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 due to macroeconomic conditions. It also warned that its gross margin would shrink. Nvidia missed 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 stock fell more than 2% 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 vs. $8.10 billion expected
The chipmaker said it expects sales of $5.9 billion in the fiscal third quarter, compared with Refinitiv consensus estimates of $6.95 billion. Nvidia’s gaming division’s revenue fell 33% year over year to $2.04 billion. Nvidia said the loss was due to lower sales of its gaming products, which are mainly graphics cards for PCs. Nvidia said it would change prices with its retailers to address “challenging market conditions” for the industry that it said it expected to persist 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, which are large cloud providers. Nvidia also has some smaller areas of business. Its professional visualization business, which sells graphics chips for enterprise use, fell 4% year-over-year to $496 million. The auto industry remains small, although it grew 45% year over year to $220 million. Nvidia said revenue from its dedicated cryptocurrency mining chips, CMP, was “nominal,” contributing to a 66% year-over-year decline in the OEM and other segments. Nvidia stock is down more than 42% so far this year. It was a pandemic, my love, that was growing big as working from home boosted purchases of graphics cards and server chips, weighing on Nvidia’s business and driving 61% revenue growth in fiscal 2022. In May, Nvidia said it would slow its hiring pace 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 graphics cards, which have been in high demand for PC gaming during the pandemic. However, questions remain about whether Nvidia’s growth was driven in part by cryptocurrency miners, who like Nvidia’s graphics cards because they are 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, the Nvidia said it has no visibility into how many cryptocurrencies are affecting demand for its products, even as 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 in the future affect 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 has contributed to the decline in Gaming demand,” Kress continued.
