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May 16, 2019, 6:29 p.m. EDT

Nvidia stock rally loses steam on cloudy outlook for server chips, full-year earnings

After healthy earnings beat, CFO says data-center visibility remains ‘low,’ declines to give full-year guidance

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By Wallace Witkowski, MarketWatch


AFP/Getty Images

Nvidia Corp. shares shed post-earnings gains in the extended session Thursday after the graphics-chip maker did not provide a full-year outlook and said that data-center sales could remain weak.

Nvidia /zigman2/quotes/200467500/composite NVDA -0.47% shares, which surged 7% after the earnings report was released Thursday afternoon, began shedding those gains after Chief Financial Officer Colette Kress said data-center sales were expected to remain weak in the second quarter, and dispensed with providing a full-year guidance.

/zigman2/quotes/200467500/composite NVDA 210.18, -1.00, -0.47%

Back in February, Nvidia had forecast “flat to down slightly” annual revenue, compared with the $11.72 billion it reported in fiscal 2019. Shares were last up 0.7% after hours.

“The data center spending pause around the world will likely persist in the second quarter and visibility remains low,” Kress said on the conference call with analysts. “And in gaming, the CPU shortage, while improving, will affect the initial ramp of our laptop business.”

“At this time, we don’t plan on giving a full year of overall guidance,” Kress said, even though she said that drivers that had gone into the earlier full-year guidance “were still in-line.”

Nvidia did provide a forecast for the current quarter, projecting revenue of $2.5 billion to $2.6 billion, while analysts had forecast revenue of $2.54 billion.

Revenue from data centers — Nvidia’s second-largest business segment — fell 10% to $634 million from the year-ago first quarter, while analysts polled by FactSet had expect data-center sales to decrease about 5% to $663.7 million.

For more: The promise of a magical rebound for tech comes with little evidence to back it up

Overall, the company reported first-quarter net income of $394 million, or 64 cents a share, compared with $1.24 billion, or $1.98 a share, in the year-ago period. Analysts surveyed by FactSet had forecast earnings of 58 cents a share.

Revenue fell to $2.22 billion from $3.21 billion in the year-ago quarter. Analysts had forecast revenue of $2.2 billion.

“Nvidia is back on an upward trajectory,” said Jensen Huang, Nvidia founder and chief executive, in a statement. “Despite the near-term pause in demand from hyperscale customers, the application of AI continues to accelerate.”

Gaming, Nvidia’s largest segment, saw revenue fall 39% to $1.06 billion, but that was better than the $933.5 million expected by Wall Street. On the call, Huang said that gaming sales in China were “vibrant.”

See also: Here are the stocks to buy if an all-out U.S.-China trade war erupts, says Goldman

Professional visualization sales rose 6% to $266 million, while the Street expected $289.9 million. Auto sales rose 14% to $166 million, while analysts expected $163.8 million, and “OEM & IP,” or original equipment manufacturers and intellectual property, revenue fell 74% to $99 million, lower than the $121.4 million expected by the Street.

Shares of Nvidia closed up 0.4% at $160.19 in Thursday’s regular session, but have declined 34.9% in the past year. Stock options before earnings had implied a tamer-than-usual stock reaction.

The PHLX Semiconductor Index /zigman2/quotes/210598361/realtime SOX -1.13%  finished down 1.7% on Thursday amid concerns about a U.S. ban on Huawei equipment, while the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -0.20%  rose 0.8%, the S&P 500 index /zigman2/quotes/210599714/realtime SPX -0.16%  gained 0.9% and the tech-heavy Nasdaq Composite Index /zigman2/quotes/210598365/realtime COMP -0.24%  advanced 1%.

/zigman2/quotes/200467500/composite
US : U.S.: Nasdaq
$ 210.18
-1.00 -0.47%
Volume: 7.21M
Nov. 21, 2019 4:00p
P/E Ratio
53.75
Dividend Yield
0.30%
Market Cap
$129.24 billion
Rev. per Employee
$882,428
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/zigman2/quotes/210598361/realtime
US : Nasdaq
1,690.83
-19.32 -1.13%
Volume: 198,105
Nov. 21, 2019 5:16p
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/zigman2/quotes/210598065/realtime
US : Dow Jones Global
27,766.29
-54.80 -0.20%
Volume: 232.02M
Nov. 21, 2019 4:58p
loading...
/zigman2/quotes/210599714/realtime
US : S&P US
3,103.54
-4.92 -0.16%
Volume: 1.86B
Nov. 21, 2019 4:58p
loading...
/zigman2/quotes/210598365/realtime
US : U.S.: Nasdaq
8,506.21
-20.52 -0.24%
Volume: 1.88M
Nov. 21, 2019 5:16p
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Wallace Witkowski is a MarketWatch news editor in San Francisco. Follow him on Twitter @wmwitkowski.

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