Despite reporting estimate beating forecast for sales for the third quarter, investors remained worried about the results of the rising semiconductor industry star’s data center business during the second quarter of the current year which affected the shares of the company.
Wall Street expectations for the second quarter were also beaten by the company that currently has market capitalization that is greater than that of f Intel Corp.
Despite this the shares of the company were down by 1.5 per cent. But for the year to date, the share price of the company have soared by more than 185 per cent while the company’s valuation is about 53 times expected earnings over the next 12 months.
According to IBES data from Refinitiv, analysts expected the company to forecast third quarter revenues of $3.97 billion while the company forecast its third quarter revenues to be at $4.40 billion – plus or minus 2 per cent, Nvidia said.
According to FactSet data, the company also reported revenues from its data center business for the second quarter at $1.75 billion which beat market estimates of $1.71 billion.
About 30 per cent of its revenues from its data centre business was contributed by Mellanox, the Israeli networking chip firm that it acquired for $7 billion in cash this year, Nvidia said.
Crunching of Nvidia’s figures shows that that the company had made a growth of 6 per cent for its core data center chips business during the quarter on a quarter to quarter basis, but a section of the company’s investors had sky high expectations from the company which was reflected in the fall in its shares, said Stacy Rasgon, an analyst with Bernstein.
After both introducing them and starting shipments in the second quarter, Nvidia is shipping its newest data center products as fast as possible, which in the past would have taken several quarter to be undertaken, said the company’s Chief Executive and co-founder Jensen Huang in a media interview.
“We’re going to do a lot more next quarter. We’re going to do a lot more the quarter after that,” he said. “We’re going ramp up here in the second half, and that’s going give us another boost.”
Revenue of $1.65 billionw was reported by the company’s gaming business which also beat estimates of analysts at $1.41 billion.
In the second quarter ended July 26, there was an almost 50 per cent growth in revenues of the company, Nvidia said, which also beat the analysts expectations $3.65 billion, according to Refinitiv IBES.
The company also reported a growth in its net income to $622 million, or $0.99 per share, for the quarter compared to $552 million, or $0.90 per share for the same period a year ago.
Semiconductor chips that helped video game graphics look more realistic was what Nvidia was once primarily known for. But the company changed its focus about a decade ago with an anticipated rise of artificial intelligence applications such as the image recognition or natural language processing computing which is behind the functioning of all modern technologies – from autonomous vehicle development to voice assistants.
This change in the technology landscape propelled Nvidia to become the largest chip company in the United States in terms of market capitalization in July as it overtook Intel.
(Adapted from BusinessWorld.in)