NVIDIA stock rose 9%
On February 14, NVIDIA (NVDA) stock rose as high as 9% in the after-hours session. The company expects strong growth in the second half of 2019. NVIDIA’s outlook was in line with Advanced Micro Devices (AMD) and Intel (INTC).
NVIDIA’s fourth-quarter earnings
On February 14, NVIDIA reported its fourth-quarter earnings. The fourth quarter ended on January 27. The company’s revenues fell 24% YoY (year-over-year) to $2.2 billion due to a 45% decline in gaming and a 36% decline in original equipment manufacturers and intellectual property. The revenues were in line with the company’s revised guidance. NVIDIA lowered its revenue guidance from $2.7 billion to $2.2 billion on January 28, which sent the stock down ~14%.
The 24% YoY decline came as the 2017–2018 cryptocurrency bubble distorted the gaming trend, which had been driving NVIDIA’s revenues. In the third quarter, NVIDIA reported that the mid-range Pascal GPU (graphics processing unit) inventory piled up. The demand from crypto miners vanished due to declining crypto prices.
NVIDIA’s CEO, Jensen Huang, in an interview with GamesBeat, stated that the company couldn’t launch its mid-range Turing-based RTX GPUs until the older mid-range Pascal GPU inventory was sold-off. To add to the trouble, the demand slowed in China (FXI). NVIDIA earns 20% of its revenues from China. During the fourth-quarter earnings call, Huang stated that the two factors mentioned above led to a “disappointing finish” to fiscal 2019.
However, NVIDIA’s fiscal 2018 revenues rose 21% YoY to $11.7 billion. The company’s gaming revenues rose 13% YoY. The gaming notebook business rose more than 50%.
NVIDIA also witnessed declining purchases from hyperscale and cloud customers, which slowed its data center revenue growth to 12% YoY in the fourth quarter, The data center revenue growth rose above 50% for the last three years. However, the company expects the demand weakness to be temporary.
Intel also reported a demand slowdown in the data center market. However, the company expects growth to pick up in the second half of the year. Next, we’ll discuss NVIDIA’s outlook for fiscal 2020.