• Nvidia’s revenue outlook for the fiscal third quarter beat expectations, but not by a wide enough margin to satisfy investors
• Nvidia expects to ship several billion dollars worth of its new Blackwell chip in the fiscal fourth quarter
• Nvidia’s data center revenue growth slowed sequentially in the fiscal second quarter
Nvidia reported its fiscal second quarter earnings on August 24, 2022. The results showed slowing revenue growth but strong profits.
Financial Results
Nvidia reported revenue of $30.04 billion for the quarter, up 12% from the previous quarter and up 122% year-over-year. However, the pace of sequential revenue growth has slowed for four consecutive quarters.
The company’s GAAP operating margin was 62.06%, narrowing from 64.92% last quarter but expanding from 50.34% a year ago. Nvidia’s operating margin remains very high compared to other tech companies.
Net income for the quarter was $6.70 billion, up 49% year-over-year. Earnings per share came in at $1.14, beating analyst estimates of $1.11.
Segment Performance
Nvidia’s data center revenue grew 15% sequentially to a record $6.27 billion. However, this represented slowing growth versus the 22% increase last quarter.
Gaming revenue fell 33% to $2.04 billion amid weak demand. Professional visualization revenue increased 20% to $496 million. Automotive revenue surged 45% to $220 million.
Outlook
For the fiscal third quarter, Nvidia guided to revenue of $5.9 billion, plus or minus 2%. This implies a sequential increase of less than 10%, signaling continuing moderation in sales growth.
The company expects to begin shipping its new Blackwell processors in the fourth quarter. Nvidia said Blackwell will contribute “several billion dollars” in revenue during the period.
China Competition
Nvidia said the China market remains competitive for its data center business. Data center revenue from China grew sequentially but remained below pre-export control levels.
The company appears to be maintaining its market share in China despite geopolitical headwinds. However, management expects China to stay a tough competitive environment going forward.
Buybacks
During the quarter, Nvidia spent $7.2 billion to repurchase its shares, more than double a year ago. The company boosted its buyback authorization by $50 billion.
Bottom Line
Nvidia delivered strong profits but showed further signs of slowing top line momentum. The company maintains leadership in AI computing but faces ongoing competitive pressure in China. Nvidia’s growth outlook depends on customers continuing to achieve compelling returns on investments in its infrastructure.
