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Will Gaming Segment Drive NVIDIA (NVDA) in Q3 Earnings?

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NVIDIA (NVDA - Free Report) is slated to report third-quarter fiscal 2020 results on Nov 14.

The company’s fortunes are tied to its gaming segment, which accounted for 50% of the total revenues in the last reported quarter.

The segment, which has been witnessing sluggish performance from past few quarters due to slowdown in gaming desktop GPU shipment, is likely to have recovered in third-quarter fiscal 2020.

Management had expected gaming revenues to normalize between the fiscal second and third quarter.

The Zacks Consensus Estimate for Gaming revenues in fiscal third quarter is pegged at $1.5 billion, which indicates a decline of 13.1% year over year and sequential improvement of 16.7%.

Click here to know how NVIDIA’s overall Q3 performance is likely to be.

NVIDIA Corporation Revenue (TTM)

 

NVIDIA Corporation Revenue (TTM)

NVIDIA Corporation revenue-ttm | NVIDIA Corporation Quote

Strengthening Gaming Business

NVIDIA’s strength in ray tracing technology, Turing GPUs and advanced graphic cards are expected to have driven Gaming revenues in the fiscal third quarter.

The company is likely to have benefited from solid momentum of its real-time ray tracing technology in the fiscal third quarter. Further, ray tracing backup in several GeForce GTX GPUs is expected to have aided the company in gaining traction among game developers.

Additionally, GeForce RTX SUPER GPUs, which deliver power efficiency and ray tracing are expected to have strengthened the company’s footprint in the high-end market. Moreover, the company is likely to have won AAA title deals backed by these Turing-powered GPUs in the fiscal third quarter.

NVIDIA’s partnership with Microsoft (MSFT - Free Report) for ray tracing technology for Minecraft is testament to the same.

Further, strong demand for NVIDIA GeForce RTX graphic cards are likely to have driven the company’s laptop business in the fiscal third quarter.

Moreover, NVIDIA RTX Studio laptops that are capable of delivering photorealistic ray tracing, AI image enhancement and ultra-high-resolution video, is a key catalyst.

Notably, the company’s major partners have released 10 new NVIDIA RTX Studio laptops and professional-grade mobile workstations in the fiscal third quarter, which in turn is likely to have aided the company in capitalizing on growing demand for gaming laptops.

Additionally, we note that management sounded optimistic regarding the console business on the last earnings call. Consequently, increasing production of Nintendo (NTDOY - Free Report) Switch gaming consoles is likely to have acted as a tailwind for NVIDIA in the fiscal third quarter.

However, NVIDIA’s fiscal third-quarter results are likely to reflect risks related to intensifying competition from Advanced Micro Devices (AMD - Free Report) whose expanding GPU portfolio is catering to every price point.

Currently, NVIDIA has 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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