Jen-Hsun Huang, president and chief executive officer of Nvidia Corp., speaks during the company’s Mobile World Congress Americas event in Los Angeles on Oct. 21, 2019.
Patrick T. Fallon | Bloomberg | Getty Images
Nvidia reported second-quarter earnings that missed Wall Street expectations for revenue and earnings per share.
The report is in line with Nvidia’s preliminary earnings two weeks ago. The chipmaker warned it would miss Wall Street estimates and that growth had slowed significantly due to disappointing gaming sales driven by macroeconomic conditions. He also warned that its gross margin will fall.
Nvidia missed revenue, but Refinitiv estimates were unchanged after the company warned on guidance and said it expected to report $6.7 billion in the quarter. Shares of Nvidia fell more than 4% in extended trading.
Here’s how Nvidia did against Refinitiv’s consensus estimates:
- EPS: $0.51, adjusted, vs. $1.26 expected
- Income: $6.7 billion vs. $8.10 billion expected
The chipmaker said it expected $5.9 billion in sales in the fiscal third quarter, versus Refinitiv’s consensus estimate of $6.95 billion.
Nvidia’s gaming division’s revenue fell 33% year over year to $2.04 billion, which was a steeper decline than the company had forecast. Nvidia said the loss was due to lower sales of its gaming products, which are mainly PC graphics cards.
“Macroeconomic headwinds around the world caused an unexpected slowdown in consumer demand” for the company’s gaming products, Nvidia CFO Colette Kress said on a call with analysts.
Nvidia said it would adjust prices with its vendors to address “challenging market conditions” for the industry that it said it expected to continue during the current quarter.
The company’s data center business fared slightly better. It grew 61% year over year to $3.8 billion, driven by what the company calls “hyperscale” customers, which are large cloud providers.
Nvidia also has several smaller business lines. Its professional visualization business, which sells graphics chips for enterprise use, fell 4% year over year to $496 million. Automotive remains small, although it grew 45% year-over-year to $220 million. Nvidia said revenue from its dedicated cryptocurrency mining chip, CMP, was “nominal,” contributing to a 66% year-over-year decline in OEM and other categories.
Shares of Nvidia are down over 42% year-to-date. It had been a pandemic darling, surging as work-from-home jobs boosted purchases of graphics cards and server chips, outpacing Nvidia’s business and driving revenue growth of 61% in fiscal 2022.
In May, Nvidia said it would slow the pace of hiring in the face of macroeconomic challenges.
Limited visibility into cryptocurrency mining demand
Nvidia’s success in the past two years has been largely attributed to the quality of its latest generation of graphics cards, which were in hot demand for 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 because they’re efficient at mining Ethereum.
In May, Nvidia said it would pay $5.5 million as part of a settlement with the SEC for telling investors how cryptocurrency was driving demand for its graphics cards in 2017. Since then, Nvidia has said it has no visibility how much cryptocurrency affects demand for its products, even though cryptocurrency prices have been down this year.
“Volatility in the cryptocurrency market – such as declines in cryptocurrency prices or changes in the method of verifying transactions, including proof-of-work or proof-of-stake — has in the past affected and may in the future affect demand for the products our and our ability. to accurately assess it,” CFO Kress said in a statement.
“We are unable to pinpoint the extent to which reduced cryptocurrency mining contributed to the decline in Gaming demand,” Kress continued.
