Nvidia Beats Estimates but Disappoints on Data Centre Performance

Nvidia forecast third-quarter sales above expectations on Wednesday, but results from the data centre business of the rising semiconductor industry star disappointed some investors, pressuring shares.

The company, with a market cap that has eclipsed Intel, also beat Wall Street expectations for the second quarter.

Still, the results sent shares down 1.5 percent in trading after the bell. Before the market close on Wednesday, Nvidia's shares had gained more than 185 percent over the past year and with a valuation of about 53 times expected earnings over the next 12 months.

Nvidia said it expects third-quarter revenue of $4.40 billion (roughly Rs. 32,985 crores), plus or minus 2 percent, compared with analysts' estimates of $3.97 billion (roughly Rs. 29,761 crores) according to IBES data from Refinitiv.

The company's data centre segment reported second-quarter revenue of $1.75 billion (roughly Rs. 13,119 crores) beating estimates of $1.71 billion (roughly Rs. 12,819 crores), according to FactSet data.

Nvidia said Mellanox, the Israeli networking chip firm that it acquired for $7 billion (roughly Rs. 52, 475 crores) in cash this year, contributed 30 percent of data centre segment sales.

Stacy Rasgon, an analyst with Bernstein, said the figure implied that Nvidia's core data centre chips grew only about 6 percent on a quarterly basis, which may have been lower than some investors with sky-high expectations had hoped.

In an interview with Reuters, Chief Executive and co-founder Jensen Huang said the company is shipping its newest data centre products as fast as possible after both introducing them and starting shipments in the second quarter, a process that in the past would play out over several quarters.

"We're going to do a lot more next quarter. We're going to do a lot more the quarter after that," he said. "We're going ramp up here in the second half, and that's going give us another boost."

Nvidia's gaming business posted revenue of $1.65 billion (roughly Rs.12,373 crores), beating FactSet estimates of $1.41 billion (roughly Rs. 10,573 crores).

Revenue rose nearly 50 percent to $3.87 billion (roughly Rs. 29,019 crores) in the second quarter ended July 26, Nvidia said, above Refinitiv IBES estimates of $3.65 billion (roughly Rs. 27,369 crores).

Net income rose to $622 million (roughly Rs. 4664 crores), or $0.99 (roughly Rs. 74) per share, in the quarter, from $552 million(roughly Rs. 3914 crores), or $0.90 (roughly Rs. 67) per share, a year earlier.

On an adjusted basis, the company earned $2.18 (roughly Rs.168) per share in the quarter compared with analysts' estimates of $1.97 (roughly Rs. 147) per share.

Nvidia was once primarily known for chips that helped video game graphics look more realistic. But more than a decade ago, Huang placed a major bet on the rise of artificial intelligence applications such as the image recognition or natural language processing computing that powers everything from autonomous vehicle development to voice assistants.

The rise of those technologies helped make Nvidia the biggest US chip company by market capitalisation in July, when it overtook Intel, which has long dominated chips for both personal computers and inside data centres.

In recent weeks, Intel shares have plunged nearly 20% as the company struggles with its chip manufacturing operations while Nvidia shares have continued to rise, leaving Nvidia with a market cap of $301.6 billion (roughly Rs. 22 lakh crores) before markets closed Wednesday compared with Intel $206.9 billion (roughly Rs. 15 lakh crores)

© Thomson Reuters 2020

Is Mi Notebook 14 series the best affordable laptop range for India? We discussed this on Orbital, our weekly technology podcast, which you can subscribe to via Apple Podcasts or RSS, download the episode, or just hit the play button below.

Should the government explain why Chinese apps were banned? We discussed this on Orbital, our weekly technology podcast, which you can subscribe to via Apple Podcasts, Google Podcasts, or RSS, download the episode, or just hit the play button below.