So as it turns out, the analysts were right -- on all counts.
Nvidia (NVDA 0.76%) reported its fiscal first-quarter 2023 earnings Wednesday evening, and yes, they beat estimates with a stick -- but also, yes, the guidance disappointed. Nvidia stock at first turned south (after-hours) on the guidance miss but eventually reversed course and traded higher on Thursday.
Nvidia by the numbers
The Q1 numbers were just that good.
Sales grew 46% year over year in Nvidia's fiscal Q1. (Analysts had forecast only 43% growth). True, generally accepted accounting principles (GAAP) profits of $0.64 per share declined 15% year over year. But when adjusted for one-time items, profits were up 49%. (And analysts had forecast only 42% growth).
Despite Wall Street worrywarts predicting a slump in Nvidia's gaming chips franchise, Nvidia CEO Jensen Huang was able to boast that both data center and gaming sales in the quarter reached "record" levels. Gaming revenues actually rose 31% year over year, and while that was below par for the company as a whole, that only highlights the fact that Nvidia's even bigger data center business is picking up the slack. (Datacenter sales, indeed, surged a mind-boggling 83% year over year).
But how long can this last?
Image source: Getty Images.
Time to blame crypto?
Confirming analysts' fears about a coming slowdown in gaming sales, Nvidia warned that its GPU sales would decline sequentially in the fiscal second quarter. Management blamed this partly on the Russian invasion of Ukraine, partly on Covid lockdowns in China -- but punted on the question of whether the recent cryptocurrency crash is hurting GPU sales, with CFO Colette Kress demurring that "the extent in which cryptocurrency mining contributed to Gaming demand is difficult for us to quantify with any reasonable degree of precision."
Whatever the reason, though, this much seems clear: "Channel inventory has nearly normalized [in gaming] and we expect it to remain around these levels in Q2" -- so it appears that the days of Nvidia enjoying windfall profits from ultra-high GPU demand are now at an end. Accordingly, Nvidia advised that GPU sales into the cryptocurrency market will make "a diminishing contribution [to its revenue stream] going forward."
So what does this mean for Nvidia, in dollars and cents?
Giving guidance for the second fiscal quarter of 2023 already underway, Nvidia warned that its revenues will be only $8.1 billion "plus or minus 2%." Even assuming Nvidia maxes out that range, it looks like the company will miss analyst forecasts for $8.45 billion in sales this coming quarter.
Furthermore, management guidance on gross profit margins, likely operating expenses, and a presumed tax rate of 12.5% all suggest that non-GAAP earnings for the second quarter will land in the neighborhood of $1.17 per share -- also short of Wall Street estimates, which call for pro forma profits of $1.35 in Q2.
In short, the good news is that everything but crypto is going great for Nvidia. But the bad news is that, because of crypto, Nvidia is almost certain to miss earnings in Q2.
