Why NVIDIA’s Revised Q4 2019 Guidance Shocked Investors

NVIDIA’s revenue guidance for Q4 2019

Previously, we saw that NVIDIA (NVDA) lowered its revenue guidance for the fourth quarter of fiscal 2019 by $500 million, or 18.5%, to $2.2 billion from $2.7 billion. At a time when most semiconductor companies are reporting revenue misses and lowering their guidance for the December 2018 quarter, NVIDIA’s lowered guidance was expected.

Why NVIDIA’s Revised Q4 2019 Guidance Shocked Investors

But what shocked investors was the magnitude of the revenue decline on an already lowered guidance of $2.7 billion, which represented a YoY decline of 7.2%. The $2.7 billion guidance was NVIDIA’s first YoY decline since 2013 and included the impact of the crypto bubble burst, which halted crypto-related GPU (graphics processing unit) sales and created excess inventory of mid-range GPUs in the channel. The $2.7 billion guidance excluded sales of mid-range Pascal GPUs (graphics processing units), as the company stalled its shipments to allow the channel to clear the inventory.

In an interview with VentureBeat on January 14, NVIDIA’s CEO, Jensen Huang, stated that all channel inventory of its Pascal-based GeForce GPUs is almost sold out. On the other hand, rival Advanced Micro Devices (AMD) might take more time to sell the excess inventory.

NVIDIA back to pre-crypto level

NVIDIA has finally gotten over the good, bad, and ugly of the crypto wave and returned to pre-crypto levels. But it is now faced with gaming and data center headwinds created by a weak macroeconomic environment in China and some company-specific factors. These headwinds are reflected in its revised revenue guidance of $2.2 billion, which represents a YoY decline of 24.4% and a sequential decline of 31%. We’ll look into the gaming headwinds next.

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