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Feb. 12, 2020, 2:11 p.m. EST

Nvidia earnings: A return to revenue growth expected after a tough year

Expect easy comparisons to last year’s challenged quarters

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By Wallace Witkowski, MarketWatch


Bloomberg News
Jensen Huang, Nvidia president and CEO.

After more than a year of quarterly revenue declines, Nvidia Corp. is finally expected to return to growth just before potentially announcing its next round of new products with many analyst seeing a potential short-term headwind in gaming because of the COVID-19 coronavirus outbreak balanced out by strong data-center trends.

Nvidia /zigman2/quotes/200467500/composite NVDA -0.89%  is scheduled to report earnings after the close of markets on Thursday, and revenue is expected to increase for the first time in more than a year. Nvidia’s largest segment, gaming, and the business that has seemed most important to investors in recent years, data-center chips, are expected to drive the growth.

Data-center sales have been one of the most widely watched sectors in the chip industry this earnings season, after a decline in infrastructure sales in 2019 led to doubts about the cloud boom. Earlier in earnings season, Intel Corp. /zigman2/quotes/203649727/composite INTC -2.32%  reported a surprise jump in its data-center sales, while Advanced Micro Devices Inc. /zigman2/quotes/208144392/composite AMD +1.13%  reported that data-center sales were strong even though those results were masked by being lumped together with poor console sales.

Read: The problem with AMD’s data-center business

Reporting after those two rivals means the bar has been raised for Nvidia. Instinet analyst David Wong, who has a hold rating and a $147 price target on Nvidia, expects data-center sales growth to be strong, but only against the “easy” comparisons of last year’s disappointment.

“We continue to think that its GPU products might only address a portion of the data center processor/accelerator market,” Wong said. “We will be interested to see if Nvidia will be able to demonstrate superior year-over-year growth in its data center segment when the comparisons become more difficult, beginning in the October 2020 quarter.”

What to expect

Earnings: Of the 31 analysts surveyed by FactSet, Nvidia on average is expected to post adjusted earnings of $1.67 a share, up from 92 cents a share in the year-ago quarter. Estimize, a software platform that uses crowdsourcing from hedge-fund executives, brokerages, buy-side analysts and others, calls for earnings of $1.70 a share.

Revenue: Wall Street expects Nvidia to return to its first quarterly revenue gain after four straight quarters of declines with revenue of $2.96 billion from Nvidia, according to 32 analysts polled by FactSet. That’s down from the $3.06 billion forecast at the beginning of the quarter, but up from the $2.21 billion reported in the year-ago quarter. Estimize expects revenue of $2.99 billion.

Revenue from gaming, Nvidia’s largest business, is expected to rise 59% to $1.53 billion, while data-center revenue is expected to rise 21% to $824.9 million, according to FactSet data..

Stock movement: Nvidia shares have gained nearly 30% since the company’s last earnings report in mid-November. In comparison, the S&P 500 index /zigman2/quotes/210599714/realtime SPX +1.85% has gained 9%, the tech-heavy Nasdaq Composite Index /zigman2/quotes/210598365/realtime COMP +0.75% has grown 15%, and the PHLX Semiconductor Index /zigman2/quotes/210598361/realtime SOX -0.05% has increased 13% in that time.

What analysts are saying

Jefferies analyst Mark Lipacis, who has a buy rating and a $315 price target, pointed to recent earnings reports from large public cloud providers as proof that data-center sales were on the upswing.

“Google /zigman2/quotes/202490156/composite GOOGL -0.18% /zigman2/quotes/205453964/composite GOOG -0.02% , Microsoft /zigman2/quotes/207732364/composite MSFT +0.02%  and Facebook /zigman2/quotes/205064656/composite FB -0.41%  expect strength in capital spending to continue into 2020, and Google noted a focus on machine learning and a shift to equipment from facilities,” Lipacis said. “This is consistent with NVDA’s commentary at CES suggesting strength in DC revenues in 4Q19 and 1Q20.”

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$ 264.57
-2.38 -0.89%
Volume: 4.37M
April 9, 2020 10:59a
P/E Ratio
58.66
Dividend Yield
0.24%
Market Cap
$163.37 billion
Rev. per Employee
$882,428
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/zigman2/quotes/203649727/composite
US : U.S.: Nasdaq
$ 57.61
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Market Cap
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$659,665
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/zigman2/quotes/208144392/composite
US : U.S.: Nasdaq
$ 49.34
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166.63
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N/A
Market Cap
$57.13 billion
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$641,089
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2,800.84
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Volume: 1.33B
April 9, 2020 11:00a
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/zigman2/quotes/210598365/realtime
US : U.S.: Nasdaq
8,151.44
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/zigman2/quotes/210598361/realtime
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1,638.99
-0.90 -0.05%
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April 9, 2020 11:00a
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/zigman2/quotes/202490156/composite
US : U.S.: Nasdaq
$ 1,204.78
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P/E Ratio
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Dividend Yield
N/A
Market Cap
$769.02 billion
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$1.39M
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/zigman2/quotes/205453964/composite
US : U.S.: Nasdaq
$ 1,210.00
-0.28 -0.02%
Volume: 596,261
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P/E Ratio
24.57
Dividend Yield
N/A
Market Cap
$769.02 billion
Rev. per Employee
$1.39M
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/zigman2/quotes/207732364/composite
US : U.S.: Nasdaq
$ 165.16
+0.03 +0.02%
Volume: 17.76M
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P/E Ratio
28.71
Dividend Yield
1.24%
Market Cap
$1255.99 billion
Rev. per Employee
$902,473
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/zigman2/quotes/205064656/composite
US : U.S.: Nasdaq
$ 173.56
-0.72 -0.41%
Volume: 6.88M
April 9, 2020 10:59a
P/E Ratio
26.95
Dividend Yield
N/A
Market Cap
$496.78 billion
Rev. per Employee
$1.57M
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