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What’s Different about NVIDIA’s Fiscal 2019 Third-Quarter Revenue?

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Factors influencing NVIDIA’s revenue 

NVIDIA (NVDA) stock fell more than 28% in two trading days after its fiscal 2019 third-quarter earnings didn’t impress investors. Revenue is a product of volume and ASP (average selling price). The company released its Turing-based GPUs (graphics processing units) during the third quarter of fiscal 2019, which boosted its ASP. However, the end of the crypto boom reduced its sales volume more than expected, causing the company’s revenue to fall short of expectations.

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NVIDIA’s fiscal 2019 third-quarter revenue

In the third quarter of fiscal 2019, NVIDIA’s revenue rose 21% YoY (year-over-year) and 2% sequentially to $3.18 billion, missing analysts’ estimate of $3.24 billion and touching the lower end of its $3.18 billion–$3.3 billion guidance. Its YoY third-quarter revenue growth slowed from 53.8% in fiscal 2017 to 32% in fiscal 2018 and 21% in fiscal 2019.

Because of an unexpected decline in gaming GPU revenue from crypto miners, even Advanced Micro Devices’ (AMD) third-quarter revenue of $1.65 billion missed analysts’ revenue estimate and its own guidance of $1.7 billion. However, this decline in GPU sales was partially offset by strong growth in CPUs (central processing units).

NVIDIA’s revenue by product

NVIDIA earns revenue by selling GPUs and Tegra processors. Its GPU revenue rose 25% YoY and 4% sequentially to $2.8 billion, driven by strong demand for professional visualization and data centers. However, its Tegra revenue fell 3% YoY and 13% sequentially to $407 million as sales of Tegra-powered Nintendo Switch game consoles slowed.

Gaming market

Both AMD and NVIDIA reported larger declines in gaming GPU revenue as crypto-related sales made up more of the gaming segment than they had estimated—users purchased gaming GPUs but used them for mining currency, making it difficult for the companies to estimate how much of their sales were related to cryptocurrency.

Both companies are now challenged with an excess of unsold midrange GPUs sitting in their channel inventory, which is impacting GPU prices and new GPU sales, and could affect their revenue in the next quarter. We’ll look at the fourth quarter’s revenue outlook next.

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