Nvidia Gives In-Line Forecast Helped by Data Center Demand

Ian King (Bloomberg) -- Nvidia Corp. gave a quarterly revenue forecast in line with analysts’ estimates, helped by a surge in spending on internet infrastructure and purchases of computer gaming gear.

Revenue will be about $3.65 billion in the fiscal second quarter, the Santa Clara, California-based company said Thursday in a statement. That compares with an average analyst estimate of $3.28 billion. The company’s prediction includes a “low-teens percentage” contribution to revenue from its acquisition of Mellanox Technologies, which some analysts hadn’t included in their forecasts.

Nvidia is the biggest maker of semiconductors that improve video-game play on computers. The company has parlayed that strength into a growing position in data centers, where its chips are well-suited to artificial intelligence work. Owners of data centers are buying more chips and other components to handle an increase in online activity spurred by a large chunk of the world’s population sheltering in place during the Covid-19 pandemic.

Revenue from gaming was $1.34 billion in the quarter. That was a gain of 27% from a year earlier but a decline of 10% from the prior period. Data center sales leapt 80% from the same quarter in 2019 and were up 18% from the fourth quarter, making it the only market to post sequential growth for Nvidia.

The company was hurt by supply constraints at the beginning of the quarter as Nvidia’s customers – personal computer and graphics card makers – had to close plants. Later in the quarter, shelter-in-place shuttered retail outlets -- which affected sales of gaming products -- Chief Financial Officer Collette Kress said in a statement published on the company’s website.

Related:Nvidia Unveils New Data Center Chips to Speed Pace of AI

Chief Executive Officer Jensen Huang recently unveiled new graphics chips and computers for AI processing in data centers. The products challenge Intel Corp.’s dominance in this area.

Gross margin, or the percentage of sales remaining after deducting the cost of production, will be about 66% in the current quarter, Nvidia also said.

The shares were little changed in extended trading following the report. Earlier, they closed at $351.01 in New York. The stock has surged 49% this year.

Beyond gaming and AI, Huang is targeting the market for self-driving vehicles, which require similar chip capabilities. Still, the majority of sales come from PC gaming, where Nvidia’s graphics chips create the most realistic experiences.

Profit in the fiscal first quarter was $917 million, or $1.47 a share, compared with $394 million, or 64 cents a year earlier. Revenue surged 39% to $3.08 billion and profit excluding certain costs was $1.80 a share in the period, which ended April 26, the company said. Analysts, on average, had predicted earnings of $1.69 a share on sales of $3 billion, according to data compiled by Bloomberg.

Related:How Cumulus Fits into Nvidia’s Data Center Play