Jen-Hsun Huang, chairman and CEO 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 that it would miss Wall Street estimates and that growth had slowed significantly due to disappointing gaming sales driven by macroeconomic conditions. It also warned that its gross margin would fall.
Nvidia missed on revenue, but Refinitiv estimates were unchanged after the company cautioned on guidance and said it expected to report $6.7 billion in the quarter. Nvidia shares fell more than 3% in extended trading.
Here’s how Nvidia did compared to Refinitiv’s consensus estimates:
- EPS: $0.51, adjusted, vs. $1.26 expected
- Revenue: $6.7 billion versus $8.1 billion expected
The chipmaker said it expected sales of $5.9 billion in its fiscal third quarter, compared with Refinitiv’s consensus estimate of $6.95 billion.
Revenue at Nvidia’s gaming division fell 33% year-on-year to $2.04 billion, a sharper drop than the company had expected. Nvidia said the shortfall was due to lower sales of its gaming products, which are primarily graphics cards for PCs.
“Macroeconomic headwinds around the world led to a sudden slowdown in consumer demand” for the company’s gaming products, Colette Kress, Nvidia’s chief financial officer, said on a call with analysts.
Nvidia said it would adjust prices with its retailers to address “difficult market conditions” for the industry that it said it expected to persist into the current quarter.
The company’s data center business improved slightly. It rose 61% year over year to $3.8 billion, driven by what the company calls “hyperscale” customers, which are large cloud providers.
Nvidia also has some smaller lines of business. Its professional display business, which sells graphics chips for business uses, declined 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 its OEM and others category.
Nvidia shares are down more than 42% year-to-date. It had been a beloved pandemic, rising sharply as working from home drove 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 its hiring pace in the face of macroeconomic challenges.
Limited visibility of cryptocurrency mining demand
Nvidia’s success over the past two years has been largely attributed to the quality of its 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 partially driven 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 over how it informed investors about how cryptocurrency was fueling demand for its graphics cards in 2017. Since then, Nvidia has said it has no visibility into how much cryptocurrency is affecting demand for its products, even though cryptocurrency prices have fallen 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 affect in the future, demand for our products and our ability to estimate that accurately,” Chief Financial Officer Kress said in a statement.
“We cannot accurately quantify the extent to which the reduction in cryptocurrency mining contributed to the decline in gaming demand,” Kress continued.