Nvidia Beat on Revenue and Profits with Datacenters Booming, but Provided Weak Guidance

Nvidia (NVDA) released its highly focused quarterly results yesterday: Q1 Non-GAAP EPS of $1.36 beat by $0.07. Revenue of $8.28 billion (+46.3% YoY) beat by $190 million. Revenue didn’t grow in all segments, but overall demand remained high. The Company posted record quarterly revenue for Data Center and Gaming. On May 23, 2022, the board of directors increased and extended the company’s share repurchase program to acquire additional common stock up to a total of $15 billion through December 2023.

Video game market revenue was $3.62 billion (+31% YoY) and data center revenue was $3.75 billion (+83% YoY). The automotive segment generated $138 million in revenue, but this was 10% less than in the same period last year. For the second time in history, the revenues of the data center segment overtook the gaming segment.

Comment from Jensen Huang, President and CEO of NVIDIA:

“We achieved record results across the datacenter and gaming divisions in a challenging macro environment. The power of deep learning to automate artificial intelligence (AI) is driving companies across industries to use NVIDIA for AI computing. The data center was our largest platform, even as the gaming segment hit records this quarter."

“We are preparing for the biggest wave of new products in our history with new GPUs, CPUs, DPUs in the second half of the year. Our new chips and systems will significantly improve AI, graphics, self-driving cars and robotics, as well as the industries affected by these technologies.”

However, shares shed over 5% in the extended session – reportedly, due to weak guidance. NVIDIA’s Q2 of fiscal 2023 outlook is as follows:

Revenue is expected to be approximately $8.10 billion, down from $8.44 billion consensus. That included an estimated loss of approximately $500 million relating to Russia and the Covid lockdowns in China. GAAP and non-GAAP gross margins are expected to be 65.1% and 67.1%, respectively. GAAP and non-GAAP operating expenses are expected to be approximately $2.46 billion and $1.75 billion, respectively.

CONCLUSION

Higher results and growth rates of the data centers are very encouraging, while the gaming direction is vague. The company is betting on expansion in a segment where there is huge demand and taking advantage of it. The long-term outlook for NVIDIA shares remains moderately positive. The main medium-term risks are the inflation, continuation of Russia-Ukraine related impairment and restrictions in China. This year, new products of the company are expected, which will strengthen its position in the market. Most analysts retain their buy recommendations, 7 adhere to holding the stock and only 1 will sell. Targets range from $160-$400, with an average of $306.7.