Nvidia data center revenue tops gaming income for the first time in FQ2

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Nvidia’s fiscal second-quarter financial results revealed its data center revenue topped its gaming sales for the first time. The company’s earnings also topped analyst projections thanks to coronavirus pandemic generated demand and its recent acquisition of Mellanox Technologies.

Though the chipmaker has a positive outlook for the fiscal third quarter, it anticipates a drop off in demand for its most popular products.

Nvidia’s Strong FQ2 Results

In the period ending July 26, Nvidia’s data center segment brought in $1.75 billion, an annual improvement of 167 percent. The division experienced explosive year-over-year growth because of purchases from online service providers needing to expand their capacity amid a pandemic related spike in usage. The firm has strived to become a significant player in the cloud computing space for years, and the global health crisis has dramatically expanded its presence in that market.

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Nvidia’s server income also got a boost from accounting for revenue from Mellanox products for the first time as its purchase closed in April. The graphics card brand outbid Intel and Microsoft to acquire the supercomputer chip firm for $6.9 billion in 2019.

Despite no longer being its leading business, Nvidia’s gaming segment made a hefty $1.65 billion in the fiscal second quarter, up 26 percent from 2019.

The company’s other divisions did not fare as well during the July period. Its professional visualization unit earned $203 million, down 30 percent from last year. Similarly, the firm’s automotive segment brought in $111 million, a 47 percent decline year-over-year. The brand explained both departments saw declining sales because of the coronavirus’s economic impact.

Nvidia recorded $3.86 billion in total revenue last quarter with adjusted earnings per share of $2.18. As such, the brand grew its sales by 50 percent from the same time frame last year and its profit by 76 percent. Wall Street predicted the firm would report earnings per share of $1.97 against gross income of $3.66 billion.

When asked, CEO Jensen Huang did not directly comment on reports his company is in talks to buy Arm.

Weakening Data Center Demand

Nvidia offered a revenue range of between $4.31 billion to $4.48 billion for the current period. The firm’s forecast calls for an annual sales increase of 43.2 to 49 percent and sequential growth of 11.6 to 16.2 percent. Bloomberg notes market analysts’ average estimate for the chipmaker’s FQ3 gross income is $3.96 billion.

One dark cloud in the firm’s otherwise sunny forecast is a predicted softening in demand for its data center products. CFO Colette Kress told analysts the segment would see “low-to-mid single-digit” growth in FQ3 after rising 54 percent sequentially in FQ2. The company’s outlook aligns with TrendForce’s recent report web services providers need for new chips has diminished from the first half.

That said, Nvidia did just launch a new line of data center GPUs, which should boost the firm’s revenue because of its pricing. Moreover, Kress mentioned her company anticipates a 25 percent surge in gaming sales quarter-over-quarter.

While Nvidia may not break any records this period, its place among the semiconductor industry’s highest echelon is secure.

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