NVIDIA decided to grace a sluggish Monday night with unexpected revelations on fiscal second quarter results, admitting total revenue for the period is unlikely to top $6.7 billion versus $8.1 billion previously forecast, and revenue toward gaming will be fully capped at $2.04 billion, down 44% sequentially and down 33% year over year.
For NVIDIA, the release of preliminary quarterly results is an extraordinary event, and the reason for such extraordinary measures was the lowering of the forecast for gaming revenue for the financial quarter ended July 31. Corporate governance in the official’s text press release preferred to attribute all failures to “macroeconomic difficulties” that prevented NVIDIA partners from selling graphics cards accumulated in warehouses. As the unfavorable macroeconomic environment is expected to continue in the current quarter, the company has decided to adjust its pricing policy and stimulate the early sale of stocks of gaming graphics cards. According to the official statement, up to $1.32 billion had to be written off in the second quarter due to the current situation in the gaming market.
Such failures, according to the head and founder of NVIDIA Jensen Huang (Jensen Huang), do not negate the company’s willingness to serve growing promising market segments, such as artificial intelligence systems. NVIDIA CFO Colette Kress added that the significant writedowns in the second quarter were due to large upfront payments to the company’s suppliers, made during a period of severe semiconductor component shortages. In the near future, NVIDIA will need to focus on maintaining the company’s profitability by limiting operating expense growth. At the same time, Colette Kress promised not to refuse to buy back shares in the company, counting on maintaining stable sources of funds from NVIDIA.
The names of the columns in the table above shouldn’t confuse – in the NVIDIA financial calendar, the second quarter of fiscal 2023 ended at the end of July.
Previously, NVIDIA expected to keep the profit margin in the 65.1-67.1% range, depending on the calculation method, but the actual value of this indicator in the second quarter should be closer to 43.7 or 46.1%, depending on the method.
Other segments of NVIDIA’s activity partially compensated for the depressing dynamics in the gaming direction, but it must be understood that in the second quarter the latter brought the company almost a third of all revenues. The server segment took on the role of the main driver of overall revenue, bringing in $3.81 billion for the quarter, up 1% sequentially and up 61% year over year. The Professional Imaging Solutions division reduced revenue to $0.5 billion, down 20% sequentially and down 4% year-on-year. In the automotive segment, revenue rose to $0.22 billion (up 59% sequentially and 45% year over year), but in absolute terms, that’s still too small an amount to make a serious difference. Finally, its OEM business generated just $0.13 billion in revenue, down 12% sequentially and 66% year over year. In the same period last year, this revenue item was impacted by the delivery of specialized CMP accelerators for cryptocurrency mining, but in the first quarter of this year they almost disappeared.
Overall, NVIDIA’s second-quarter revenue is expected to fall 19% sequentially to $6.7 billion but grow 3% year over year. The final element of momentum is credit to the company’s predominant server business. NVIDIA promises to release a full quarterly report on August 24, at the same time it will be possible to talk in more detail about the factors that contributed to such a dynamic change in the company’s financial performance. NVIDIA shares opened today’s trading session down 8%, but at the time of writing, the difference from the previous session’s close was reduced to 4.5%.