NVIDIA Corporation NVDA is slated to report second-quarter fiscal 2023 results on Aug 24.
NVIDIA has impressed investors with its stellar financial performance and experienced robust top and bottom-line growth in the past several quarters. However, the weakening demand for its chips used in gaming and data center end markets is likely to have put a brake in its growth momentum during the second quarter of fiscal 2023.
Soft Gaming Chip Demand to Hurt Q2 Revenues
In the last reported quarter, revenues from the gaming business unit shot up 31% year over year and 6% sequentially to $3.62 billion. NVIDIA had been experiencing robust sales for its chips used in gaming end market for the past couple of years, driven by pandemic-induced stay-at-home instructions.
NVIDIA Corporation Price and EPS Surprise
NVIDIA Corporation price-eps-surprise | NVIDIA Corporation Quote
The demand for NVIDIA’s gaming chips increased immensely as people were surfing games to stay engaged and entertained indoors during lockdowns. Moreover, with the massive emergence of multiplayer online games and Gaming-as-a-Service concepts, demand for graphic processing units shot up exponentially.
However, in its fiscal second-quarter preliminary results reported on Aug 8, NVIDIA stated that Gaming segment revenues would decline significantly in the second quarter, suggesting a reduction in channel partner sales due to macroeconomic headwinds. The company anticipates reporting Gaming segment revenues of $2.04 billion, down 33% year over year and 44% sequentially.
Weakness in Data Center Chip Sales
The continued strength of its data center business on the growing adoption of cloud-based solutions amid the pandemic-induced work-from-home wave is expected to have boosted NVDA’s second-quarter revenues. An increase in the Hyperscale demand and the growing adoption in the inference market are likely to have been tailwinds during the to-be-reported quarter.
However, the company stated that data center revenues might fall short of management’s expectations due to ongoing supply-chain disruptions. NVIDIA projects to report revenues of $3.81 billion from the segment, indicating an increase of 61% on a year-over-year basis and 1% sequentially.
Zacks Rank & Stocks to Consider
NVIDIA currently carries a Zacks Rank #4 (Sell). Shares of NVDA have decreased 42% year to date (“YTD”).
Some better-ranked stocks from the broader Computer and Technology sector are Clearfield CLFD, Silicon Laboratories SLAB and Taiwan Semiconductor TSM. While Clearfield and Silicon Laboratories each sport a Zacks Rank #1 (Strong Buy), TSM carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Clearfield’s fourth-quarter fiscal 2022 earnings has been revised upward by 10 cents to 80 cents per share over the past 30 days. For fiscal 2022, earnings estimates have moved 36 cents north to $3.13 per share in the past 30 days.
Clearfield’s earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 33.9%. Shares of CLFD have soared 41.2% YTD.
The Zacks Consensus Estimate for Silicon Laboratories’ third-quarter 2022 earnings has increased 22.9% to $1.02 per share over the past 30 days. For 2022, earnings estimates have moved 14.2% up to $4.18 per share in the past 30 days.
Silicon Laboratories’ earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 63.6%. Shares of SLAB have decreased 35.6% YTD.
The Zacks Consensus Estimate for Taiwan Semiconductor’s third-quarter 2022 earnings has been revised a penny southward to $1.69 per share over the past seven days. For 2022, earnings estimates have moved 37 cents north to $6.30 per share in the past 60 days.
TSM’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 3.9%. Shares of the company have decreased 29.1% YTD.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
NVIDIA Corporation (NVDA) : Free Stock Analysis Report
Taiwan Semiconductor Manufacturing Company Ltd. (TSM) : Free Stock Analysis Report
Silicon Laboratories, Inc. (SLAB) : Free Stock Analysis Report
Clearfield, Inc. (CLFD) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
Add Comment