Data Center Slowdown Blurs NVIDIA’s Full-Year 2020 Guidance

NVIDIA doesn’t provide full-year fiscal 2020 guidance

NVIDIA’s (NVDA) fiscal 2020 first-quarter revenue and earnings fell significantly on a YoY basis due to the absence of crypto-related sales and weak data center demand. The same factors pushed the company’s earnings down to a two-year low in the fourth quarter of fiscal 2019. At that time, the company guided full-year fiscal 2020 revenue to remain flat or fall owing to weakening demand in China’s gaming and data center markets. The guidance assumed that demand would pick up in the second half and mitigate the declines in the first half.

Data Center Slowdown Blurs NVIDIA’s Full-Year 2020 Guidance

However, NVIDIA’s chief financial officer, Colette Kress, in its fiscal 2020 first-quarter earnings call stated that the company is no longer giving full-year fiscal 2020 guidance, as the slowdown in data center spending has created demand uncertainty. NVIDIA is following Intel’s footsteps, as Intel lowered its full-year 2019 revenue guidance by $2.5 billion to $69 billion, down 2.5% YoY, owing to slowing data center demand. NVIDIA’s move comes as its second-quarter guidance is lower than what it anticipated at the start of the year.

NVIDIA’s fiscal 2020 second-quarter guidance

For the second quarter of fiscal 2020, NVIDIA expects revenue to rise 15% sequentially but fall 18% YoY to $2.55 billion, beating analysts’ estimate of $2.54 billion. The company expects revenue to grow sequentially in all quarters of fiscal 2020 as demand for its Turing-based gaming GPUs picks up with the growing adoption of ray tracing. Nvidia CEO Jensen Huang is optimistic about China’s gaming market.

However, data center demand is falling. NVIDIA’s data center revenue fell 6.6% sequentially in the first quarter of fiscal 2020 after falling 14% in the previous quarter. Even Intel’s data center revenue fell 19% in the March 2019 quarter and 1.1% in the previous quarter. The decline comes as data centers absorb the excess capacity they built in the first three quarters of 2018 due to fears of the United States-China trade war.

There are fears that the trade war could impact regulatory approval for NVIDIA’s acquisition of networking firm Mellanox Technologies. Last year, the trade war delayed China’s approval for the Qualcomm-NXP Semiconductors acquisition, which resulted in the cancellation of the deal. But NVIDIA expects to close the Mellanox deal by the end of the year.

Check out all the data we have added to our quote pages. Now you can get a valuation snapshot, earnings and revenue estimates, and historical data as well as dividend info. Take a look!