells graphics chips for business use, declined 4% annually to $496 million. Automotive remains small, though it is up 45% year-over-year to $220 million. Nvidia said revenues from its dedicated cryptocurrency mining chips, CMP, were “nominal”, contributing to a 66% annual decline in its OEM and other category.
Nvidia shares are down more than 42% so far since the start of the year. It had been a pandemic darling, booming as working from home prompted purchases of graphics cards and server chips, fueling Nvidia’s business and driving 61% revenue growth in fiscal 2022.
In May, Nvidia said it would slow its human resources policy in the face of macroeconomic challenges.
Limited understanding of cryptocurrency mining demand
Nvidia’s success over the past two years has been largely attributed to the quality of the latest generation of graphics cards, which were in high demand for PC gaming during the pandemic.
But questions remain about whether Nvidia’s growth was driven in part by cryptocurrency miners, who like Nvidia’s graphics cards for being efficient at mining Ethereum.
In May, Nvidia said it would pay $5.5 million as part of a settlement with the SEC on how it briefed investors on how cryptocurrency fueled demand for its graphics cards in 2017. Since then, Nvidia has said it has no insight into how much cryptocurrency affects the demand for its products, even as cryptocurrency prices have fallen this year.
“Volatility in the cryptocurrency market — such as falls in cryptocurrency prices or changes in the method of verifying transactions, including proof of work or proof of stake — has historically impacted, and may affect, for the demand for our products and our ability to accurately estimate it,” Nvidia CFO Colette Kress said in a statement.
“We are unable to accurately quantify the extent to which reduced cryptocurrency mining contributed to the decline in gaming demand,” Kress continued.