Nvidia Is Officially a Data Center Company. Here's Why. -- Barrons.com
DOW JONES & COMPANY, INC. 5:56 PM ET 8/19/2020
Symbol Last Price Change | NVDA | 485.54 | -4.89 (-1%) | | QUOTES AS OF 04:00:00 PM ET 08/19/2020 |
The 27-year-old Nvidia(NVDA) turned a significant corner on Wednesday, having its quarterly data-center sales surpass its videogame chip business for the first time since the company's inception.
Long known for its graphics cards and chips suited for playing videogames, Nvidia(NVDA) has slowly made inroads into selling data-center semiconductors, in large part because the graphics processing units that are good for games are also capable of tackling complex artificial intelligence and machine-learning tasks too. Despite revenue damage to two of its segments because of the Covid-19 pandemic, the company's fiscal-second quarter handily beat the consensus estimates.
"Our new Ampere [graphics processing unit] architecture is sprinting out of the blocks, with the world's top cloud service providers and server makers moving quickly to offer NVIDIA(NVDA) accelerated computing. Mellanox grew sharply, driven by the need for high-speed networking in cloud data centers to scale-out AI services," Nvidia(NVDA) CEO Jensen Huang said. Ampere is the company's latest graphics processing unit chip design.
Shares of Nvidia(NVDA) ticked down 1.7% in the extended session Wednesday as investors digested the results. The stock closed the regular session down 1% to $485.54.
The chip maker reported GAAP (or generally accepted accounting principles) second-quarter earnings of $622 million, which amounts to 99 cents a share, compared with earnings of $552 million, or 90 cents a share, in the year-ago period. Nvidia(NVDA) reported adjusted, or non-GAAP, earnings of $2.18 a share compared with $1.24 a share a year ago.
Wall Street expected GAAP earnings of $1.02 a share. The consensus view for the results had been adjusted earnings of $1.97 a share.
Sales rose to $3.87 billion, beating the consensus of $3.66 billion and topping the year-ago total of $2.58 billion. Its data-center sales grew 167% to $1.75 billion compared with a year ago, which included the Mellanox acquisition. Mellanox contributed 30% of the segment's revenue. Videogame sales rose 26% to $1.65 billion.
Data-center business was expected to generate sales of $1.62 billion and videogame's haul was predicted to be $1.43 billion.
Nvidia (NVDA) said it expected fiscal third-quarter sales of $4.4 billion plus or minus 2%, which topped the consensus estimate of $3.96 billion.
The company's two other key segments, professional visualization and automotive, reported sales of $203 million and $111 million respectively, which Huang said was due to the impact of the Covid-19 pandemic.
Shares of Nvidia(NVDA) have more than doubled this year, as the S&P 500 index advanced 4.6%. The PHLX Semiconductor index has gained 18.8% in 2020.
Write to Max A. Cherney at max.cherney@barrons.com
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