Nvidia (NASDAQ: NVDA) said that "challenging market conditions" and a decline in sales of its PC parts are responsible for the company's recent EPS and revenue miss.
Nvidia's Q2 results seem to line up with the company's earlier warning that it would miss Wall Street's estimates. The company announced at the time that its revenue would likely come in at $6.7 billion, missing its earlier figure of $8.1 billion by a significant margin.
"We are navigating our supply chain transitions in a challenging macro environment and we will get through this," said Nvidia founder and CEO, Jensen Huang, in a press release. "Accelerated computing and AI, the pioneering work of our company, are transforming industries. Automotive is becoming a tech industry and is on track to be our next billion-dollar business. Advances in AI are driving our Data Center business while accelerating breakthroughs in fields from drug discovery to climate science to robotics."
Huang has also noted that the company overproduced graphical processing units (GPUs), and currently holds a bloated inventory.
Investors initially seemed spooked, triggering a 2% drop in pre-market trading on Thursday. However, it seems that Wall Street still has plenty of confidence in the tech company, with shares recovering 5% late by 3:30 Thursday afternoon.
Inside Nvidia's Q2 Report
Nvidia met its preliminary estimates and pulled in $6.7 billion, 19% down from the $8.3 billion it pulled in last quarter, but up 3% year over year.
Adjusted earnings per share came in at $0.51, a 63% drop compared to Q1 and 51% year over year, and a wide miss from analyst estimates of $1.26.
Nvidia's data center division had a stronger showing compared to its gaming division, coming in at $3.81 billion, a 1% rise from the previous quarter, but up 61% year over year. Gaming revenue was $2 billion, a 44% decline from Q1 and a drop of 33% year over year.
So, Now There's a Supply Glut?
At one point, due to interest in crypto mining, supply line dysfunction, and recurring problems such as scalping, it was extremely difficult to obtain a GPU. The prices for Nvidia's gaming GPUs steadily grow over the last few years, pricing many consumers out of their next upgrade.
However, the crypto crash, the shift of some crypto assets to proof-of-stake over mining, and Nvidia's overproduction coalesced to finally cause a reversal of rising prices.
"We found ourselves with excess inventory," Huang said in an earnings call. "Our strategy is to sell-in well below the current sell-through levels in the marketplace to give the channel an opportunity to correct."
Distributors can expect much cheaper prices for Nvidia's older products as it slims down its inventory. This could result in widespread sales for consumers in the coming months, especially as retailers try to make room for the forthcoming RTX 4000 family of GPUs in the fall.