- Quarterly revenue and profits break records
- Data centre sales hurt by China restrictions
- Stock slips 2% after-hours
Beating forecasts has become commonplace for Nvidia (NVDA:NASDAQ) for several quarters but the outlook on China remains a bit murky, a market where the US company has struggled with export restrictions and pressure from Beijing.
It presents investors with a level of uncertainty that may or may not clear down the line. Nvidia’s stock fell about 2% in after-hours trading after reporting fiscal first quarter adjusted earnings of $1.04 per share on $46.7 billion of revenue, beating consensus forecasts of $1.01 and $46.1 billion.
Three years ago, Nvidia was doing less than $7 billion of quarterly revenue.
DATA CENTRES REVENUE
However, data centre revenue, its largest and most critical division, came in at $41.1 billion, missing analysts’ projection of $41.34 billion. The company said that $33.8 billion of Nvidia’s data centre sales were for Nvidia’s GPU chips, down 1% from the first quarter due to $4 billion fewer H20 sales because it sold none of these chips to China in the quarter.
Relaxation of export controls could see Nvidia sell between $2 billion and $5 billion of H20 chips this quarter, although these potential sales are not included in revenue guidance.
Nvidia expects to generate $54 billion in revenue in its fiscal third quarter, plus or minus 2%, a fraction above the $53.5 billion anticipated by analysts, but this includes zero H20-related revenue to China.
GLASS HALF FULL
Spun positively, it implies there’s room for upside to Q3 sales if it gets the green light from Washington. ‘If their sales to China are able to surprise next quarter, that could be a huge catalyst moving forward’, wrote one analyst in a note to clients.
Another big issue discussed by Nvidia chief financial officer Colette Kress, is that the widely reported arrangement Trump struck with Nvidia, under which the government would get a 15% cut of the company’s China revenues, hasn’t been codified in regulations.
Nvidia also noted in a securities filing that the arrangement with the government ‘may subject us to litigation’, suggesting the deal isn’t quite as set in stone as Trump implies.
