NVIDIA Inc. Expects Crypto-Related Sales to Crash in the Next Quarter
On Thursday night, graphics chip giant NVIDIA (NASDAQ: NVDA) reported first-quarter results. Plunging demand from the cryptocurrency mining sector notwithstanding, the company delivered solid growth across the board.
Here's a closer look at the first quarter of NVIDIA's fiscal year 2019.
NVIDIA's first-quarter results: The raw numbers
| Metric |
Q1 2018 |
Q1 2017 |
Year-Over-Year Change |
|---|---|---|---|
| Revenue |
$3.21 billion |
$1.94 billion |
66% |
| Net income |
$1.24 billion |
$507 million |
145% |
| GAAP earnings per share (diluted) |
$1.98 |
$0.79 |
151% |
What happened with NVIDIA this quarter?
- NVIDIA found comfortable year-over-year growth in nearly all its reportable segments and target markets. Tegra processors saw a 33% revenue boost, while the larger graphics processing unit (GPU) division roared 77% higher.
- Gaming sales rose 68% year over year, representing 54% of NVIDIA's total revenues. Data center revenues jumped 71% higher, and the OEM segment, which includes products specifically catering to cryptocurrency mining, surged 148% higher to land at $387 million ($289 million of that market's sales came from the crypto-specific products).
- One eye-catching laggard was found in the automotive computing market, where revenues rose just 4% higher. This segment is going through a phase of modest growth but large behind-the-scenes platform expansion. According to comments made by CFO Colette Kress on a conference call with Wall Street analysts, the company now has more than 370 companies and research institutions working with NVIDIA's autonomous driving platform. These projects should lead up to real sales of market-ready products in due time, but it's a waiting game for now.
What management had to say
Cryptocurrency demand spiked in the first quarter, to the point where NVIDIA is taking steps to shield the gaming market from crypto miners gobbling up all their graphics cards. That being said, those sales are coming back down again in a hurry, according to Kress:
Looking ahead
NVIDIA's management offered the following guidance targets for the second quarter:
- Top-line sales should land near $3.1 billion, roughly 40% above the year-ago period.
- GAAP gross margins are moving toward 63.3%, down from 64.5% in this first-quarter report, but up from 58.4% in last year's second quarter.
- On the bottom line, GAAP earnings are projected to continue their 151% year-over-year gains at approximately $1.98 per diluted share.
These targets include the plunging view of crypto-related sales but assume that the huge popularity of first-person shooters Fortnite and PlayerUnknown's Battlegrounds will stay strong. That sounds like a reasonable assumption.
Over the long run, NVIDIA sees its addressable data-center markets expanding from $30 billion in 2020 to at least $50 billion by the year 2023, driven by rising demand for artificial intelligence and data analysis tools.
Bitcoin is overhyped: 10 better buys for you nowWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and investing directly in Bitcoin was noticeably absent from their recommendations! That's right -- they think these 10 stocks are better buys.
{% render_component 'sa-returns-as-of' type='rg'%}
Anders Bylund has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Nvidia. The Motley Fool has a disclosure policy.