Nvidia earnings beat expectations, its data center business is bigger than its gaming business for the first time ever

Jen-Hsun Huang, president and chief executive officer of Nvidia Corp., speaks during the company’s event at Mobile World Congress Americas in Los Angeles on Oct. 21, 2019.

Patrick T. Fallon | Bloomberg | Getty Images

Shares of graphics card maker Nvidia fell slightly in extended trading on Wednesday after the company reported better-than-expected fiscal second-quarter earnings and quarterly revenue guidance.

Here’s how the company did:

  • Earnings: $2.18 per share, adjusted, vs. $1.97 per share as expected by analysts, according to Refinitiv. 
  • Revenue: $3.87 billion, vs. $3.65 billion as expected by analysts, according to Refinitiv.

Overall revenue rose 50% on an annualized basis in the quarter which ended on July 26, according to a statement. Revenue grew 39% in the prior quarter.

The company’s gaming business produced $1.65 billion in revenue, up 26% year over year and above the $1.41 billion consensus estimate among analysts surveyed by FactSet. Even as people spent more time playing games during the coronavirus pandemic, Nvidia ended up with more data center revenue than gaming revenue for the first time, at $1.75 billion. The unit’s revenue was up 167% and higher than the FactSet consensus estimate of $1.71 billion.

This follows the milestone of $1 billion in revenue in the fiscal first quarter for the data center business, which includes sales of graphics processing units that power artificial intelligence workloads for business use. The company is growing that business as it decreases its reliance on the video-game market and continues to supply products to cloud providers such as Amazon, and through acquisitions.

The data center business includes a contribution from Mellanox, a company that makes ethernet switches and other networking hardware. Nvidia closed its $7.13 billion acquisition of Mellanox in the quarter, the largest deal in Nvidia’s 27-year history. Mellanox contributed 14% of Nvidia’s overall revenue in the fiscal second quarter. 

Also in the quarter Nvidia said it had begun “full production” of the first graphics card based on its Ampere architecture, the A100 for data center use. Ampere gaming cards will come later; Nvidia will host a virtual event for its GeForce gaming brand on Sept. 1.

Two smaller parts of Nvidia, professional visualization and automotive, declined during the quarter as the pandemic impacted business. Corporate customers put off purchases of workstations, and vehicle production was lower than usual, Nvidia said.

“Sales were hurt by lower enterprise demand and the closure of many offices around the world,” Colette Kress, Nvidia’s finance chief, said on a conference call with analysts. “Industries negatively impacted during the quarter include automotive, architectural engineering and construction, manufacturing, media and entertainment, and oil and gas.”

Nvidia called for $4.40 billion in revenue in the fiscal third quarter, which would work out to 46% growth at the middle of the range. Analysts polled by Refinitiv had expected $3.97 billion in revenue for the quarter.

Nvidia shares are up 106% since the start of the year, while the S&P 500 index is up 4%. 

This is breaking news. Please check back for updates.

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