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Gaming, Datacenters, & Other Key Q3 Nvidia (NVDA) Estimates

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Nvidia (NVDA - Free Report) has seen its stock price fall roughly 15% over the last month as part of the larger market selloff. The question now is will the once high-flying chip power regain some momentum with a strong third quarter? We need to take a look at what to expect from Nvidia’s individual business units and more in order to find out.

Overview

Nvidia, which has long been a leader in graphics chips for gaming, is set to benefit from the growth and expansion of artificial intelligence, machine learning, and cloud computing. We should also remember that Nvidia recently launched its latest GPUs based on its new Turing architecture after nearly two years of anticipation. “Turing is Nvidia’s most important innovation in computer graphics in more than a decade,” CEO and founder Jensen Huang said at a conference in August.

The chip firm also announced at the start of the week that its new T4 GPU “received the fastest adoption of any server GPU.” Nvidia said that its Turing architecture-based T4, which is designed to speed up workloads, is currently featured in 57 separate server designs just two months after introduction. Plus, Nvidia noted that Hewlett Packard Enterprise (HPE - Free Report) , IBM (IBM - Free Report) , Lenovo, and other giants have featured the T4. Meanwhile, the Google (GOOGL - Free Report) Cloud Platform just became the first major cloud vendor to offer availability for the T4 GPU.

Nvidia stock closed Tuesday at $199.31 per share, which marked a roughly 32% downturn from its 52-week and all-time high of $292.76 that it touched on October 2. Shares of NVDA had slipped roughly 1.5% through morning trading Wednesday. We should note that shares of fellow chip firms such as Advanced Micro Devices (AMD - Free Report) , Micron (MU - Free Report) , and Texas Instruments (TXN - Free Report) have fallen recently as well.

Q3 Outlook

Now that we have done a quick overview of Nvidia, it’s time to see what to expect from its Q3 results. Our current Zacks Consensus Estimate is calling for Nvidia's adjusted quarterly earnings to jump 43.6% to reach $1.91 per share. However, investors should note that Nvidia’s earnings estimate revisions have all trended downward over the last 30 days.

At the top of the income statement, Nvidia is projected to see its Q3 revenues jump by 22.9% to hit $3.24 billion. To put NVDA’s revenue growth expectations into perspective, revenues climbed 32% to reach $2.64 billion in the year-ago period. Plus, Q1 revenues soared 66% and Q2 revenues jumped 40%.

On top of these overall top and bottom line estimates, we need to know how Nvidia’s individual business units are projected to perform since they could determine how NVDA stock moves following its earnings release Thursday. Luckily, we can turn to our exclusive non-financial metrics consensus estimate file to prepare.

The Zacks Consensus NFM file contains detailed estimate data for business segment metrics and non-financial metrics reported by companies. The data is acquired from digest and contributing broker models and includes the independent research of expert stock market analysts.

Gaming

Despite all of the love for Nvidia’s growing datacenter business, the company still relies heavily on its core gaming unit. NVDA’s gaming division is projected to jump by roughly 20.5% from $1.56 billion in the year-ago quarter to hit $1.88 billion in Q3. This means that gaming is projected to account for roughly 58% of total Q3 revenues.

In the second quarter, Nvidia’s gaming revenues soared 52% from $1.19 billion in the year-ago quarter to reach $1.80 billion. In Q1, gaming sales skyrocketed 68% to hit $1.72 billion. So clearly, we can see that a significant slowdown is projected compared to the previous two quarters of its current fiscal year.

Datacenter

Moving on, Nvidia’s growing datacenter business is projected to hit $816.36 million, which would represent a 63% climb from the $501 million the company reported in the year-ago period. Based on our projections, datacenter revenues would account for approximately 25% of Nvidia’s quarterly revenues.

Datacenter unit revenues jumped 71% to touch $701 million in the first quarter and 83% in Q2 to reach $760 million.

Professional Visualization

Nvidia’s third-largest business unit, professional visualization, is projected to jump roughly 16% from $239 million to land at $276.77 million. Investors should note that this would mark a downturn from last quarter when unit revenue jumped 20% to $281 million. First quarter professional visualization revenues popped 22% to reach $251 million.

Professional visualization is set to account for roughly 8.5% of NVDA’s quarterly revenues, based on our projections.

Automotive

Lastly, Nvidia’s automotive division is projected to see its quarterly revenues reach $161.26 million, which would mark a roughly 12% climb from the year-ago quarter’s $144 million. The company’s smallest unit jumped 13% to $161 million in the second quarter. Automotive revenues popped just 4% to reach $145 million in Q1.

Nvidia is scheduled to release its Q3 financial results after the closing bell on Thursday, November 15. And make sure to come back to Zacks for our full post-earnings analysis.

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