Nvidia Corp (NVDA) has achieved multiple years of soaring revenue and profits, spurred significantly by its performance during the COVID-19 pandemic. The transition to remote work and online entertainment during the pandemic helped to boost demand for Nvidia’s gaming, and data center products during the last couple of years.
Currently, Nvidia says its focusing on leveraging its current momentum by investing in new products, like new chips, and tools for XR and Artificial Intelligence (AI).
While shares of Nvidia have outperformed the broader industry market in the last couple of years, the company has faced some issues with supply and demand. Investors considering purchasing Nvidia shares will be looking at the recently announced “Preliminary financial results” for the second fiscal quarter of 2023 for insights into continued growth.
Nvidia Revenue Growth Opportunities
In the first fiscal quarter of 2023, ending on May 1st, 2022, NVIDA reported a record revenue of $8.29 billion, an increase of 46% from the previous year, and 8% from the previous quarter. The company’s GAAP earnings per diluted share for the quarter were down 16% from a year ago, and 46% from the previous quarter however, as a result of the Arm acquisition termination charge.
For the second quarter, Investors one easymarkets will be looking to see whether Nvidia can maintain its revenue growth. Second quarter revenue is predicted to be around $6.7 billion according to the company, which would be a decrease of 19% from the first quarter, but an increase of 3% from the previous year. Nvidia notes this slightly reduced revenue is expected as a slightly weaker than forecasted gaming revenue.
The gaming revenue for the business was down by around $2.04 billion for this quarter, a 44% reduction from the previous quarter, and a 33% reduction from the prior year. Additionally, channel partner sales have reduced somewhat this quarter as a result of macroeconomic issues. Alongside reducing sell-in, the company also implemented new pricing programs with channel partners to reflect the market conditions which should persist into the third quarter.
Nvidia Data Center Revenue
Investors are also likely to be focused heavily on Nvidia’s data center revenue, as the segment represents a rapidly growing part of the business. Nvidia is responsible for creating a range of chips used by modern data centres, and demand for these chips has increased following the pandemic.
In the first quarter of 2023, data center revenue achieved a new record, and was expected to generate new opportunities with the arrival of the NVIDIA Spectrum 4 end-to-end networking platform. According to the preliminary Q2 report, data center revenue has fallen somewhat short of company expectations, as a result of supply chain issues.
The revenue for the data center products produced by Nvidia is expected to be around $2.81 billion, which is an increase of 1% from the previous quarter, but a massive boost of 61% from the previous year. The data center revenue for the brand surpassed the gaming revenue for the company for the first time and is expected to play a strong role in the growth of the company during the third quarter.
For the full year of 2023, analysts expect revenue from the data center business to expand by around 48.4%, to a value of $15.7 billion, eclipsing the $14.8 billion expected revenue for the gaming sector.
Other Points to Consider in the Preliminary Report
Overall, the revenue shared in the preliminary report for FY 2023 Q2 by Nvidia is slightly lower than the projected outlook, $6.7 billion compared to a projected $8.10 billion. The operating expenses of the company are largely aligned, at $2.42 billion compared to an outlook for $2.46 billion (GAAP).
The second quarter results are expected to include approximately $1.32 billion in charges, for inventory and related reserves, according to revised expectations of future demand.
According to Jensen Huang, the Founder and CEO of NVIDIA, the company’s gaming projections declined slightly as the quarter progressed as a result of macroeconomic conditions. As a result, the company is taking actions with Gaming partners to update channel prices and inventory.
The significant chargers incurred in this quarter are also reflective of the long-term purchase commitments made by the brand during component shortages and the expectations held about the macroeconomic uncertainties in the market.
Despite some issues, Nvidia believes its long-term profile for gross margin results will remain intact. Operating expense growth has been slowed to balance strategies for long-term development with near-term profitability issues. The company also plans to continue stock buybacks in the future, as they predict strong future growth and cash generation opportunities.
A conference call will be held by Nvidia on the 24th of August at 2pm PT to discuss the full financial results for the second quarter, and the call will be webcast live on the investor platform for the company (investor.nvidia.com). The company will also be hosting a question-and-answer session.