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Gaming and Datacenter to Drive NVIDIA's (NVDA) Q2 Earnings

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NVIDIA’s (NVDA - Free Report) graphic processing units (GPUs) are rapidly penetrating the gaming and datacenter markets, which is driving top-line growth. This is expected to be the case in fiscal second quarter 2019 as well, results of which are scheduled to be reported on Aug 16.

NVIDIA’s continued focus on introducing fast and innovative products as well as agreements with leading PC game makers has been driving the Gaming GPU business. Furthermore, the company’s data-center segment is likely to maintain its massive growth momentum in the to-be-reported quarter.

Click here to know how the company’s overall Q2 performance is likely to be.

Gaming Remains Strong

NVIDIA’s gaming segment will likely be the largest contributor to fiscal second-quarter revenues and continue to witness growth.

In the last reported quarter, revenues at Gaming GPU were up 68% on a year-over-year basis to $1.72 billion on the back of demand across all regions and products. Strong adoption of NVIDIA’s Pascal architecture-based graphics processing units (GPUs) is a key growth driver.

The company is benefiting from strong demand for gaming on the back of rising interest on battle royale games such as Fortnite and PUBG as well as growing popularity of eSports. Notably, its GeForce platform is gaining traction among more and more gamers.

The Zacks Consensus Estimate for segment revenues is $1.76 billion, indicating year-over-year growth of 48.2%.

Growing GPU Adoption in Datacenters

NVIDIA is one of the leading players in selling GPUs to data-center service providers boasting clients like Amazon (AMZN - Free Report) , Microsoft (MSFT - Free Report) and Alphabet (GOOGL - Free Report) .

Demand for NVIDIA’s data-center-focused products has increased due to an increase in datacenter production around the world. Management has successfully marketed its solutions to compete with industry leaders like Intel.

In the last reported quarter, revenues from datacenter increased 71% year over year to $701 million. This was driven by strong adoption of AI, deep learning, high-performance computing (HPC) and strong traction of the new Volta architecture.

The consensus estimate for datacenter revenues is $761 million, indicating growth year-over-year growth of 82.9%.

NVIDIA currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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