Nvidia returned to its roots when it reported profits late Wednesday, as sales of video games for chips again outpaced their data center business as the company transformed into a company positioned to take advantage of the future of computers.
The San Jose, California-based company exceeded forecasts and issued a forecast that exceeded expectations. But the results did not seem to impress investors, and after a brief rise of 1.7% in the extended session on Wednesday, the shares were torn. Shares fell approximately 0.6% by 5:12 p.m. Eastern Time.
(ticker: NVDA) is in the midst of a transformation from a company once known for its powerful video game graphics chips to a company whose chips run some of the world’s most advanced data centers with artificial intelligence chips and machine learning. Last quarter, its business data center, helped in part by the acquisition of Mellanox, outpaced sales of video game chips, which have been the company’s revenue and profit for decades.
Easily ahead of analysts, the chipmaker reported third-quarter fiscal net earnings of $ 1.34 billion, or $ 2.12 per share, compared to a net profit of $ 899 million, or $ 1.45 per share, for the period a year ago. Adjusted for stock compensation, among other things, earnings were $ 2.91 per share. Revenue rose 57 percent to $ 4.73 billion from $ 3.01 a year ago.
Analysts had expected a profit of $ 1.68 per share of sales of $ 4.42 billion; the adjusted consensus for earnings was $ 2.58 per share.
Destroying Nvidia’s business, the company reported slightly higher-than-expected revenue from video games – mostly graphics chips it sells that power video games to PCs – with sales of $ 2.27 billion, compared to the consensus estimate of $ 2.1 billion. In a comment to CFO, Nvidia said sales have benefited from new graphics cards announced in September and sales of console chips, possibly related to those that power the Nintendo Switch.
Data center sales also exceeded expectations, and Nvidia reported revenue of $ 1.9 billion, while Wall Street expects $ 1.8 billion. Israeli network company Mellanox, which Nvidia acquired earlier this year, accounted for approximately a third of data center sales, but overall the segment was raised higher due to the new Ampere-based semiconductors.
“Nvidia is firing on all cylinders, achieving record revenues in Gaming, Data Center and overall,” said CEO Jenson Huang. “The new Nvidia GeForce RTX [graphics processing unit] provides our biggest leap in generations so far and the demand is huge. Nvidia RTX has made beam tracking the new standard in gaming. “
Other segments of Nvidia, such as automotive and professional visualization, also beat consensus forecasts.
The company said it expects fourth-quarter fiscal sales of $ 4.8 billion, well above the consensus estimate of $ 4.41 billion. Nvidia did not provide guidance on earnings per share for the fourth quarter.
Shares of Nvidia closed the regular session on Wednesday with 0.1% to $ 537.15. Shares are up 128% this year, as
the index rose by 37%.
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