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Nvidia (NVDA) earnings Q2 2023

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Nvidia reported second quarter earnings that missed Wall Street expectations for revenue and earnings per share.

The report is in keeping with Nvidia’s preliminary earnings two weeks ago. The chipmaker warned that it could miss Wall Street estimates and that growth had slowed significantly due to disappointing gaming sales driven by macroeconomic conditions. It also warned its gross margin would drop.

Nvidia missed on revenue but Refinitiv estimates didn’t change after the corporate warned on guidance and said it expected to report $6.7 billion within the quarter. Nvidia stock fell over 4% in prolonged trading.

Here’s how Nvidia did versus Refinitiv consensus estimates:

  • EPS: $0.51, adjusted, versus $1.26 expected
  • Revenue: $6.7 billion versus $8.10 billion expected

The chipmaker said it expected $5.9 billion in sales in its fiscal third quarter, versus Refinitiv consensus estimates of $6.95 billion.

Nvidia’s gaming department revenue was down 33% year-over-year to $2.04 billion, which was a sharper decline than the corporate anticipated. Nvidia said that the miss was due to lower sales of its gaming products, that are primarily graphics cards for PCs.

“Macroeconomic headwinds the world over drove a sudden slowdown in consumer demand” for the corporate’s gaming products, Nvidia CFO Colette Kress said on a call with analysts.

Nvidia said it could adjust prices with its retailers to handle “difficult market conditions” for the industry that it said it expected to persist through the present quarter.

The corporate’s data center business did barely higher. It rose 61% on an annual basis to $3.8 billion, driven by what the corporate calls “hyperscale” customers, that are big cloud providers.

Nvidia also has a couple of smaller lines of business. Its skilled visualization business, which sells graphics chips for enterprise uses, declined 4% annually to $496 million. Automotive stays small, even though it increased 45% year-over-year to $220 million. Nvidia said that revenue from its dedicated cryptocurrency mining chips, CMP, was “nominal,” contributing to a 66% annual decrease in its OEM and other category.

Nvidia stock is down over 42% to this point for the reason that starting of the 12 months. It had been a pandemic darling, rising heavily as work-from-home prompted purchases of graphics cards and server chips, supercharging Nvidia’s business and driving 61% revenue growth in fiscal 2022.

In May, Nvidia said it could slow its pace of hiring within the face of macroeconomic challenges.

Limited visibility into cryptocurrency mining demand

Nvidia’s success previously two years has been largely attributed to the standard of its latest generation of graphics cards, which were in hot demand for PC gaming in the course of the pandemic.

But questions remain about whether Nvidia’s growth was partially driven by cryptocurrency miners, who like Nvidia’s graphics cards because they’re efficient at mining Ethereum.

In May, Nvidia said it could pay $5.5 million as a part of a settlement with the SEC about the way it informed investors about how cryptocurrency was stoking demand for its graphics cards in 2017. Since then, Nvidia has said it doesn’t have visibility into how much cryptocurrency affects the demand for its products, whilst cryptocurrency prices have plunged this 12 months.

“Volatility within the cryptocurrency market – equivalent to declines in cryptocurrency prices or changes in approach to verifying transactions, including proof of labor or proof of stake – has previously impacted, and might in the long run impact, demand for our products and our ability to accurately estimate it,” CFO Kress said in an announcement.

“We’re unable to accurately quantify the extent to which reduced cryptocurrency mining contributed to the decline in Gaming demand,” Kress continued.

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