Nvidia Corp. (NVDA) shares traded sharply higher Friday after the chipmaker posted stronger-than-expected second quarter earnings as video game revenues offset an ongoing slide in data center sales.
Nvidia said adjusted earnings for the three months ending on July 28 came in at $1.24 per share, down 36% from the same period last year but firmly ahead of the Street consensus forecast of $1.15 per share. Group revenues, Nvidia said, fell 17% to $2.58 billion but edged just ahead of analysts' forecasts of a $2.55 billion tally.
Looking into the group's 2020 fiscal year, Nividia said it sees current quarter revenues of $2.9 billion, plus or minus 2%, and GAAP and non-GAAP gross margins of between 62% percent and 62.5% respectively.
"We're happy with our results this quarter and our return to growth across our platforms. Gaming is doing great. It's great to see NVIDIA RTX reinvigorating the industry. GeForce has several growth drivers," CEO Jensen Huang told investors on a conference call late Thursday. "Ray traced games continue to gain momentum. A large number of gaming laptops are rolling out, and our new Studio platform is reaching the large underserved community of creators."
"Outside a few hyperscalers, we're seeing broad-based growth in data centers. AI is the most powerful technology force of our time and a once-in-a-lifetime opportunity."
Nvidia shares were marked 8% higher at the start of trading Friday to change hands at $160.71 each, a move that would extend the stock's year-to-date gain to around 20% and value the Santa Clara, California-based chipmaker at around $98.2 billion.
Gaming revenues, Nvidia said, were down 27% from last year at $1.31 billion, but topped forecasts and was actually up 24% from the previous quarter. That gain offset a 14% year-on-year slide for data center revenues, which came in at $655 million.
"Nvidia's gross margin appears to be recovering in a sustainable manner, higher than what we have been modeling for," said BMO Capital Markets analyst Ambrish Srivastava, who boosted his price target on the stock by $5 to $145 following the earnings release. "OpEx is a little lower as well vs. our model."
"On the revenue front, Gaming appears to be normalizing, while Datacenter missed expectations for F2Q, and the commentary on a broad-based recovery seemed a bit disconnected to us," he added