Nvidia Stock Jumps 7% On Q2 Earnings Beat

Shares of Nvidia Corporation, the leading provider of graphics processing units (GPUs) and system-on-a-chip units (SoCs) to the gaming industry, jumped as much as 7% Thursday in extended trading on better-than-expected fiscal second quarter earnings.

Nvidia’s revenue came to $2.58 billion during the quarter, which was 17% lower year-on-year. Revenue, however, was higher than the $2.54 billion expected by analysts, said Refinitiv.

Earnings per share came to $1.24 (excluding certain items) vs. $1.15 per share expected by analysts polled by Refinitiv.

Shares of Nvidia in after hours trading later settled at $157.20, a gain of 5.67%. The stock opened at $150.83 in regular trading.

Before the earnings report, Nvidia shares had risen 11% since the start of this year. Nvidia announced its new GeForce RTX Super graphics cards for gaming in Q2. There are also reports Nvidia plans to design a Super version of its incredibly powerful Nvidia RTX 2080 Ti, which will be good for future sales.

Gaming, Nvidia’s biggest segment, generated $1.31 billion in revenue. This figure was 27% lower year-on-year but was larger than the $1.30 billion consensus estimate among analysts polled by FactSet. Nvidia recorded fewer shipments of GPUs for desktop PCs and SOCs for gaming systems in Q2.

Nvidia’s data center segment posted $655 million in revenue, which was 14% lower year-on-year and also lower than the $668.5 million FactSet consensus. Nvidia said a drop in revenue from “hyperscale” customers like cloud infrastructure providers caused the decline.

“While sales for internal hyperscale use were muted, the engineering focus on AI is growing,” said CFO Colette Kress on a conference call with analysts Thursday.

She also claims Nvidia’s “business is normalized.”

Nvidia’s fiscal third quarter guidance projects $2.9 billion in revenue give or take 2%. This figure, however, represents a 9% annualized decline. It’s also below the $2.97 billion consensus estimate among analysts polled by Refinitiv.

Analysts noted Nvidia has been bugged by supply issues over the past few quarters but this problem might soon end. There are reasons to be optimistic about a return to supply normalcy in the second half of the year, said Matt Bryson of Wedbush Securities

Bryson cited a boost in Nintendo products sporting Nvidia components and the introduction of the Nintendo Switch Lite console as positives for Nvidia.

“Our meeting with [PC maker] Maingear indicated NVDA continues to dominate the high end/custom PC GPU market and is holding share vs. AMD,” wrote Bryson.