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Nvidia cuts quarterly guidance, down from $2.7bn to $2.2bn

by Mark Tyson on 29 January 2019, 10:11

Tags: NVIDIA (NASDAQ:NVDA)

Quick Link: HEXUS.net/qad35z

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In a surprise move, Nvidia has updated its guidance for its upcoming set of quarterly financials, due to be published on 14th Feb. The big news is that the expected revenue for the three months covered by the firm's Q4 fiscal results have taken a hefty cut. Now, Nvidia expects to bring in $2.2bn in revenue, significantly lower than the previously published figure of $2.7bn (both figures plus or minus 2 per cent). Nvidia's shares have been heavily impacted in afterhours trading, dropping 14 per cent and trimming more than $13bn off Nvidia's market cap.

In a press release from Nvidia, seeking to explain the discrepancy and offer some reassurance, we can read various excuses, and some reasons to be optimistic from now on. In gaming, Nvidia said much of the downturn was previously forecast to be due to "excess mid-range channel inventory following the crypto-currency boom". However, conditions were made worse by "deteriorating macroeconomic conditions, particularly in China," that are beyond the control of a business like Nvidia. Furthermore, high-end Turing GPUs sold in lower numbers than expected, as patient customers waited for these already expensive cards to settle down nearer to MSRPs.

 

Previous Q4 Fiscal 2019
Guidance

Updated Q4 Fiscal 2019
Guidance

Revenue

$2.70 billion, plus or minus 2%

$2.20 billion, plus or minus 2%

Gross margin – GAAP
Gross margin – non-GAAP

62.3%, plus or minus 50 bps
62.5%, plus or minus 50 bps

55.0%, plus or minus 100 bps
56.0%, plus or minus 100 bps

Operating expenses – GAAP
Operating expenses – non-GAAP

$915 million
$755 million

$915 million
$755 million

GAAP and non-GAAP other income and expense

$21 million

$25 million

GAAP and non-GAAP tax rate, excluding discrete items

8%, plus or minus 1%

6%, plus or minus 1%

 

As mentioned in the article subheading, Nvidia's Data Centre business has disappointed in Q4 too. In brief, Nvidia's previous forecasts included a number of deals that haven't closed as yet, and aren't expected to be closed by the end of the period covered by these financials. Despite this setback Nvidia says it is confident it can continue with strong growth in data centre, expanding its presence in AI and high performance computing for example.

In the official press statement, Nvidia CEO Jensen Huang was quoted directly, trying to paper over cracks and calm investors:

"Q4 was an extraordinary, unusually turbulent, and disappointing quarter. Looking forward, we are confident in our strategies and growth drivers."

"The foundation of our business is strong and more evident than ever – the accelerated computing model NVIDIA pioneered is the best path forward to serve the world's insatiable computing needs. The markets we are creating – gaming, design, HPC, AI and autonomous vehicles – are important, growing and will be very large. We have excellent strategic positions in all of them."

In addition to the above, Nvidia released a letter directly to shareholders (PDF) which talked through the period leading up to this guidance change, and provides a bullet point list of new hopes for revenue generation from Nvidia. It wraps up with Jensen Huang, resolutely claiming "Your company is resilient, creative, and repeatedly rises to great challenges. We will shake this off and come back strong."



HEXUS Forums :: 8 Comments

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Not a small amount to be cutting, but they will recover!
Good. I hope they stop their ridiculous price gouging. But I doubt it.
wow shock horror…

Excessively high prices on new items
Change to EULA to stop data centre's using geforce gpu's (several ‘data centre’ deals fell through according to other sites). The difference in cost for ‘equal’ cards is nearly 5x the cost of a geforce for a quadro/tesla card. AMD is considerably cheaper option if you can use it.

And what a surprise, they blame it primarily on China rather than their own business decisions, just like every other company of late…
LSG501
And what a surprise, they blame it primarily on China rather than their own business decisions, just like every other company of late…

Kinda like how the train lines blame infrastructure for how they have to increase prices in the UK despite giving all their profits out to shareholders and not building customer relations
LSG501
wow shock horror…

Excessively high prices on new items

It isn't just about the high pricing though, if Nvidia were offering a solid price / performance ratio then I doubt we'd be complaining about pricing too much. The problem they have is the previous series of cards they released are still pretty great price / performance wise (looking at 1070), however the newer cards just don't offer that, instead they offer new features not widely supported yet. I guess time will tell how it plays out.