Nvidia (Nasdaq: NVDA) was 4% higher following a stellar Q2 earnings report which showed the company beating earnings and revenue expectations due to strong sales of its graphic cards to gamers. The one miss was cryptocurrency card sales missed forecasts.
Overall, Nvidia's stock has once again been a major outperformer. It's one of the leading tech stocks due to being the number one chipmaker for a variety of industries including graphics, gaming, and servers. Thus, the company benefits from the growth in industries like video games, cloud computing, AI, autonomous driving, cryptocurrency, etc. Interestingly, the company is also looking to move into CPU production as well.
Inside the Numbers
In Q2, Nvidia reported $1.04 in earnings per share, exceeding estimates of $1.01 per share. Revenue also topped expectations at $6.5 billion vs forecasts of $6.3 billion. This was a 68% increase from last year which follows an 84% jump in Q1.
The one downbeat note in the report was lower sales of its cryptocurrency chip product which had $266 million in sales, falling short of the company's forecast of $400 million. Likely this was due to the slowdown in the cryptocurrency complex as prices fell for the most part in Q2 leading to less demand from miners.
Its graphics segment grew 87% to $3.9 billion, while the Compute and network segment grew 46% to $2.6 billion.
For Q3, Nvidia forecast $6.8 billion in revenue which topped expectations of $6.5 billion. The company has a streak of beating expectations for 11 straight quarters. Since the start of the year, analysts have raised EPS estimates for 2021 and 2022 by about 30% each.
The company said that it continues to deal with supply issues which are leading to less than ideal production levels. As a result, the company's products have been constantly selling out with much higher prices on secondary markets. The company said that it expects these issues to drag on into the second half of the year.
Nvidia's automotive business generated $152 million in sales a 37% increase from last year. The company said this unit has been hampered by the coronavirus and production issues for automakers. Many are anticipating that this unit will contribute a greater share of revenue as automotive driving picks up.
Stock Price Outlook
Sometimes companies become so big that their fortunes become entwined with an entire industry. For example, Google (Nasdaq: GOOGL) basically grew in size as the entire Internet grew bigger. Nvidia is similar as its business is tied to a variety of industries where it has a leading position such as graphics and chips for servers.
Thus, Nvidia's stock is likely to continue moving higher despite its big gains in the short and long term. Therefore, investors should keep adding on weakness.