Fiscal 1Q18 revenue estimates
For fiscal 1Q18, Nvidia (NVDA) expects its revenue to decline 12% quarter-over-quarter to around $1.9 billion. This sequential decline would be higher than the 7% sequential decline it reported in fiscal 1Q17. However, if we remove the effect of seasonality, the $1.9 billion revenue equates to a YoY (year-over-year) growth of 46%, indicating that the company’s overall growth is strong.
However, the YoY growth rate is expected to slow in fiscal 2018 as competition picks up in Nvidia’s key growth markets of gaming, data center, and automotive.
Nvidia’s gaming revenue rose 66% YoY in fiscal 4Q17 driven by strong demand from emerging markets, increasing popularity of e-sports, and the growing adoption of virtual reality. The company commands a 70% share in the discrete GPU (graphics processing unit) market and is the dominant player in the high-end GPU market.
However, Advanced Micro Devices (AMD) is making a comeback in the high-end market with its Vega GPU. It would price its GPU competitively as it looks to regain its lost share in the GPU market. This would force Nvidia to reduce its prices. The first signs were already visible as Nvidia launched its GeForce GTX 1080 Titan card for a price of $699 instead of $1,200. This should slow down Nvidia’s growth in gaming revenue in fiscal 2018.
Nvidia’s Data Center segment was the main highlight, reporting 205% YoY growth in revenue in fiscal 4Q17. This growth was driven by the increasing adoption of its GPUs by cloud companies and enterprises for their AI (artificial intelligence) workload. Nvidia had a first-mover advantage in this space.
But competition has been growing as AMD plans to launch its AI chips under the Radeon Instinct brand later in the year, and as Intel (INTC) brings its Xeon-Phi chips built on the Nervana platform. Although Nvidia’s data center segment may not be able to replicate the twofold growth, it could still report double-digit growth in fiscal 2018.
Nvidia’s automotive revenue rose 38% YoY in fiscal 4Q17, and this segment will likely continue to grow at a higher rate, even though the competition is growing, because Nvidia’s technology is way ahead of its competitors. Notably, Intel has now acquired Mobileye (MBLY), a leader in the ADAS (advanced driver assistance systems) market with 70% share, for $15.3 billion.
Next, we’ll see how these growth opportunities could fare for Nvidia’s profits.