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Is This the End of NVIDIA’s Double-Digit Revenue Growth?

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Nov. 20 2020, Updated 4:59 p.m. ET

Is this the end of NVIDIA’s double-digit revenue growth?

NVIDIA’s (NVDA) fiscal 2019 third-quarter revenue guidance of $3.25 billion missed analysts’ estimate of $3.34 billion. Even with this weak guidance, the company’s fiscal 2019 third-quarter revenue of $3.18 billion missed analysts’ revised estimate of $3.24 billion and their original estimate by 4.8%.

Additionally, NVIDIA’s fiscal 2019 fourth-quarter revenue guidance of $2.7 billion missed analysts’ estimate by $700 million—it expects its gaming revenue to fall sequentially to $1.1 billion from $1.76 billion, reversing NVIDIA’s two-year trend of beating analysts’ estimate. Cryptocurrency was behind both revenue misses. These results suggest that either NVIDIA’s business is slowing faster than expected or analysts are overly optimistic.

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Impact of the crypto bubble on NVIDIA’s revenue

During NVIDIA’s fiscal 2019 third-quarter earnings call, CEO Jensen Huang stated that he expected the decline in crypto demand to reduce GPU (graphics processing unit) prices and increase sales from gamers who were unable to buy GPUs during the crypto boom. However, as retailers and wholesalers were reluctant to reduce GPU prices due to uncertainty about crypt-related demand, demand from gamers slowed, thereby freezing the market and increasing the channel inventory.

NVIDIA’s fiscal 2019 fourth-quarter revenue guidance missed analysts’ estimate by $700 million, which is close to its quarterly data center revenue of $790 million. The magnitude of the crypto bubble burst dwarfed NVIDIA’s combined YoY growth in its data center, automotive, and professional visualization revenue of $385 million in the third quarter of fiscal 2019. Rival Advanced Micro Devices (AMD) was also hit by the crypto bubble burst. Next, we’ll see why cryptocurrency, which accounted for just 10% of NVIDIA’s revenue, grew suddenly to unexpected levels in the fourth quarter of fiscal 2019.

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