NVIDIA (NVDA +1.80%) published a business update on Thursday evening, covering the second quarter of the company's fiscal 2019. The designer of graphics processors and other high-performance number-crunching chips enjoyed strong data center sales while cryptocurrency mining fell right off the map.
NVIDIA's second-quarter results: The raw numbers
|
Metric |
Fiscal Q2 2019 |
Fiscal Q2 2018 |
Year-Over-Year Change |
|---|---|---|---|
|
Revenue |
$3.12 billion |
$2.23 billion |
40% |
|
Net Income |
$1.10 billion |
$583 million |
89% |
|
GAAP earnings per share (diluted) |
$1.76 |
$0.92 |
91% |
Data source: NVIDIA. GAAP = generally accepted accounting principles.
What happened with NVIDIA this quarter?
- NVIDIA's second-quarter sales rose in lockstep across its two reportable segments, as both the GPU and Tegra divisions posted 40% year-over-year growth.
- Breaking the quarter down by target markets, data center products led the way with an 82% revenue boost. System builders and data center operators are embracing NVIDIA's latest Tesla processors with double the previous generation's on-chip memory reserves. In particular, NVIDIA saw strong demand from companies involved in artificial intelligence and data analysis.
- OEM and intellectual property sales lagged far behind as revenue in this segment fell 54% below the year-ago period's result. Weak demand from cryptocurrency enthusiasts explained the big drop in OEM sales, where NVIDIA includes its crypto-specific products. Management had expected roughly $100 million in revenue related to digital coin mining but the actual figure was approximately $18 million.
- Three months ago, NVIDIA centered its second-quarter revenue guidance around the $3.1 billion mark. Unadjusted earnings were expected to land near $1.98 per diluted share.
Image source: Nvidia.
What management had to say
Following these soft crypto-mining results, NVIDIA isn't betting on a big swing to the upside anytime soon.
"Whereas we had previously anticipated cryptocurrency to be meaningful for the year, we are now projecting no contributions going forward," said CFO Colette Kress in a prepared statement.
In a conference call with analysts, Kress and CEO Jensen Huang added some color commentary to the flagging cryptocurrency sector. Some enthusiasts had been buying gaming cards with top-shelf performance profiles in the hopes of scraping together some crypto-mining income when they weren't playing Fortnite and PlayerUnknown's Battlegrounds. That trend is taking a break now, but gaming product sales still rose 55% year over year. In other words, NVIDIA's management doesn't need to worry too much about weak crypto demand pumping the brakes on gaming card growth. That slowdown already happened and it didn't really hurt.
Looking ahead
NVIDIA recently started shipping development systems for its DRIVE Pegasus autonomous driving platform. Management claims that more than 370 companies are using or at least investigating this platform for use in their self-driving vehicle projects. The company also introduced a closely related chip under the Jetson name this quarter, aimed at automating industrial processes and machinery with a number-crunching system optimized for low energy requirements.
In the data center sector, the DGX server system -- with special optimizations for the artificial intelligence use case -- saw a second-generation platform introduced in the second quarter. DGX-2 should ramp up to commercial production volume during the third quarter.
All told, management expects third-quarter revenue in the neighborhood of $3.25 billion, give or take 2%. At the midpoints of the guidance ranges provided for gross margin, operating expenses, and effective tax rates, GAAP net income should land near $1.08 billion, or $1.73 per diluted share. Hitting these targets would amount to year-over-year sales growth near 39%, as well as 29% higher earnings.
