19 Nov

Looking at NVIDIA’s Sluggish Revenue Growth

WRITTEN BY Sneha Nahata

NVIDIA’s revenue

NVIDIA (NVDA) reported weaker-than-expected revenue in the third quarter of fiscal 2019. Its revenue of $3.18 billion rose ~21% YoY (year-over-year) from $2.64 billion in the third quarter of fiscal 2018 and increased 2% sequentially from $3.12 billion in the second quarter of fiscal 2019.

However, its revenue was below its revenue expectation of $3.25 billion and analysts’ estimate of $3.24 billion. Meanwhile, rival Advanced Micro Devices’ (AMD) revenue rose 4.4% YoY due to computing and graphics segment revenue, and Intel’s (INTC) revenue rose 19% YoY to $19.2 billion in the third quarter.

Looking at NVIDIA’s Sluggish Revenue Growth

Fall in demand from cryptocurrency miners

NVIDIA, a maker of graphics chips for gaming and AI, has been reporting double-digit revenue growth for the past 13 quarters. It earns more than 85% of its revenue from four platforms: gaming, data centers, professional visualization, and automotive.

The company enjoyed high demand for graphics chips during the crypto market boom. However, recently, the company has witnessed a significant fall in demand for GPUs (graphics processing unit) related to cryptocurrency miners. NVIDIA’s revenue from personal computer makers also fell almost 40% in the quarter due to the lower demand for GPU products, which were mainly used in cryptocurrency mining.

Sales from gaming increased 13% YoY to $1.76 billion but fell from the previous quarter and missed the consensus estimate of $1.89 billion due to a drop in cryptocurrency mining demand. Meanwhile, the company’s CEO, Jensen Huang, believes that gaming demand is likely to improve this holiday season, as the prices of mid-range gaming chips have stabilized.

Fourth-quarter outlook

For the fourth quarter of fiscal 2019, NVIDIA expects its revenue to reach $2.70 billion plus or minus 2%, down from analysts’ expectation of $2.9 billion for the quarter due to the inventory pile-up of chips with distributors and retailers amid the end of cryptocurrency mining boom. Its revenue is expected to be ~7% lower than its revenue of $2.9 billion in the fourth quarter of fiscal 2018.

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