Nvidia Earnings In-Line With Estimates, But Data Center Revenue Falls Short

Bloomberg's Mandeep Singh, Sarah Frier and Jay Goldberg, senior analyst at Seaport Research Partners, react as Nvidia reports lackluster earnings. The chipmaker's overall revenue came in slightly higher than estimates, but data center revenue was short and the numbers excluded sales in China. Nvidia also reported it approved an additional $60 billion in share buyback.

Nvidia Corp., the world’s most valuable publicly traded company, gave a tepid revenue forecast for the current period, fueling concerns that a massive run-up in artificial intelligence spending is slowing. 
Sales will be roughly $54 billion in the fiscal third quarter, which runs through October, the company said in a statement Wednesday. Though that was in line with the average Wall Street estimate, some analysts had projected more than $60 billion. The forecast excluded data center revenue from China, a market where it has struggled with US export restrictions and opposing pressure from Beijing.
The company’s tepid outlook adds to concern that pace of investment in artificial intelligence systems is unsustainable. Difficulties in China also have clouded Nvidia’s business. Though the Trump administration recently eased restrictions on exports of some AI chips to that country, the reprieve hasn’t yet translated into a rebound in revenue. 
Nvidia shares fell about 4% in extended trading following the announcement. They had rallied 35% this year through the close, lifting the company’s market capitalization above $4 trillion.
Nvidia is still dealing with the fallout from a growing US-China rivalry, where semiconductor technology has become a major flashpoint. In April, the Trump administration tightened restrictions on exports of data center processors to Chinese customers, effectively shutting Nvidia out of the market. Washington has subsequently rolled that back, saying that the US will allow some shipments in return for a 15% slice of the revenue. 

Nvidia shares fell about 1.6% in premarket trading before New York exchanges opened on Thursday. They had rallied 35% this year through the close, lifting the company’s market capitalization above $4 trillion.

During a conference call with analysts Wednesday, the company’s leadership rejected the notion that interest in deploying AI infrastructure was flagging. 
“The opportunity ahead is immense,” Chief Executive Officer Jensen Huang said. “We see $3 trillion to $4 trillion in AI infrastructure spend by the end of the decade.”
The company also approved an additional $60 billion in stock buybacks. Nvidia had $14.7 billion remaining under its previous repurchase plan at the end of the second quarter. 

Sales in that period, which ended July 27, rose 56% to $46.7 billion. That compared with an average estimate of $46.2 billion. Though the gain added more than $16 billion in quarterly revenue from a year earlier, it was the smallest percentage increase in more than two years.
Second-quarter profit was $1.05 a share, minus certain items. Wall Street was looking for $1.01.
The data center unit, a division that’s now larger by itself than any other chipmaker, had sales of $41.1 billion. That compares with an average estimate of $41.3 billion. Gaming-related revenue — once Nvidia’s main source of income — was $4.29 billion. Analysts projected $3.8 billion on average. The automotive segment generated $586 million in sales, a bit shy of estimates.
The results showed hints that spending by giant data center operators “could tighten at the margins if near-term returns from AI applications remain difficult to quantify,” Emarketer analyst Jacob Bourne said in a note.

Nvidia is still dealing with the fallout from a growing US-China rivalry, where semiconductor technology has become a major flashpoint. In April, the Trump administration tightened restrictions on exports of data center processors to Chinese customers, effectively shutting Nvidia out of the market. Washington has subsequently rolled that back, saying that the US will allow some shipments in return for a 15% slice of the revenue. 

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