Nvidia
Of course, Nvidia was one of the big winners of the post-pandemic economy as it supplied chips for a number of categories with explosive growth such as AI, cryptocurrencies, gaming, cloud computing, etc. And, there were many unique, unsustainable factors like the bubble in crypto, the launch of new consoles, and the pandemic which forced many companies to bolster their cloud infrastructure. Now, like so many tech companies, it's dealing with a bust as all these trends are slowing or reversing to some degree.
Inside the Numbers
In Q2, Nvidia reported $0.51 in earnings per share which badly missed analysts' expectations of $1.26 per share. Revenue also missed at $6.7 billion vs $8.1 billion expected. Compared to last year, this was a decline of 72% in EPS and a 3% increase in revenue. In last year's Q2, revenue was up 61%.
The company also fell short of analysts' expectations for Q3 as it sees $5.9 billion in revenue while the consensus was for $7 billion.
The biggest factor in its poor performance was a 33% decline in gaming revenue. It said that macroeconomic issues led to lower sales of graphic cards. One factor is certainly that so much demand was pulled forward during the pandemic, stimulus, and console launches.
However, Nvidia's data center unit continued to outperform as it saw revenue increase by 61% due to strong demand from cloud providers. Automotive revenue also was up 45% albeit from a much smaller base. It also noted that cryptocurrency revenue was down 66% which isn't too surprising given the sea change in sentiment.
Nvidia stock is down over 42% so far since the beginning of the year. It had been a pandemic darling, rising heavily as work-from-home prompted purchases of graphics cards and server chips, supercharging Nvidia's business and driving 61% revenue growth in fiscal 2022.
In addition to slowing revenues, Nvidia faces another challenge in terms of margin compression. To address, this the company is slowing its hiring plans and also looking to cut costs in other areas.
