Nvidia Underwhelms in First Results Since Scrapping Arm Deal

(Bloomberg) — Nvidia Corp., which walked away from a $40 billion acquisition of Arm Ltd. earlier this month, failed to impress investors with its latest forecast, a sign of the lofty expectations for the most valuable U.S. chipmaker.

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Though the company topped Wall Street estimates with its latest quarterly results Wednesday — and projected strong growth for the current period — the shares slipped as much as 5.3% in late trading.

The company’s adjusted gross margin, meanwhile, was 67% last quarter — just shy of the 67.1% analysts predicted.

Chief Executive Officer and co-founder Jensen Huang has turned a niche business — graphics cards for gamers — into a chip empire worth more than $600 billion. But investors have high hopes for the company, and even a record-setting quarter can leave them underwhelmed.

The company also is bouncing back from its failed attempt to acquire Arm, a deal that faced regulatory opposition around the world. It terminated the transaction on Feb. 8 and expects to write off $1.36 billion this quarter to account for prepayments it pledged to Arm’s owner, SoftBank Group Corp.

Even without Arm, Nvidia has been growing more quickly than projected. Revenue in the fiscal first quarter will be about $8.1 billion, the company said Wednesday. That compares with a $7.2 billion average analyst estimate, according to data compiled by Bloomberg.

The Santa Clara, California-based company has pushed into the booming field of artificial intelligence computing, where its processors are used to handle an ever-growing flood of data. That’s turned Nvidia’s products into essential equipment for data centers, rather than just gaming computers.

Nvidia posted sales of $7.64 billion in the fourth fiscal quarter, topping the $7.4 billion average prediction from analysts. Earnings came in at $1.32 a share, excluding some items, compared with an estimate of $1.22.