Nvidia earnings fall short, Q3 forecast misses by $1 billion

Nvidia (NVDA) announced its fiscal Q2 earnings after the bell on Wednesday, missing on earnings per share and falling short on Q3 forecasts amid a slowdown in PC and gaming sales following the explosive growth the sectors saw in 2020 and 2021. Here are the most important numbers from the report compared to what analysts were expecting.

Revenue: $6.7 billion versus $6.7 billion expected
Adj. EPS: $0.51 versus $0.53 expected
Data Center: $3.8 billion versus $3.8 billion expected
Gaming: $2.0 billion versus $2.0 billion expected

Net income for the company fell 72% year-over-year to $656 million. Shares of Nvidia were down more than 2% following the announcement.

Nvidia also announced Q3 revenue projections that fell short of expectations, saying it will bring in $5.9 billion in the quarter. Wall Street was looking for $6.9 billion.

“We are navigating our supply chain transitions in a challenging macro environment and we will get through this,” Nvidia founder and CEO Jensen Huang said in a statement.

Nvidia released its preliminary earnings on Aug. 8, warnings investors that the company was going to miss on its own expectations for the quarter as gaming sales continued to plummet.

According to the company’s numbers, gaming segment revenue dropped an eye-watering 33% year-over-year and 44% quarter-over-quarter. Fellow gaming companies including Microsoft (MSFT), Sony (SONY), Nintendo (NTDOY), and others have also reported a drop in game hardware spending.

SANTA CLARA, CALIFORNIA - MAY 25: A sign is posted at the Nvidia headquarters on May 25, 2022 in Santa Clara, California. Semiconductor maker Nvidia will report first quarter earnings today after the closing bell. (Photo by Justin Sullivan/Getty Images) — Nvidia will report its Q2 earnings amid falling game and PC sales. (Photo by Justin Sullivan/Getty Images)

It’s not just sales of individual graphics cards that are hurting Nvidia, though. The slowdown in PC sales is also slamming the company. In Q4 2020, PC shipments grew 26.1% year-over-year to 91.6 million units, according to IDC.

Since then, however, sales have fallen off considerably, with Gartner reporting a 12.6% decline in Q2 2022. Full-year PC sales are expected to decline by 9%.

While Nvidia’s gaming segment is taking a beating, the company said its data center business grew 61% in the quarter. The data center segment is Nvidia’s main growth engine, as companies increasingly turn to machine learning and artificial intelligence, they need high-powered chips that can handle multiple parallel processes with ease. And Nvidia’s graphics chips are a winner in that regard.

Still, chip stocks have been hammered during this year’s market selloff, with Nvidia falling as much as 41% year-to-date and competitors Intel (INTC) and AMD (AMD) dropping 35% and 34%, respectively. When they’ll turn the corner is still anyone’s guess.

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