NVIDIA outperforms analyst revenue projections for FQ2 2020


On Thursday, chipset maker NVIDIA announced its fiscal second-quarter results. Notably, the firm beat analyst predictions in terms of both revenue and earnings. The corporation generated $2.58 billion in revenue versus estimates of $2.54 billion. This correlates with earnings of $1.24 per share compared to forecasts of $1.15.

NVIDIA’s FQ2 2020 net profits totaled $552 million, down from $1.1 billion brought in during FQ2018.

Though NVIDIA’s quarterly revenue declined by 17 percent year-on-year, its sales outpaced expectations. Moreover, the company’s stock price rose by 6 percent following its earnings announcements. Indeed, it seems that the component glut plaguing the semiconductor industry throughout the past year might finally be coming to an end.

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Gaming Business Up by 24 Percent

In an earnings call, NVIDIA CEO Jensen Huang explained that the company’s highest-earning segment, gaming chips, brought in $1.3 billion in revenue. Even so, that portion of the corporation’s overall sales is still down 27 percent from the same time last year. However, there is a silver lining to that uninspiring financial outcome. NVIDIA’s gaming chipset business rose by 24 percent from FQ1 2020.

Admittedly, NVIDIA’s core business could stand to improve a great deal. However, the fact that its gaming hardware segment grew by nearly 25 percent in just three months is a positive sign. Slowly but surely, the firm’s clients are raising their ordering numbers in accordance with Evercore’s semiconductor sector recovery forecast. Its analysts predicted that manufacturers would eventually burn through their excess chip inventories and that now seems to be happening.

Meanwhile, thanks to a new contract to provide components for Nintendo, including its upcoming Switch Lite console, the firm is on course to improve its gaming business even further during Q3 2019.

Data Center Sales Stagnate

NVIDIA also saw an increase in its data center business. In the fiscal second quarter, the segment brought in $655 million, a 3.3 percent improvement over FQ1. However, this did fall below analyst revenue forecasts of $668.5 billion and result in a decline of 14 percent year-on-year.

Huang attributed the segment’s underperformance to the wider semiconductor pileups globally. Primarily, NVIDIA blames the decrease on the fact that its data center customers still have stockpiles of graphics processing units. However, Huang also noted that the corporation anticipates high growth in chipset sales for artificial intelligence (AI) computing moving forward. Indeed, Research and Markets recently published a report indicating that North American AI will be worth $42.3 billion by 2024.

Since the firm is positioned as a leading supplier of components for context-aware systems, it should be able to realize its ambition of capitalizing that market. Though NVIDIA as a whole will likely not grow again until mid-2020, its second-quarter rally suggests that things are finally getting better.