Nvidia's (NVDA - Get Report) stock has been on a roller-coaster ride in recent months, and it saw more of the same on Thursday afternoon as markets digested its results, guidance and earnings call commentary.
After the bell on Thursday, Nvidia reported April quarter (fiscal first quarter) revenue of $2.22 billion (down 31% annually), GAAP EPS of $0.64 and non-GAAP EPS of $0.88. Revenue slightly topped a $2.2 billion consensus; GAAP and non-GAAP EPS, both of which benefited from low tax rates, respectively topped consensus estimates of $0.58 and $0.81.
Nvidia also guided for July quarter revenue of $2.55 billion, plus or minus 2%. At the midpoint, this outlook implies an 18% annual sales decline, but is slightly above a pre-earnings consensus of $2.54 billion.
Shares initially rose over 6% in response to Nvidia's report. However, they pulled back after CFO Colette Kress made cautious remarks on the earnings call about Nvidia's near-term outlook, and finished after-hours trading up 2% to $163.39.
Here are some notable takeaways for Nvidia's earnings report and call.
1. Nvidia Is No Longer Providing Full-Year Sales Guidance
Three months ago, Nvidia forecast its fiscal 2020 (ends in Jan. 2020) revenue would be flat to down slightly, and that its Gaming segment revenue would be down slightly on the year. Both outlooks implied strong second-half sales pickups.
However, on the call, Kress said that while Nvidia expects its second-half revenue to be "sizably larger" than its first-half revenue, it's no longer providing full-year guidance. She also said the July quarter outlook (though slightly favorable to consensus) was "somewhat lower" than what Nvidia previously expected.
2. Gaming GPU Sales Were Stronger Than Expected
Nvidia's Gaming segment, which still accounts for nearly half its sales, posted April quarter revenue of $1.055 billion -- down 39% annually, but up 11% sequentially and soundly above a $934 million consensus.
The GPU channel inventory reductions that have followed a collapse in demand from cryptocurrency miners continued weighing on Gaming revenue, and lower Nintendo Switch processor sales also took a toll. However, the segment got a boost from growing sales of Nvidia's Turing-architecture GPUs, aided by strong gaming laptop demand and the launch of cheaper Turing chips (including ones that lack specialized processing cores meant to power real-time ray tracing and run AI/deep learning algorithms that can improve game performance).
In addition, during a week in which China's Tencent and NetEase reported better-than-expected numbers for their gaming operations, CEO Jensen Huang suggested Chinese gaming demand, which was hurt by a temporary halt in game monetization approvals, has stabilized. On the other hand, Kress and Huang both indicated Intel (INTC - Get Report) CPU shortages are affecting the initial ramp of Nvidia's recently-launched Turing notebook GPUs.
A breakdown of Nvidia's quarterly sales. Source: Nvidia.
3. A Cloud Capital Spending Slowdown Continues Weighing on Server GPU Sales
Nvidia's Data Center segment, which covers sales of server GPUs and related hardware, posted revenue of $634 million -- down 7% sequentially and 10% annually, and below a $664 million consensus. Much like Intel, Micron (MU - Get Report) and a number of other chip suppliers, Nvidia reports a capital spending pause among cloud clients running giant hyperscale data centers is hurting demand, as the companies digest the capacity they've built up in recent quarters. The company also suggests demand from some enterprise clients softened.
Nvidia expects demand from cloud giants, which remain heavy users of Nvidia GPUs for the demanding task of training AI models, to eventually pick up. And given that these firms are still generally seeing strong revenue growth and remain committed to investing heavily in their data center infrastructures, that should happen in time. But for now, Nvidia says Data Center sales visibility remains similar to what it was three months ago.
One bright spot for the segment: Sales of GPUs used for AI inference -- the running of trained AI models against new content such as voice assistant requests or photos uploaded from a smartphone -- rose sharply, aided by growing demand for Nvidia's Tesla T4 GPU. Kress says the contribution of inference-related sales to Nvidia's Data Center revenue "is now well into the double-digit percent."
Go Behind the Label: Nvidia Is Building the Future. How Did It Get There?
4. Automotive Revenue Saw Moderate Growth
Nvidia's Automotive segment revenue grew 2% sequentially and 14% annually to $166 million, slightly beating a $164 million consensus. Growing sales of Tegra processors used in "AI cockpit" solutions such as Mercedes' MBUX platform helped, as did autonomous driving development deals.
For now, sales of Nvidia's Drive computing systems for cars supporting some measure of autonomous driving appear to account for a small portion of Automotive revenue, but that should change in the coming years given the extent of Nvidia's customer engagements. On the call, Huang forecast sales of cars supporting Level 2+ autonomy would ramp in 2021 and 2022, and that production of robotaxis, which require a much higher level of processing power, would ramp in 2020 and 2021.
5. Inventories Remained Elevated
Nvidia ended its April quarter with $1.43 billion in inventory. That's down from $1.57 billion at the end of the January quarter, but (though revenue fell 31% annually) still up sharply from $797 million a year ago. Days sales of inventory (DSI) stood at 140 days, down by 3 days sequentially but up by 76 days annually.
6. Stock Buybacks Were (Temporarily) Halted
After spending $700 million on stock buybacks in the January quarter, Nvidia refrained from buying back additional shares in the April quarter. However, Nvidia reiterates that -- inclusive of $797 million spent over the last two quarters -- it plans to spend $3 billion on buybacks and dividends through the end of fiscal 2020.
The disclosures come as Nvidia pushes ahead with a $6.9 billion deal to buy server interconnect hardware and chip supplier Mellanox Technologies (MLNX - Get Report) . Amid worries that ongoing Chinese trade tensions could impact regulatory approval, Nvidia says it still expects the deal to close by the end of 2019.
TheStreet's Eric Jhonsa previously covered Nvidia's earnings report and call through a live blog.