NAGA : Nvidia Reported Q2 Earnings That Missed Wall Street Expectations

Nvidia ($NVDA.re) reported earnings for the 2nd quarter ended June 30, 2022. According to the published data, the company's profit and income did not meet the expectations of Wall Street. This had a negative impact on the company's stock price. However, experts argue that this could be a temporary phenomenon.

Here are the main figures of the earnings report:

• Earnings Per Share (EPS): $0.51, adjusted, versus $1.26 expected
• Revenue: $6.7 billion versus $8.10 billion expected.

Nvidia's gaming department revenue was down 33%

The manufacturer of chips, video cards and other products reported a significant decrease in EPS and income. The actual figures for Q2 turned out to be much worse than forecasted. For example, Earnings Per Share turned out to be lower by more than 50% than expected. This caused a strong reaction among shareholders, forcing the company's management to provide justified comments.

At the same time, Nvidia's gaming department revenue was down 33% year-over-year to $2.04 billion, which was a sharper decline than the company anticipated. Nvidia said that the miss was because of lower sales of its gaming products, which are primarily graphics cards for PCs.

"Macroeconomic headwinds across the world drove a sudden slowdown in consumer demand" for the company's gaming products, Nvidia CFO Colette Kress said on a call with analysts.

Nvidia said it would adjust prices with its retailers to address "challenging market conditions" for the industry that it said it expected to persist through the current quarter.

Nevertheless, one of the company's activities showed growth in quarterly and annual terms. Specifically, the company's data center business did slightly better. It rose 61% on an annual basis to $3.8 billion, driven by what the company calls "hyperscale" customers, which are big cloud providers. However, this is still not enough to cover the decline in demand for other brand products like chips and graphics cards.

What to expect from Nvidia shareholders

Nvidia daily stock chart, August 25, 2022.

Nvidia's stock is down over 42% so far since the beginning of the year. It had been a pandemic darling, rising heavily as work-from-home prompted purchases of graphics cards and server chips, supercharging Nvidia's business and driving 61% revenue growth in fiscal 2022.

However, after the acute phase of the pandemic ended, demand for video cards and chips declined sharply. In particular, due to the beginning of the cryptocurrency bear market, when the value of Bitcoin and altcoins decreased several times compared to the peak price in 2019.

The future outlook for Nvidia looks debatable. For example, crypto winter may take longer than predicted, and Ethereum's upcoming transition to PoS may further reduce demand for mining video cards. In addition, demand for video cards and chips may adjust amid the economic crisis and shortage of components for their production.

Based on these factors, Nvidia made a prediction about future financial performance. The chipmaker said it expected $5.9 billion in sales in its fiscal third quarter, versus Refinitiv consensus estimates of $6.95 billion.

At this stage, the company will take all possible steps to optimize costs and increase profits. However, the decline in key financial indicators may continue for some time, based on the current situation and forecasts.

Summary

• Nvidia reported second quarter earnings that missed Wall Street expectations for revenue and earnings per share.
• The disappointing report is in line with Nvidia's preliminary earnings reported two weeks ago.
• Nvidia said that the miss was because of lower sales of its gaming products, which are primarily graphics cards for PCs, which are facing "challenging market conditions."
• The company will take all possible steps to optimize costs and increase profits.

Important Notice: Any news, opinions, research, analyses, prices, or other information contained in this article are provided as general market commentary and do not constitute investment advice. The market commentary has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and therefore, it is not subject to any prohibition on dealing ahead of dissemination. Past performance is not an indication of possible future performance. Any action you take upon the information in this article is strictly at your own risk, and we will not be liable for any losses and damages in connection with the use of this article.

Risk Warning:​​ CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 84.69% of retail client investors lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.