Nvidia marks the death of crypto demand in Q2 of its fiscal 2019

Nvidia reported its results for the second quarter of its fiscal 2019 today. The company pulled in $3.12 billion in revenue, up 40% year-on-year, and operating income of $1.16 billion, up 68% year-on-year. Gross margin was 63.3%, up 4.9 percentage points on the year. The company reported record revenue across all of its divisions.

The GPU business made up the vast majority of Nvidia's revenue at $2.66 billion. The company said strong performance in its gaming, professional visualization, and data-center products made up for a "substantial decline" in cryptocurrency sales. Gaming revenue was up 52% from this time last year at $1.8 billion thanks to strong sales of Pascal cards for desktops and Max-Q notebooks. Professional visualization products brought in $281 million, 20% better than a  year ago, and data center revenue reached $760 million, up 83% from a year ago. Those data center results came thanks to sales of Volta products like the Tesla V100 and the DGX systems containing them, according to the company.

The company's OEM and IP bucket leaked 54% of the revenue it posted this time last year, down to $116 million, thanks to declines in demand from cryptocurrency miners for the green team's GPUs. The sequential drop of 70% in this line item underscores just how much crypto demand has faltered of late. Nvidia notes that it had predicted crypto-specific demand would be $100 million for this quarter, while actual revenues were $18 million. Furthermore, the company expects no meaningful contributions from cryptocurrency products to revenue for the remainder of its fiscal 2019. If there's a surer sign that enthusiasm for new mining power is dead, I'm not sure we'll find it.

The company's Tegra business, on the other hand, brought in $467 million, up 40% from a year ago. Tegra chips find their way into Nvidia's automotive products, embedded platforms, and most importantly, the Nintendo Switch. Tegra products for cars brought in $161 million, up 13% from a year ago, including infotainment systems, Drive PX boards, and software-development partnerships with automakers.

For its next quarter, Nvidia expects $3.25 billion in revenue, plus or minus two percent. That figure includes no income from crypto demand. Going by Nvidia's third-quarter fiscal 2017 results, that figure would represent a 23.3% year-on-year increase, suggesting the company's meteoric rise of late might be tapering off a bit. GAAP gross margin is projected at 62.6%, which would reflect a 3.1-percentage-point increase. With the release of new GeForce products imminent, we'll have to see just how much pent-up demand for next-generation gaming products the company is able to unleash as cryptocurrency demand finally seems to be dying off.

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