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Nvidia Stock Jumps on Game-Driven Earnings, Forecast Beat; Arm Deal 'Taking Longer'

Nvidia is a rare premarket gainer Thursday after the gaming and datacenter chipmaker topped Street forecasts in its second quarter earnings report.

Nvidia Corp.  (NVDA) - Get NVIDIA Corporation Report shares powered higher Thursday after the gaming and datacenter chipmaker posted stronger-than-expected second quarter earnings that offset concerns for the fate of its $40 billion takeover of Britain's ARM Ltd.

Nvidia said current-quarter revenues should rise to around $6.8 billion, with a range of plus or minus 2%, and gross margins of around 65.2%, plus or minus 30 basis points. Second quarter earnings included a bottom line beat of $1.04 per share on sales of $6.51 billion.

Gaming chips brought in $3.06 billion in sales, Nvidia said, while its thriving datacenter business generated revenues of $2.37 billion, both of which beat analysts' forecast. 

"We expect another strong quarter with sequential growth driven largely by accelerating demand in data center. In addition, we expect sequential growth in each of our three other market platforms," CFO Colette Kress told investors on a conference call late Wednesday. "Gaming demand is continuing to exceed supply as we expect channel inventories to remain below target levels as we exit Q3."

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"We are working through the regulatory process, although some Arm licensees have expressed concerns and objected to the transaction," she added. "And discussions with regulators are taking longer than initially thought. We are confident in the deal and that regulators should recognize the benefits of the acquisition to Arm, its licensees and the industry."

Nvidia shares were marked 1% higher in early trading Thursday to change hands $192.20 each, a move that would extend the stock's year-to-date gain to around 46%.

"Nvidia posted strong beat and raise results lead by strong data center and pro visualization revenues. Data center strength was driven by both cloud and vertical industries (enterprise)," said KeyBanc Capital Markets analyst John Vinh, who lifted his price target on the stock to $245, with an 'overweight' rating, following last night's earnings report. 

"Additionally, concerns associated with inflated crypto demand appear to be de-risked, as CMP revenues in the quarter were lower than expected and are expected to be minimal going forward, while attach rates of low-hash rate gaming GPUs (which limits Ether mining capabilities) were 80% in the quarter," Vinh added.