Daily Management Review

Nvidia earns $ 3.2 billion in Q3


Graphics maker Nvidia will complete the third quarter of the 2019 fiscal year with a 21 percent increase in sales. Profits increased as well - by 38%. The company reported a slight drop in gross margin in the third quarter. Those buyers who were supplanted by miners during the crypto rush, are not returning as quickly as the company expected.

The Conmunity - Pop Culture Geek
The Conmunity - Pop Culture Geek
According to a recent financial report, in the third quarter, the total value of excess products in the company's warehouses increased more than five times and exceeded $ 70 million, and over the last nine months it reached $ 124 million.

“The hangover after the cryptoboom lasted longer than expected. We thought that we correctly estimated the dynamics of cryptocurrency,” said Nvidia CEO Jensen Huang.

For the three-month reporting period, closed on October 28, 2018, Nvidia's revenue was $ 3.2 billion versus $ 2.6 billion a year earlier. In quarterly terms, the increase was 2%. Net profit during this time rose to $ 1.2 billion from $ 833 million. Wall Street predicted sales of $ 3.24 billion. Growth for the quarter is 12%.

Operating profit was $ 1.058 billion. A year ago, it was equal to $ 895 million, that is, over the year it grew by 18%. In quarterly terms, a decrease of 9% is observed.

The lion’s share (55%) of Nvidia’s revenues comes from the sale of graphics processors for gaming graphics cards. Last quarter, the revenue of this unit was $ 1.76 billion, which is 13% more than a year ago. This is primarily the merit of high-end GeForce RTX accelerators, while mid-level video cards of the past generation are not being sold as good as before.

In the third financial quarter, revenue from sales for the OEM segment declined by 22.5% over the year and amounted to $ 148 million. Here, the company includes GPUs for mining accelerators and Tegra processors for the Nintendo Switch console.

Nvidia has long noticed a decline in mining interest among video card consumers. Earlier, the company had already made a statement announcing a decision to stop focusing on the cryptocurrency industry, citing the low profitability that this direction brings.

Nvidia CFO Colette Kress, in particular, noted that the company does not expect growth in this segment in the remainder of 2018.

“We believe that we have reached the normal period and are not going to focus on cryptocurrency in the future. We expected the profits from cryptocurrency-related products to fall to about $ 100 million, but in reality it fell to $ 18 million. In future, revenues from this direction will be insignificant,” she said.

The head of Nvidia, Jensen Huang, also noted that the profitability of the mining-oriented chips that the company produces is constantly decreasing due to the fall in the cryptocurrency market.

The profitability of mining of Ethereum dropped to zero, and therefore using Nvidia's flagship GPU processors becomes unprofitable, said Susquehanna analyst Christopher Rolland. According to a study by Susquehanna, the monthly profit from mining ETH using graphics processors dropped from $ 150 in June last year to $ 0 in November 2018.

Since miners have practically ceased to make a profit, many turn off their equipment and the network's hashrate falls. According to Etherscan, the Ethereum hashrate has fallen by almost 20% in the last 3 months. The main factor behind the decline in profits is the fall in the price of ETH: over the year, its price fell by 86% from a maximum of $ 1,350 in January to a level of $ 177 as of November 16, 2018.

Sales of solutions for data centers provided Nvidia $ 792 million in revenue, which is 58.1% more than in the third quarter of last year. The division specializing in the production of professional graphics adapters Quadro, brought $ 305 million, the automotive area - $ 172 million.

Financial results fell short of Wall Street expectations, so Nvidia shares fell 17%.

Nvidia plans to end the next quarter with revenues of $ 2.7 billion (versus $ 2.9 billion last year). It is also below the average analytical forecast of $ 3.4 billion.

source: cnbc.com