Financial Performance

Nvidia Shares Drop 5% on Lowered Guidance

The chipmaker's cryptocurrency-mining business collapsed in the second quarter and it now expects a “negligible” revenue contribution in the future.
Matthew HellerAugust 17, 2018

Chipmaker Nvidia reported strong quarterly earnings across all its markets but the collapse of its cryptocurrency-mining business and lower-than-expected revenue guidance alarmed investors.

Nvidia’s shares fell as much as 5% in after-hours trading Thursday even though it earned $1.76 per share in the second quarter on revenue of $3.12 billion, beating analysts’ estimates of EPS of $1.67 per share on revenue of $3.11 billion.

“Growth across every platform — AI, Gaming, Professional Visualization, self-driving cars — drove another great quarter,” CEO Jensen Huang said in a news release. “Fueling our growth is the widening gap between demand for computing across every industry and the limits reached by traditional computing. Developers are jumping on the GPU-accelerated computing model that we pioneered for the boost they need.”

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But revenue from systems used for cryptocurrency mining plunged to just $18 million from $289 million in the first quarter. Nvidia CFO Colette Kress had predicted second-quarter cryptomining revenue of $100 million.

For the third quarter, the company is now expecting revenue at $3.25 billion, plus or minus 2%, with cryptomining likely to have “negligible” revenue impact in the future. The consensus estimate was $3.34 billion.

According to SiliconANGLE, cryptomining, which uses computers with graphical processing units (GPUs) in them, “has been a source of continuing concern to investors, who doubt how long the crypto boom will last.”

Analysts were also “troubled by Nvidia’s gross margin forecast of 62.8 percent, slightly below expectations of 62.9 percent and possibly a result of putting more memory modules on its chips,” Reuters said.

Nvidia’s overall results showed continuing strong demand for graphics chips used in gaming, high-performance computing and artificial intelligence. Revenue of GPUs for gaming, still by far its largest business, grew 52% from a year ago, to $1.8 billion, while professional visualization revenue rose 20 percent to $281 million.

Nvidia is expecting its next-generation Turing graphics cards will become available in the fourth quarter. “We believe gaming demand is seeing some softness due to [the Turing] product transition,” RBC Capital Markets analyst Mitch Steves wrote in a client note.