Nvidia grew Q3 revenue and profits as inventory clouds gather


Nvidia reported its financial results for the third quarter of its fiscal 2019 today. The company brought in revenue of $3.18 billion, up 21% from this time last year, and operating income of $1.06 billion, up 18% from a year ago. The company also posted net income of $1.23 billion, up 47% from a year ago, and diluted earnings per share of $1.97, up 48% from this time in 2017. Gross margin rang in at 60.4%, up 0.9 percentage points from this time last year. The company's stock fell about 16% in after-hours trading on those numbers, thanks to a miss on Wall Street analyst estimates.

Q3 FY19 Q3 FY18 Change
Revenue $3.18 billion $2.64 billion Up 21%
Gross margin 60.4% 59.5% Up 0.9 pp
Operating income $1.06 billion $895 million Up 18%
Net income $1.23 billion $838 million Up 47%
Diluted earnings per share $1.97 $1.33 Up 48%

Nvidia unsurprisingly continues to make the lion's share of its revenue from its GPUs. Across all of its GPU-related businesses, the company brought in $2.77 billion in revenue, up 25% from a year ago. GeForce-related revenue was $1.76 billion, up 13% from a year ago, although the company acknowledges that revenue for its gaming business in the wake of its Turing launch was "short of our expectations."

The gaming business' results were counterweighted by softening seasonal demand for Tegra SoCs for the Nintendo Switch. Tegra products in general brought in $407 million in revenue, down 3% on the year, across automotive, Nintendo, and embedded edge-computing products.

The company's professional visualization business brought in $305 million in revenue, up 28% from this time a year ago and a result Nvidia describes as a record. The company touted strong demand for its desktop and mobile workstation products in this segment. Data-center revenue was $792 million, up 58% from a year ago, on continued strong sales of Volta V100 and DGX systems. Nvidia also says its new Tesla T4 accelerator gave its data-center results a boost.

Nvidia's automotive business was $172 million, up 19% from a year ago, accounting for sales of infotainment hardware, Drive PX systems, and software development agreements with partner companies. OEM and IP revenue was $143 million, down 23% on the year, thanks to the evaporation of demand for GPUs for cryptocurrency mining.

For the fourth quarter of Nvidia notes that "excess channel inventory of mid-range Pascal products" will weigh on its fourth-quarter results, although it expects that excess inventory to clear out of retail and e-tail in "one to two quarters." Nvidia says it intends to ship no "meaningful" numbers of mid-range Pascal cards into the channel for the fourth quarter to allow demand to draw down those stocks. With all that in mind for the fourth quarter of its fiscal 2019, Nvidia expects revenue of $2.7 billion, plus or minus 2%, as well as GAAP gross margin of 62.3%, plus or minus half a percentage point.

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