Nvidia Corp (NVDA) forecast revenue above expectations for the current quarter, buoyed by tablets and other gadgets using its mobile processors as the chipmaker diversifies away from personal computers.
With PC sales suffering from economic uncertainty and a growing consumer preference for tablets, Nvidia has staked its future on leveraging its graphics expertise to make high-performance processors, branded Tegra, for mobile devices. But it faces tough competition from the likes of Qualcomm Inc , Texas Instruments Inc and Samsung Electronics Co Ltd.
Nvidia won spots for its Tegra chips in two of the highest-profile tablets to be launched in 2012.
In June, Microsoft unveiled its Surface tablet using Nvidia's Tegra chip, while Google Inc launched its Nexus 7 tablet, which also uses Tegra 3 and has had strong sales.
The devices mark Microsoft's and Google's first forays into a tablet market dominated by Apple Inc's iPad.
"Going forward, the key focus is going to be Tegra, Tegra, Tegra," said Evercore analyst Patrick Wang. "I think it would be hard to argue that there's significant organic growth left in the discrete graphics market."
Consumer products revenue, the bulk of which comes from the Tegra business, leapt 35.5 percent in the second quarter from the first, more than double the growth of Nvidia's traditional graphics unit division.
Consumer products accounted for more than 17 percent of total revenue in the quarter, up from 14 percent in the first quarter.
As PCs lose popularity with consumers, those computers are increasingly being manufactured without separate graphics chips like the ones Nvidia designs.
The recent Nexus and Surface announcements follow some earlier disappointments for the company, including Samsung's reliance on its own chips instead of Nvidia's.
Nvidia posted second-quarter revenue of $1.044 billion, up from $1.016 billion in the year-ago quarter. It estimated current-quarter revenue of $1.15 billion to $1.25 billion.
Analysts on average were expecting revenue of $1.007 billion in the second quarter and $1.093 billion in the third quarter, according to Thomson Reuters I/B/E/S.
The maker of processors for personal computers and mobile devices said second-quarter GAAP net income was $119 million, or 19 cents a share, compared to $152 million, or 25 cents a share, in the same quarter last year.
It had non-GAAP earnings of 27 cents per share in the second quarter.
Santa Clara, California-based Nvidia's shares rose 4.75 percent in extended trading after closing up 3.37 percent at $14.71 on Nasdaq.