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Nvidia reported earnings for the third fiscal quarter ended October 30 amid a slowdown in PC and gaming sales as well as restrictions on what it can sell to China.
The Santa Clara, California-based company reported revenue for the third fiscal quarter of $5.93 billion, down 17% from a year ago and down 12% from the previous quarter.
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GAAP earnings per diluted share for the quarter were 27 cents, down 72% from a year ago and up 4% from the previous quarter. Non-GAAP earnings per diluted share were 58 cents, down 50% from a year ago and up 14% from the previous quarter.
A downturn started in the previous quarter. The previous quarter’s financial results for revenues met diminished expectations, which were set after Nvidia warned that its quarterly results would be weaker than expected.
The company’s business in game graphics and artificial intelligence (AI) chips saw huge growth in 2020 and 2021 during the pandemic, but now things are slowing down in gaming. In after-hours trading, Nvidia’s stock is up 1.7% to $161.65 a share.
Analysts expected revenue of $5.77 billion (compared to $7.1 billion a year ago) and earnings per share came in at 69 cents on a GAAP basis.
For the data center, analysts expected $3.7 billion versus $2.9 billion last year. And for gaming they expected $1.3 billion versus $3.22 billion last year.
Actual third-quarter revenue was $3.83 billion, up 31% from a year ago and up 1% from the previous quarter. Actual third-quarter revenue for gaming was $1.57 billion, down 51% from a year ago and down 23% from the previous quarter.
Nvidia began to struggle this summer as it warned investors on August 8 that the company was going to miss on its own expectations for the quarter as gaming sales weakened. Nvidia saw softness due to the war in Ukraine and a slowdown in China, with macroeconomic slowdowns around the world affecting consumer demand in a negative way.
The company said it is unable to determine what impact slipping demand for crypto mining had on the lower revenues, but that may have been a drag as well.
“We are quickly adapting to the macro environment, correcting inventory levels and paving the way for new products,” said Jensen Huang, founder and CEO of Nvidia, in a statement. “The ramp of our new platforms ― Ada Lovelace RTX graphics, Hopper AI computing, BlueField and Quantum networking, Orin for autonomous vehicles and robotics, and Omniverse ― is off to a great start and forms the foundation of our next phase of growth.”
He added, “Nvidia’s pioneering work in accelerated computing is more vital than ever. Limited by physics, general-purpose computing has slowed to a crawl, just as AI demands more computing. Accelerated computing lets companies achieve orders-of-magnitude increases in productivity while saving money and the environment.”
Huang said in the analyst call that we are in the beginning of the “era of generative AI,” meaning AI that can handle creative tasks such as automatically generating concept art, using applications such as Stable Diffusion. Huang also said that power efficiency and cost efficiency are more important than ever to applications. And he noted traditional scaling via Moore’s Law is getting harder and harder.
In an analyst call, chief financial officer Colette Kress said demand in China remained soft in FYQ3 and continues to be that way in the current fourth fiscal quarter. Today, Nvidia announced with Microsoft that it would build an Azure-based supercomputer with tens of thousands of A100 chips. Some product segments were solid in China, but desktop chips were “a bit soft,” Kress said.
Kress said the company has brought down a lot of inventory related to slumping demand for certain products, but it has also built up inventory for new products such as its 4090 graphics chips.
Huang said he does not believe that blockchain-related GPU purchases will be an important part of the company’s business going forward.
Nvidia’s outlook for the fourth fiscal quarter ending January 31 is as follows:
- Revenue is expected to be $6.00 billion, plus or minus 2%.
- GAAP and non-GAAP gross margins are expected to be 63.2% and 66.0%, respectively, plus or minus 50 basis points.
- GAAP and non-GAAP operating expenses are expected to be approximately $2.56 billion and $1.78 billion, respectively.
- GAAP and non-GAAP other income and expenses are expected to be an income of approximately $40 million, excluding gains and losses from non-affiliated investments.
- GAAP and non-GAAP tax rates are expected to be 9.0%, plus or minus 1%, excluding any discrete items.
Data center revenue
Third-quarter revenue was $3.83 billion, up 31% from a year ago and up 1% from the previous quarter.
Nvidia began shipping its H100 Tensor Core GPU based on the new Nvidia Hopper architecture in the quarter, with first systems available now.
Gaming and visualization
Third-quarter revenue was $1.57 billion, down 51% from a year ago and down 23% from the previous quarter.
In the quarter, Nvidia launched GeForce RTX 4090, the first Ada Lovelace architecture GPU for gamers and creators, which quickly sold out in many locations. Sales began today of the RTX 4080. Kress said Nvidia’s 4090 sold out quickly and the company is hustling to keep up with demand.
Third-quarter revenue for professional visualization was $200 million, down 65% from a year ago and down 60% from the previous quarter.
During the quarter, the company introduced Omniverse Cloud, the company’s first software- and infrastructure-as-a-service offering, with a comprehensive suite of cloud services for artists, developers and enterprise teams to access metaverse applications.
Automotive and embedded
Third-quarter revenue for automotive was $251 million, up 86% from a year ago and up 14% from the previous quarter.
During the quarter, Nvidia’s customers launched the all-electric Volvo EX90, powered by Nvidia Drive Orin and Xavier, and Polestar 3, the brand’s first SUV, which runs on the Nvidia Drive platform.
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