Nvidia Jumps on Sales Forecast Projecting Return to Growth

Ian King (Bloomberg) -- Nvidia Corp. predicted stronger fiscal 2020 sales than analysts had estimated, raising optimism the company can quickly return to growth when it clears a buildup of unused gaming chips. The stock rallied more than 7 percent in extended trading.

Revenue will be flat to down slightly in the fiscal year, the company said Thursday in a statement. Analysts, on average, estimated a 7 percent drop. The chipmaker also forecast a 20 percent decline in the current quarter, suggesting Nvidia sees a big boost in sales coming later in the year.

Chief Executive Officer Jensen Huang is trying to convince investors that the stall in the company’s sales is a short-lived trend and that the broader use of graphics chips in everything from cars to data centers will restore growth that has doubled the size of his company since 2016.

“This was a turbulent close to what had been a great year,” Huang said in the statement. “Despite this setback, Nvidia’s fundamental position and the markets we serve are strong. We fully expect to return to sustained growth.”

Nvidia’s run of consecutive revenue gains, stretching back to 2014, was broken in the reported quarter when sales of chips to cryptocurrency miners crashed as the digital-coin market plunged. The resulting excess inventory has been compounded by weaker demand from consumers and from operators of data centers, who had been increasingly using the chips for artificial intelligence computing.

Earlier, Nvidia shares rose 1.1 percent to close at $154.53 in New York. The stock has gained 16 percent this year.

The company projected sales of $2.2 billion, plus or minus 2 percent, in the fiscal first quarter. That compares with an average analyst estimate of $2.29 billion. Gross margin, or the percentage of sales remaining after deducting costs of production, will be 59 percent, the Santa Clara, California-based company said. Analysts projected 59 percent.

Nvidia, biggest maker of processors for computer graphics cards, last month warned that it hadn’t met its targets for the fiscal fourth quarter, citing weaker gamer demand and slower orders from data center operators. It predicted revenue of about $2.2 billion in the period, down from a previous forecast of about $2.7 billion.

Net income was $567 million, or 92 cents a share, in the quarter, compared with $1.1 billion, or $1.78 a share in the same period a year earlier. Revenue fell 24 percent to $2.205 billion, the first quarterly decline since 2014.