NVIDIA (NVDA - Free Report) fourth-quarter fiscal 2020 results, scheduled to be reported on Feb 13, are likely to have benefited from recovery in its datacenter business.
The company’s fate is tied to its datacenter segment, which accounts for a bulk of its revenues. Sluggish growth in the datacenter market owing to a temporary pause in cloud spending had been a major overhang on the company last year.
However, robust sequential growth in datacenter revenues in the last reported quarter coupled with management's solid guidance in the same for the soon-to-be-reported quarter raises our optimism around this segment.
Notably, the Zacks Consensus Estimate for Datacenter revenues in the fourth quarter is pegged at $820 million, indicating an increase of 20.7% from the figure reported in the year-ago quarter and 12.9% sequentially.
Click here to know how the company’s overall fiscal Q4 performance is likely to be.
Datacenter Business Likely to Aid Fiscal Q4
Datacenter presents solid growth opportunity for the company. As more and more businesses are shifting to cloud, the need for datacenters is increasing. This is likely to have positively impacted the company’s upcoming results. Uptick in spending by hyperscalers is likely to have remained a tailwind.
Growing adoption of Conversational AI among hyperscale customers is likely to have remained a key driver. NVIDIA believes Conversational AI to be a powerful catalyst for it in both training and inference. Increasing adoption of Natural Language Processing by cloud players is expected to have been an upside.
Further, growing adoption of the company’s T4 GPU in public clouds makes us optimistic this earnings season. The company shipped more T4 GPUs than V100 in the last reported quarter given solid inference demand growth. In September, Amazon (AMZN - Free Report) cloud computing arm, AWS, announced general availability of the T4 globally, following the T4 rollout on Alphabet’s (GOOGL - Free Report) Google Cloud platform earlier in 2019.
Preferred by the datacenter operators, NVIDIA’s GPUs are likely to have helped the company grab a larger market space. Their impact on the upcoming quarterly results remains to be seen.
Zacks Rank and a Key Pick
NVIDIA carries a Zacks Rank #3 (Hold). A better-ranked stock in the broader technology sector is Applied Materials (AMAT - Free Report) , flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth rate for Applied Materials is currently pegged at 8.2%.
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