NVIDIA’s earnings beat estimates

NVIDIA’s (NVDA) stock rose as much as 7.4% in the May 16 after-hours trading session after it reported its fiscal 2020 first-quarter earnings ended April 28, 2019. NVIDIA is the world leader in discrete graphics cards used in PCs and video games, data centers, and automotive. The company’s earnings bottomed out in the fourth quarter of fiscal 2019 as it grappled with excess inventory created by the end of crypto-related GPU (graphics processing unit) demand, a slowdown in data center spending because of weak demand in China, and slow uptake of its new Turing GPUs.

NVIDIA’s Q1 Earnings Beat Estimates on Gaming Strength

NVIDIA’s fiscal 2020 first-quarter earnings highlights

NVIDIA’s YoY figures remain weak as the current year hasn’t had the crypto-related demand that brought windfall gains last year. Moreover, the demand from core markets of gaming and data center are also weak amid the United States-China trade war. However, the company is reporting sequential growth, indicating that the excess GPU inventory is clearing and demand is gradually increasing.

Revenue

In the first quarter of fiscal 2020, NVIDIA’s revenue rose 1% sequentially but fell 31% YoY to $2.22 billion, beating analysts’ estimate of $2.20 billion. The sequential growth was driven by 11% growth in NVIDIA’s gaming revenue as the launch of cheaper variants of Turing GPU and strong demand for gaming laptops more than offset weak demand for Nintendo Switch processors. NVIDIA’s data center revenue declined 7% sequentially due to a slowdown in demand from cloud and enterprise customers. Server processor leader Intel also reported a 19% sequential decline in data center revenue for the same quarter.

Profits

NVIDIA’s profits rose faster than revenue on a sequential basis in the first quarter of fiscal 2020 driven by a higher mix of Turing-based GPUs, which improved its ASP (average selling price). Better ASP improved NVIDIA’s non-GAAP (generally accepted accounting principles) gross margin by 300 basis points sequentially to 59%. Higher gross margin also improved operating margin by 340 basis points sequentially to 25.1%. Its non-GAAP EPS rose 10% sequentially to $0.88, beating analysts’ estimate of $0.81.

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