NVIDIA (NVDA 252.30, -5.14) is lower by 2.0% in pre-market, as the company's cautious guidance overshadows better than expected quarterly results.
The high-flying GPU manufacturer reported above-consensus second quarter earnings of $1.94 per share on a 40.0% year-over-year increase in revenue to $3.12 billion, which was just ahead of estimates.
Granted, NVIDIA's quarterly results lived up to expectations, but the company issued its first below-consensus guidance in almost three years. Our Story Stocks comment from August14 noted that the company is likely to see a slowdown in demand from cryptocurrency miners, but the somewhat cautious outlook also left the door open to questions about the availability of the next line of GeForce GTX graphics cards, which are responsible for the bulk of the company's revenue (57.8% during the second quarter).
The company acknowledged that it went into the second quarter expecting a $100 million contribution from sales to cryptocurrency miners, but the actual contribution was only $18 million. Going forward, the company no longer expects any contributions from this market.
During yesterday's conference call, Chief Executive Officer Jen-Hsun Huang touted the technological leap achieved in the recently-announced Turing-based GPUs for visual professionals. However, Mr. Huang did not give any indication about the expected availability of Turing-based GeForce video cards for the consumer market, other than telling attending analysts to ‘stay tuned.'
The company's last refresh of the GeForce GTX line took place in May 2016, meaning the company has lengthened its product cycle past the usual 18-24 months. It is typical for a product launch to cause a spike in demand (and revenue), but NVIDIA's guidance suggests the launch of the next line of GeForce cards may not happen in the third quarter, or happen late enough so there is no meaningful boost to revenue from new product sales.
Chief Executive Officer Jen-Hsun Huang remained wildly optimistic about the company's smaller segments like Professional Visualization (Q2 revenue +19.6% y/y to $281 mln), Datacenter (Q2 revenue +82.7% y/y to $760 mln), and Auto (Q2 revenue +13.4% y/y to $161 mln), but the market remains eager to hear when the company will be ready to unveil the next generation of GeForce GTX cards, which should sustain the strength of revenue growth in the company's main Gaming segment (Q2 revenue +52.2% y/y to $1.81 bln).