On Thursday after the close, Nvidia (NASDAQ:NVDA) reported its second-quarter earnings results. NVDA stock fell about 5% after issuing the report, despite beating earnings and revenue estimates. Those losses were pared back to about 2% before the open.
Earnings of $1.76 per share came in 10 cents per share above expectations and grew 91% year-over-year (YoY). Revenue grew nearly 40% to $3.12 billion and slightly edged out analysts’ expectations.
A little luster has worn off for Nvidia, though. While the company did beat on estimates, the beats were not nearly as strong as they have been.
For instance, the average revenue beat over the previous four quarters was $272.5 million. This quarter? Just $20 million. On the earnings front, Nvidia has averaged a beat of 38 cents per share or 24%. This quarter was just 10 cents per share or 6% ahead of expectations.
Further, both revenue and earnings decline sequentially, when it earned $2.05 per share on $3.21 billion in Q1.
Nvidia Earnings
Investors are taking away two big things from Nvidia’s quarter: the impact of crypto and its guidance.
Starting with the latter, management forecasts Q3 revenue of roughly $3.19 billion to $3.32 billion (midpoint of $325 billion) and earnings of roughly $1.85 to $2.02 per share (midpoint of $1.93 per share). Consensus estimates stand at sales of $3.34 billion and earnings of $1.99 per share.
Now, management has a tendency to smash guidance, so maybe we’ll see that happen again this quarter. But considering how the company barely edged past expectations in Q2, I wouldn’t be so sure.
One cause of that slowdown could be crypto. Both Nvidia and Advanced Micro Devices (NASDAQ:AMD) have tried to downplay the impact crypto has had on their business, likely because it is such a volatile area to begin with.
For instance, its OEM and IP business generated revenue of $116 million, down 54% YoY and 70% sequentially on lower crypto demand. Analysts were looking for more than $187 million in sales for this division. From CFO Colette Kress on the conference call:
“Our revenue outlook had anticipated cryptocurrency-specific products declining to approximately $100 million, while actual crypto-specific product revenue was $18 million, and we now expect a negligible contribution going forward.”
Bottom Line on NVDA Stock
This company is not a crypto story; it’s not a bitcoin talking point or a ripple narrative. Yes, crypto has some impact on Nvidia, but it’s a fraction compared to its overall business.
In Kress’ words, Nvidia’s newly announced Turing GPU architecture is “the biggest leap in GPU architecture in over a decade.” In the company’s press release, Nvidia referred to it as being capable of providing “the Holy Grail of computer graphics.”
Gaming, its largest business with $1.8 billion in sales for the quarter, grew 52% YoY and 5% sequentially. Datacenter revenue soared 83% YoY and 8% sequentially to $760 million.
Does anyone still think the cloud is weak?
As if the results from Amazon (NASDAQ:AMZN), Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) and Microsoft (NASDAQ:MSFT) needed more confirmation.
Automotive revenue came in at a record of $161 million, up 13% YoY and 11% sequentially. From Kress, “we have created a scalable AI car platform that spans the entire range of automated and autonomous driving, from traffic jam pilots to level 5 robotaxis.”
The company’s partnership with Daimler and Bosch for an autonomous mobility service will be a long-term driver for this business. As Drive Pegasus and Drive Constellation begin to gain traction, this should be a long-term driver of revenue.
Admittedly, we’re not there yet, but automotive will give Nvidia a boost in a way not many people seem to expect.
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Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Kenwell is long NVDA.
