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Nvidia (NVDA) Down 29.9% Since Last Earnings Report: Can It Rebound?
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It has been about a month since the last earnings report for Nvidia (NVDA - Free Report) . Shares have lost about 29.9% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Nvidia due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
NVIDIA Misses Q2 Earnings Estimates, Issues Dim Q3 Guidance
NVIDIA reported lower-than-expected earnings results for the second quarter of fiscal 2023. For the second quarter, NVIDIA reported non-GAAP earnings of 51 cents per share, which missed the Zacks Consensus Estimate by 8.9%. Moreover, the reported figure plunged 51% year over year and 63% sequentially.
Revenues of $6.7 billion met the consensus mark and increased 3% year over year. However, the top line declined 19% on a quarter-over-quarter basis. The company’s revenues came way below its May 2022 forecast of $8.10 billion (+/-2%) due to weaker sales across its Gaming and Data Center business segments.
Segment Details
NVIDIA reports revenues under two segments – Graphics and Compute & Networking.
Graphics includes GeForce GPUs for gaming and personal computers, the GeForce NOW game-streaming service and related infrastructure, along with solutions for gaming platforms, Quadro GPUs for enterprise design, GRID software for cloud-based visual and virtual computing and automotive platforms for infotainment systems.
Graphics accounted for 41.7% of fiscal second-quarter revenues. The segment’s top line plunged 28% year over year and 39% sequentially to $2.8 billion.
Compute & Networking represented 58.3% of fiscal second-quarter revenues. The segment comprises Data Center platforms and systems for artificial intelligence, high-performance computing and accelerated computing, the DRIVE development platform for autonomous vehicles and Jetson for robotics and other embedded platforms.
Compute & Networking revenues soared 50% year over year and 6% sequentially to $3.91 billion.
Market Platform’s Top Line Details
Based on the market platform, Gaming revenues (43.7% of revenues) plunged 33% year over year and 44% sequentially to $2.04 billion. The decline was primarily due to a lower sell-in of Gaming products, reflecting reduced channel partner sales due to macroeconomic headwinds.
Revenues from Data Center (45.2% of revenues) jumped 61% year over year and 1% from the previous quarter to $3.81 billion. This year-over-year upswing was driven by the strong demand for its Ampere architecture products from cloud computing and AI providers. However, the company noted that the business unit’s sales were below expectations due to ongoing supply-chain disruptions and lower sales to China’s hyperscale customers, who are affected by economic conditions.
Professional Visualization revenues (7.5% of revenues) decreased 4% year over year and 20% sequentially to $496 million, primarily due to lower sales of desktop workstation graphic processing units, which more than offset the benefits of an increase in mobile revenues.
Automotive sales (1.7% of revenues) in the reported quarter totaled $220 million, up 45% on a year-over-year basis and 59% sequentially, mainly driven by the increased revenue contribution from self-driving and artificial intelligence cockpit solutions.
OEM and Other revenues (1.9% of revenues) plunged 66% year over year and 11% sequentially to $140 million, mainly due to the weak performance of Cryptocurrency Mining Processors, which generated nominal sales during the quarter compared with $266 million in the year-ago quarter. Moreover, lower notebook OEM sales also negatively impacted the overall business unit’s performance during the second quarter.
Operating Details
NVIDIA’s non-GAAP gross margin contracted by 20.8% year over year to 45.9%, mainly due to a $1.34 billion charge for inventory and related reserves and warranty reserves.
Non-GAAP operating expenses flared up 38.2% year over year and 8.8% sequentially to $1.74 billion on higher compensation-related expenses associated with employee growth and increased engineering development costs.
The non-GAAP operating income slumped 57% year over year and 66% quarter over quarter to $1.33 billion.
Balance Sheet and Cash Flow
As of Jul 31, 2022, NVDA’s cash, cash equivalents and marketable securities were $17.04 billion, down from $20.34 billion as of May 1, 2022.
As of Jul 31, 2022, the total long-term debt (including current maturities) was $10.95 billion, flat with the previous quarter ended May 1, 2022.
NVIDIA generated $1.27 billion in operating cash flows, down from the year-ago quarter’s $2.68 billion and the previous quarter’s $1.73 billion. The free cash flow was $824 million, down from the year-ago quarter’s $2.48 billion and the previous quarter’s $1.35 billion. In the first half of fiscal 2023, the company generated operating and free cash flows of $3 billion and $2.17 billion, respectively.
In the second quarter, the company returned $3.45 billion to shareholders through $100 million in dividend payouts and $3.35 billion in share repurchases. During the first half of fiscal 2023, NVIDIA paid $200 million in dividends and bought back common stocks worth $5.34 billion.
Third-Quarter Guidance
For the third quarter of fiscal 2023, NVIDIA anticipates revenues of $5.90 billion (+/-2%). The company expects Gaming and Professional Visualization revenues to decline sequentially as OEMs and channel partners continue to reduce inventory levels. Nonetheless, a sequential increase in Data Center and Automotive segment revenues is likely to partially offset the negative impact of weak Gaming and Professional Visualization sales.
The GAAP and non-GAAP gross margins are projected at 62.4% and 65%, respectively (+/-50 bps). GAAP and non-GAAP operating expenses are estimated at $2.59 billion and $1.82 billion, respectively.
GAAP and non-GAAP other income and expenses, excluding gains and losses from non-affiliated investments, are anticipated at approximately $10 million.
The GAAP and non-GAAP tax rate for the quarter is estimated at 9.5% (+/- 1%). The company projects to make capital expenditure between $550 million and $600 million during the quarter.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -31.98% due to these changes.
VGM Scores
Currently, Nvidia has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. However, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Nvidia has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.
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Nvidia (NVDA) Down 29.9% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for Nvidia (NVDA - Free Report) . Shares have lost about 29.9% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Nvidia due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
NVIDIA Misses Q2 Earnings Estimates, Issues Dim Q3 Guidance
NVIDIA reported lower-than-expected earnings results for the second quarter of fiscal 2023. For the second quarter, NVIDIA reported non-GAAP earnings of 51 cents per share, which missed the Zacks Consensus Estimate by 8.9%. Moreover, the reported figure plunged 51% year over year and 63% sequentially.
Revenues of $6.7 billion met the consensus mark and increased 3% year over year. However, the top line declined 19% on a quarter-over-quarter basis. The company’s revenues came way below its May 2022 forecast of $8.10 billion (+/-2%) due to weaker sales across its Gaming and Data Center business segments.
Segment Details
NVIDIA reports revenues under two segments – Graphics and Compute & Networking.
Graphics includes GeForce GPUs for gaming and personal computers, the GeForce NOW game-streaming service and related infrastructure, along with solutions for gaming platforms, Quadro GPUs for enterprise design, GRID software for cloud-based visual and virtual computing and automotive platforms for infotainment systems.
Graphics accounted for 41.7% of fiscal second-quarter revenues. The segment’s top line plunged 28% year over year and 39% sequentially to $2.8 billion.
Compute & Networking represented 58.3% of fiscal second-quarter revenues. The segment comprises Data Center platforms and systems for artificial intelligence, high-performance computing and accelerated computing, the DRIVE development platform for autonomous vehicles and Jetson for robotics and other embedded platforms.
Compute & Networking revenues soared 50% year over year and 6% sequentially to $3.91 billion.
Market Platform’s Top Line Details
Based on the market platform, Gaming revenues (43.7% of revenues) plunged 33% year over year and 44% sequentially to $2.04 billion. The decline was primarily due to a lower sell-in of Gaming products, reflecting reduced channel partner sales due to macroeconomic headwinds.
Revenues from Data Center (45.2% of revenues) jumped 61% year over year and 1% from the previous quarter to $3.81 billion. This year-over-year upswing was driven by the strong demand for its Ampere architecture products from cloud computing and AI providers. However, the company noted that the business unit’s sales were below expectations due to ongoing supply-chain disruptions and lower sales to China’s hyperscale customers, who are affected by economic conditions.
Professional Visualization revenues (7.5% of revenues) decreased 4% year over year and 20% sequentially to $496 million, primarily due to lower sales of desktop workstation graphic processing units, which more than offset the benefits of an increase in mobile revenues.
Automotive sales (1.7% of revenues) in the reported quarter totaled $220 million, up 45% on a year-over-year basis and 59% sequentially, mainly driven by the increased revenue contribution from self-driving and artificial intelligence cockpit solutions.
OEM and Other revenues (1.9% of revenues) plunged 66% year over year and 11% sequentially to $140 million, mainly due to the weak performance of Cryptocurrency Mining Processors, which generated nominal sales during the quarter compared with $266 million in the year-ago quarter. Moreover, lower notebook OEM sales also negatively impacted the overall business unit’s performance during the second quarter.
Operating Details
NVIDIA’s non-GAAP gross margin contracted by 20.8% year over year to 45.9%, mainly due to a $1.34 billion charge for inventory and related reserves and warranty reserves.
Non-GAAP operating expenses flared up 38.2% year over year and 8.8% sequentially to $1.74 billion on higher compensation-related expenses associated with employee growth and increased engineering development costs.
The non-GAAP operating income slumped 57% year over year and 66% quarter over quarter to $1.33 billion.
Balance Sheet and Cash Flow
As of Jul 31, 2022, NVDA’s cash, cash equivalents and marketable securities were $17.04 billion, down from $20.34 billion as of May 1, 2022.
As of Jul 31, 2022, the total long-term debt (including current maturities) was $10.95 billion, flat with the previous quarter ended May 1, 2022.
NVIDIA generated $1.27 billion in operating cash flows, down from the year-ago quarter’s $2.68 billion and the previous quarter’s $1.73 billion. The free cash flow was $824 million, down from the year-ago quarter’s $2.48 billion and the previous quarter’s $1.35 billion. In the first half of fiscal 2023, the company generated operating and free cash flows of $3 billion and $2.17 billion, respectively.
In the second quarter, the company returned $3.45 billion to shareholders through $100 million in dividend payouts and $3.35 billion in share repurchases. During the first half of fiscal 2023, NVIDIA paid $200 million in dividends and bought back common stocks worth $5.34 billion.
Third-Quarter Guidance
For the third quarter of fiscal 2023, NVIDIA anticipates revenues of $5.90 billion (+/-2%). The company expects Gaming and Professional Visualization revenues to decline sequentially as OEMs and channel partners continue to reduce inventory levels. Nonetheless, a sequential increase in Data Center and Automotive segment revenues is likely to partially offset the negative impact of weak Gaming and Professional Visualization sales.
The GAAP and non-GAAP gross margins are projected at 62.4% and 65%, respectively (+/-50 bps). GAAP and non-GAAP operating expenses are estimated at $2.59 billion and $1.82 billion, respectively.
GAAP and non-GAAP other income and expenses, excluding gains and losses from non-affiliated investments, are anticipated at approximately $10 million.
The GAAP and non-GAAP tax rate for the quarter is estimated at 9.5% (+/- 1%). The company projects to make capital expenditure between $550 million and $600 million during the quarter.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -31.98% due to these changes.
VGM Scores
Currently, Nvidia has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. However, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Nvidia has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.