NVidia beat earnings expectations in the July Fiscal quarter of 2023. Q2 revenue of $6.7 billion matched consensus. Non-GAAP EPS of $0.51 beat by $0.01. However, Nvidia guided for FQ3 revenue of $5.9B, plus or minus 2%. That’s below a $6.91B consensus. The release comes just two weeks after NVDA issued a sales and margin warning. $NVDA Shares got relief from Gaming and Professional Visualization segment revenue expected to be down Q/Q in FQ3, but Data Center and Automotive revenue expected to be up.
Nvidia Q2 2022 Earnings
Highlights
- Q2 Rev. $6.70b, +3% Y/Y
- Q2 Adj EPS 51c, Est. 50c
- Q2 Gaming Rev. $2.04b, -33% Y/Y
- Q2 Data Centre Revenue $3.81b, +61% Y/Y
- Q2 Adj Gross Margin 45.9% Vs. 66.7% Y/Y
- Sees Q3 Rev. $5.90b Plus or Minus 2%, Est. $6.92b
- Nvidia notes it spent $3.44B on buybacks/dividends in FQ2, and says it plans to continue buybacks in FY23 (ends in Jan. ’23).
- FQ2 free cash flow was $824M, down from $1.35B in FQ1 and $2.48B a year earlier. Nvidia ended the quarter with $17B in cash/equivalents and $10.9B in debt.
- Nvidia’s inventory rose to $3.89B in FQ2 from $3.16B in FQ1 and $2.11B a year earlier.
Nvidia says gaming GPU sales were hurt by lower sell-in to channel partners (i.e. graphics card makers), as well as “pricing programs with channel partners to address challenging market conditions that are expected to persist into the third quarter.”
“Volatility in the cryptocurrency market – such as declines in cryptocurrency prices or changes in method of verifying transactions, including proof of work or proof of stake – has in the past impacted, and can in the future impact, demand for our products and our ability to accurately estimate it,” Nvidia CFO Colette Kress said in a statement.
Nvidia says Data Center segment sales to cloud giants (hyperscalers) nearly doubled Y/Y. Hyperscalers have been an area of strength for a while, thanks in part to the large AI training and inference investments they’re making.
Sales to North American hyperscalers also rose Q/Q, while sales to Chinese hyperscalers fell Q/Q. Sales to “vertical industries” clients (i.e. enterprises) rose Q/Q and Y/Y by an unspecified amount.
Earlier Warning
n its warning NVDA estimated Gaming segment sales were down 33% Y/Y in FQ2, thanks to softer gaming GPU demand and channel inventory corrections. They also said Data Center revenue was estimated to be up 61% Y/Y in part due to strong server GPU demand from cloud giants.
Balance Sheet and Cash Flow
- Cash, cash equivalents and marketable securities were $17.04 billion, down from $19.65 billion a year ago and down from $20.34 billion a quarter ago. The year-on-year and sequential decreases reflect share repurchases offset by free cash flow generation.
- Accounts receivable was $5.32 billion compared with $3.59 billion a year ago and $5.44 billion a quarter ago.
- DSO was 72 days, up from 50 days a year ago and up from 60 days a quarter ago.
- Inventory was $3.89 billion compared with $2.11 billion a year ago and $3.16 billion a quarter ago.
- Outstanding gross inventory purchase and long-term supply obligations were $9.22 billion, up from $4.79 billion a year ago due to longer lead-times throughout the supply chain, and down from $9.59 billion a quarter ago.
- Prepaid supply agreements were $3.14 billion, up from $3.06 billion a quarter ago. DSI was 93 days, up from 84 days a year ago and down from 101 days a quarter ago.
- Cash flow from operating activities was $1.27 billion, down from $2.68 billion a year ago and down from $1.73 billion a quarter ago. The year-on-year decrease reflects lower revenue, higher cash tax payments, and increased inventory levels. The sequential decrease reflects lower revenue and higher cash tax payments, partially offset by reduced advance long term supply payments.
- Free cash flow was $824 million, down from $2.48 billion a year ago and down from $1.35 billion a quarter ago.
Outlook
- Gaming and Professional Visualization segment revenue is expected to be down Q/Q in FQ3,
- Data Center and Automotive revenue is expected to be up.
- Guiding for an FQ3 non-GAAP gross margin of 65%, plus or minus 50 bps. That suggests it doesn’t expect to take major inventory charges during the quarter.
Source: NVidia, AlphaStreet
From The TradersCommunity Research Desk