NVIDIA Q2 FY 2020 Earnings Report: Continuing Crypto Disruption

NVIDIA Q2 FY 2020 Earnings Report: Continuing Crypto Disruption 1

Today NVIDIA announced their earnings for the second quarter of their 2020 fiscal year, which ended on July 28. NVIDIA made tremendous gains during the cryptocurrency boom, and as we saw in Q1, the company has had to deal with the loss of the crypto sales which contributed a lot of revenue to their bottom line in the last year or two. Revenue for Q2 2020 came in at $2.579 billion, which is down 17% from a year ago, and while gross margin was also down 350 bps, it was still a healthy 59.8%. Operating income for the quarter was down 51% to $571 million, and net income was down 50% to $552 million. This resulted in earnings-per-share coming in at $0.90, down 49% from a year ago.

NVIDIA Q2 2020 Financial Results (GAAP)
  Q2’2020 Q1’2020 Q2’2019 Q/Q Y/Y
Revenue $2579M $2220M $3123M +16% -17%
Gross Margin 59.8% 58.4% 63.3% +1.4% -3.5%
Operating Income $571M $358M $1157M +59% -51%
Net Income $552M $394M $1101M +40% -50%
EPS $0.90 $0.64 $1.76 +41% -49%

Over the last couple of years, NVIDIA has diversified its portfolio, but even so, Gaming continues to be the largest revenue generator at NVIDIA, and by a wide margin. Despite gaming revenue dropping nearly $500 million from a year ago, gaming still accounts for over 50% of NVIDIA’s total revenue. For Q2, gaming brought in $1.313 billion, down from $1.805 billion a year ago. It’s a big drop, but NVIDIA did make gains over Q1 where the drop was 39% year-over-year, compared to the current quarter which had a 27% drop year-over-year. NVIDIA stated that gaming desktop GPU sales fell, which isn’t a surprise considering the crypto craze a year ago, but sales were partially offset by increased notebook GPU sales.

Professional Visualization, which is NVIDIA’s Quadro lineup, had revenue of $291 million for the quarter, which is up 4% from a year ago. As with the gaming segment, increased sales of notebook versions of Quadro were the reason for the increase.

Data Center also had a drop, with revenues coming in at $655 million, which is down 14% from a year ago. NVIDIA saw a large jump in data center GPU sales for AI over the last couple of years, but that growth has stagnated and now regressed. NVIDIA attributes the drop to lower hyperscale revenue, and NVIDIA has started to see some fierce competition in the hyperscale space with companies even creating their own custom silicon for specific workloads. It’ll be interesting to see how NVIDIA responds.

Automotive, which is the market NVIDIA moved their Tegra processor into when they dropped their mobile efforts, continues to do well. Revenue for automotive was a record $209 million, up 30% from a year ago. NVIDIA has made a lot of gains in AI cockpit solutions and autonomous driving solutions, and attributes the revenue gain to a development services agreement they signed in this quarter.

Finally, OEM and Other revenue was $111 million, down 4% from a year ago.

NVIDIA Quarterly Revenue Comparison (GAAP)
($ in millions)
In millions Q2’2020 Q1’2020 Q2’2019 Q/Q Y/Y
Gaming $1313 $1055 $1805 +24% -27%
Professional Visualization $291 $266 $281 +9% +4%
Datacenter $655 $634 $760 +3% -14%
Automotive $209 $166 $161 +26% +30%
OEM & IP $111 $99 $116 +12% -4%

Looking ahead to Q3, NVIDIA is expecting revenues around $2.9 billion, plus or minus 2%. Q3 FY 2019 NVIDIA had revenues of $3.2 billion, so NVIDIA is still expecting to be below those numbers, but edging closer to where they were a year ago.

Source: NVIDIA Investor Relations

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