Preliminary second quarter revenue of $6.70 billion versus outlook of $8.10 billion.
Shortfall versus outlook primarily driven by weaker Gaming revenue
Management to discuss financial results and outlook on Aug. 24 earnings call
NVIDIA (NASDAQ: NVDA) today announced selected preliminary financial results for the second quarter ended July 31, 2022.
Second quarter revenue is expected to be approximately $6.70 billion, down 19% sequentially and up 3% from the prior year, primarily reflecting weaker than forecasted Gaming revenue. Gaming revenue was $2.04 billion, down 44% sequentially and down 33% from the prior year. Data Center revenue was $3.81 billion, up 1% sequentially and up 61% from the prior year.
The shortfall relative to the May revenue outlook of $8.10 billion was primarily attributable to lower sell-in of Gaming products reflecting a reduction in channel partner sales likely due to macroeconomic headwinds. In addition to reducing sell-in, the company implemented pricing programs with channel partners to reflect challenging market conditions that are expected to persist into the third quarter.
Data Center revenue, though a record, was somewhat short of the company's expectations, as it was impacted by supply chain disruptions.
Second quarter results are expected to include approximately $1.32 billion of charges, primarily for inventory and related reserves, based on revised expectations of future demand.
'Our gaming product sell-through projections declined significantly as the quarter progressed,' said Jensen Huang, founder and CEO of NVIDIA. 'As we expect the macroeconomic conditions affecting sell-through to continue, we took actions with our Gaming partners to adjust channel prices and inventory.
'NVIDIA has excellent products and position driving large and growing markets. As we navigate these challenges, we remain focused on the once-in-a-generation opportunity to reinvent computing for the era of AI,' he said.
'The significant charges incurred in the quarter reflect previous long-term purchase commitments we made during a time of severe component shortages and our current expectation of ongoing macroeconomic uncertainty,' said Colette Kress, EVP and CFO of NVIDIA.
'We believe our long-term gross margin profile is intact. We have slowed operating expense growth, balancing investments for long-term growth while managing near-term profitability. We plan to continue stock buybacks as we foresee strong cash generation and future growth,' she said.
Q2 FY23 Outlook1 Q2 FY23 Preliminary Results
Revenue $8.10 billion, plus or minus 2% $6.70 billion
Gross margin - GAAP
Gross margin - non-GAAP 65.1%, plus or minus 50 bps
67.1%, plus or minus 50 bps 43.7%, plus or minus 50 bps
46.1%, plus or minus 50 bps
Operating expenses - GAAP
Operating expenses - non-GAAP $2.46 billion
$1.75 billion $2.42 billion
GAAP and non-GAAP other income and expense $40 million expense $24 million and $16 million expense, respectively
GAAP and non-GAAP tax rate 12.5%, plus or minus 1%, excluding discrete items -35% GAAP (benefit) and 2% non-GAAP, including discrete items
1 Announced in May 2022 in connection with the company's press release announcing its financial results for first quarter fiscal 2023.
Revenue by Market Platform
($ in billions) Q2 FY23
Preliminary Results Q/Q Y/Y
Gaming $2.04 Down 44% Down 33%
Data Center 3.81 Up 1% Up 61%
Professional Visualization 0.50 Down 20% Down 4%
Automotive 0.22 Up 59% Up 45%
OEM and Other 0.13 Down 12% Down 66%
Total $6.70 Down 19% Up 3%
The preliminary results for the second quarter ended July 31, 2022, are an estimate, based on information available to management as of the date of this release, and are subject to further changes upon completion of the company's standard quarter and year-end closing procedures. This update does not present all necessary information for an understanding of NVIDIA's financial condition as of the date of this release, or its results of operations for the second quarter. As NVIDIA completes its quarter-end financial close process and finalizes its financial statements for the quarter, it will be required to make significant judgments in a number of areas. It is possible that NVIDIA may identify items that require it to make adjustments to the preliminary financial information set forth above and those changes could be material. NVIDIA does not intend to update such financial information prior to release of its final second quarter financial statement information, which is currently scheduled for Aug. 24, 2022.
Conference Call and Webcast Information
NVIDIA will host a conference call on Wednesday, Aug. 24, at 2 p.m. PT (5 p.m. ET), to discuss its financial results for the second quarter of fiscal year 2023.
The call will be webcast live (in listen-only mode) on investor.nvidia.com. The company's prepared remarks will be followed by a question-and-answer session, which will be limited to questions from financial analysts and institutional investors.
Ahead of the call, NVIDIA will provide written commentary on its second-quarter results from its CFO, Colette Kress. This material will be posted to investor.nvidia.com immediately after the company's results are publicly announced at approximately 1:20 p.m. PT.
The webcast will be recorded and available for replay until the company's conference call to discuss financial results for its third quarter of fiscal year 2023.
In addition to U.S. GAAP financial measures, this press release includes preliminary estimates of non-GAAP measures of certain components of financial performance. These preliminary estimates of non-GAAP measures include non-GAAP gross margin, operating expenses, other income and expense, and income tax expense.
These non-GAAP financial measures exclude stock-based compensation expense, acquisition-related and other costs, gains or losses from non-affiliated investments, interest expense related to amortization of debt discount and the associated tax impact of these items, where applicable.
A preliminary updated reconciliation of GAAP to non-GAAP gross margin, operating expenses, other income and expenses and tax rate is as follows:
Reconciliation of GAAP to non-GAAP Financial Measures
($ in millions) Q2 FY23
GAAP gross margin 43.7%
Stock-based compensation expense, acquisition-related costs, and other costs 2.4
Non-GAAP gross margin 46.1%
GAAP operating expenses $2,416
Stock-based compensation expense and acquisition-related costs (667)
Non-GAAP operating expenses $1,749
GAAP other expense, net $24
Losses from non-affiliated investments and other costs (8)
Non-GAAP other expense, net $16
GAAP tax rate (benefit) (35%)
Tax impact of non-GAAP adjustments 37
Non-GAAP tax rate 2%
NVIDIA believes the presentation of its non-GAAP financial measures enhances the user's overall understanding of the company's financial performance. The presentation of the company's non-GAAP financial measures is not meant to be considered in isolation or as a substitute for the company's financial results prepared in accordance with GAAP, and the company's non-GAAP measures may be different from non-GAAP measures used by other companies.