Nvidia (NVDA) Q2 2023 results

Jen-Hsun Huang, president and CEO of Nvidia Corp., speaks during 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 expectations for revenue and earnings per share.

The report is in line with Nvidia’s preliminary results two weeks ago. The chipmaker warned that it would miss Wall Street estimates and that growth had slowed significantly due to disappointing game sales due to macroeconomic conditions. He also warned that his gross margin would plummet.

Nvidia missed its revenue, but Refinitiv’s estimates remained unchanged after the company warned against its forecast and said it expected to report $6.7 billion in the quarter. Nvidia stock fell more than 3% in extended trading.

Here’s how Nvidia did against Refinitiv’s consensus estimates:

  • EPS: $0.51, adjusted, vs. $1.26 expected
  • Revenue: 6.7 billion dollars against 8.10 billion dollars expected

The chipmaker said it expects sales of $5.9 billion in its fiscal third quarter, versus Refinitiv’s consensus estimate of $6.95 billion.

Revenue for Nvidia’s games department fell 33% year-over-year to $2.04 billion, which was a steeper drop than the company expected. Nvidia said the error was due to declining sales of its gaming products, which are primarily PC graphics cards.

“Macroeconomic headwinds around the world have resulted in a sudden slowdown in consumer demand” for the company’s gaming products, Nvidia chief financial officer Colette Kress said in a call with analysts.

Nvidia said it would adjust pricing with its retailers to address “challenging market conditions” for the industry that it said would persist through the current quarter.

The company’s data center business fared slightly better. It grew 61% year-on-year to $3.8 billion, driven by what the company calls “hyperscale” customers, which are large cloud providers.

Nvidia also has a few smaller business lines. Its professional visualization business, which sells graphics chips for professional use, fell 4% annually to $496 million. The auto remains small, though it was up 45% year-over-year to $220 million. Nvidia said revenue from its dedicated cryptocurrency mining chips, CMP, was “nominal,” contributing to a 66% annual decline in its OEM and other category.

Nvidia stock is down more than 42% since the start of the year. It was a pandemic darling, rising sharply as working from home spurred purchases of graphics cards and server chips, boosting Nvidia’s business and driving revenue growth of 61% in the fiscal year. 2022.

In May, Nvidia said this would slow its pace of hiring in the face of macroeconomic challenges.

Limited visibility into 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 has been partly driven by cryptocurrency miners, who like Nvidia’s graphics cards because they’re good 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 he had no visibility into the impact of cryptocurrency on demand. for its products, even as cryptocurrency prices have fallen this year.

“Cryptocurrency market volatility – such as declines in cryptocurrency prices or changes in transaction verification methods, including proof-of-work or proof-of-stake – has in the past had an impact, and may in the future, impact demand for our products and our ability to accurately estimate it,” Chief Financial Officer Kress said in a statement.

“We are unable to quantify precisely to what extent the reduction in cryptocurrency mining has contributed to the decline in demand for games,” Kress continued.

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