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Weak Gaming Chip Demand to Hurt NVIDIA (NVDA) Q3 Earnings
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NVIDIA Corporation (NVDA - Free Report) is slated to report third-quarter fiscal 2023 results on Nov 16.
NVIDIA impressed investors with its stellar financial performance and experienced robust top and bottom-line growth in the past several quarters. However, the weakening demand for its chips used in gaming and data center end markets has put a break on its growth momentum as depicted from the last reported quarter.
In the second quarter of fiscal 2023, though NVIDIA’s revenues of $6.7 billion met the Zacks Consensus Estimate, revenues came lower than management’s May 2022 forecast of $8.10 billion (+/-2%) due to weaker sales across its Gaming and Data Center business segments. Moreover, non-GAAP earnings plunged 51% year over year to 51 cents per share.
The trend is likely to have continued in the third quarter. In its second-quarter earnings release, the company stated that revenues from its Gaming market segments would decline sequentially as OEMs and channel partners continue to reduce inventory levels.
NVIDIA experienced robust sales for its chips used in gaming end markets for the past couple of years. This was driven by pandemic-induced stay-at-home instructions.
The demand for NVIDIA’s gaming chips increased immensely as people were surfing games to stay engaged and entertained indoors during lockdowns. Moreover, with the massive emergence of multiplayer online games and Gaming-as-a-Service concepts, the demand for graphic processing units shot up exponentially.
However, the reopening of economies, along with the rising global slowdown concern amid the ongoing Russia-Ukraine war and the U.S.-China trade war, has been hurting the demand for gaming chips.
The company’s revenues from the Gaming market platform plunged 33% year over year and 44% sequentially in the last reported quarter. We believe that the trend is likely to have continued in the third quarter. The Zacks Consensus Estimate for the Gaming segment’s revenues is pegged at $1.4 billion, indicating a 56.6% decline from the year-ago quarter’s revenues of $3.22 billion.
Zacks Rank & Stocks to Consider
NVIDIA currently carries a Zacks Rank #3 (Hold). Shares of NVDA have decreased 44.5% year to date (YTD).
Some better-ranked stocks worth considering from the broader technology sector are Celestica (CLS - Free Report) , Zscaler (ZS - Free Report) and Coupa Software . Celestica and Zscaler each sport a Zacks Rank #1 (Strong Buy) at present, while Coupa carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Celestica’s fourth-quarter 2022 earnings has increased by 9 cents to 53 cents per share over the past 30 days. For 2022, earnings estimates have moved 9.4% up to $1.86 per share in the past 30 days.
CLS' earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 11.8%. Shares of the company have increased 2.9% YTD.
The Zacks Consensus Estimate for Zscaler's second-quarter fiscal 2023 earnings has been revised 5 cents north to 26 cents per share over the past 90 days. For fiscal 2023, earnings estimates have moved a penny north to $1.18 per share in the past 60 days.
ZS’ earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 28.6%. Shares of the company have declined 55.7% YTD.
The Zacks Consensus Estimate for Coupa's fourth-quarter fiscal 2023 earnings has been revised 3 cents northward to 7 cents per share over the past 90 days. For fiscal 2023, earnings estimates have moved upward by 19 cents to 44 cents per share in the past 90 days.
Coupa's earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 478.1%. Shares of COUP have slumped 65% YTD.
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Weak Gaming Chip Demand to Hurt NVIDIA (NVDA) Q3 Earnings
NVIDIA Corporation (NVDA - Free Report) is slated to report third-quarter fiscal 2023 results on Nov 16.
NVIDIA impressed investors with its stellar financial performance and experienced robust top and bottom-line growth in the past several quarters. However, the weakening demand for its chips used in gaming and data center end markets has put a break on its growth momentum as depicted from the last reported quarter.
In the second quarter of fiscal 2023, though NVIDIA’s revenues of $6.7 billion met the Zacks Consensus Estimate, revenues came lower than management’s May 2022 forecast of $8.10 billion (+/-2%) due to weaker sales across its Gaming and Data Center business segments. Moreover, non-GAAP earnings plunged 51% year over year to 51 cents per share.
The trend is likely to have continued in the third quarter. In its second-quarter earnings release, the company stated that revenues from its Gaming market segments would decline sequentially as OEMs and channel partners continue to reduce inventory levels.
NVIDIA Corporation Price and EPS Surprise
NVIDIA Corporation price-eps-surprise | NVIDIA Corporation Quote
Softness in Gaming Chip Demand
NVIDIA experienced robust sales for its chips used in gaming end markets for the past couple of years. This was driven by pandemic-induced stay-at-home instructions.
The demand for NVIDIA’s gaming chips increased immensely as people were surfing games to stay engaged and entertained indoors during lockdowns. Moreover, with the massive emergence of multiplayer online games and Gaming-as-a-Service concepts, the demand for graphic processing units shot up exponentially.
However, the reopening of economies, along with the rising global slowdown concern amid the ongoing Russia-Ukraine war and the U.S.-China trade war, has been hurting the demand for gaming chips.
The company’s revenues from the Gaming market platform plunged 33% year over year and 44% sequentially in the last reported quarter. We believe that the trend is likely to have continued in the third quarter. The Zacks Consensus Estimate for the Gaming segment’s revenues is pegged at $1.4 billion, indicating a 56.6% decline from the year-ago quarter’s revenues of $3.22 billion.
Zacks Rank & Stocks to Consider
NVIDIA currently carries a Zacks Rank #3 (Hold). Shares of NVDA have decreased 44.5% year to date (YTD).
Some better-ranked stocks worth considering from the broader technology sector are Celestica (CLS - Free Report) , Zscaler (ZS - Free Report) and Coupa Software . Celestica and Zscaler each sport a Zacks Rank #1 (Strong Buy) at present, while Coupa carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Celestica’s fourth-quarter 2022 earnings has increased by 9 cents to 53 cents per share over the past 30 days. For 2022, earnings estimates have moved 9.4% up to $1.86 per share in the past 30 days.
CLS' earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 11.8%. Shares of the company have increased 2.9% YTD.
The Zacks Consensus Estimate for Zscaler's second-quarter fiscal 2023 earnings has been revised 5 cents north to 26 cents per share over the past 90 days. For fiscal 2023, earnings estimates have moved a penny north to $1.18 per share in the past 60 days.
ZS’ earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 28.6%. Shares of the company have declined 55.7% YTD.
The Zacks Consensus Estimate for Coupa's fourth-quarter fiscal 2023 earnings has been revised 3 cents northward to 7 cents per share over the past 90 days. For fiscal 2023, earnings estimates have moved upward by 19 cents to 44 cents per share in the past 90 days.
Coupa's earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 478.1%. Shares of COUP have slumped 65% YTD.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.