Nvidia falls on weak earnings results and China Covid shutdowns

Nvidia earnings

There were two events that investors were paying close attention to on Wednesday. The first was the Federal Reserve’s meeting notes, which revealed the central bank is still worried about how best to curtail inflation. The other closely watched event was Nvidia’s (NASDAQ: NVDA) Q1 financial results. With so many companies reporting weaker-than-expected earnings, jittery traders were wondering whether Nvidia would buck the trend or not.

Unfortunately for the company, Nvidia’s Q1 results ended up causing a selloff. The company reported around $8.3 billion in revenue, which was slightly better than the $8.1 billion expected. Earnings similarly managed to edge out over Wall Street’s expectations, with an EPS of $1.36 versus the $1.29 consensus target.

Most of Nvidia’s revenue growth came from its data centre business, which sells chips for cloud computing enterprises. This particular segment grew by over 83% to $3.8 billion, now surpassing the company’s long-standing flagship gaming business, which grew by 31% to $3.6 billion.

However, where the company really dropped the ball was on its future guidance. The chipmaker gave light guidance for this upcoming quarter. In particular, the company blamed China’s ongoing Covid lockdowns. Combined with the Russia-Ukraine conflict, Nvidia expects future revenues to fall by around $500 million due to both of these factors.

As we expect ongoing impact, as we prepare for a new architectural transition later in the year, we are projecting gaming revenue to decline sequentially in Q2. Channel inventory has nearly normalized and we expect it to remain around these levels in Q2,” said Kress in an interview following the analyst call. “Now we’re having a better equilibrium between the supply that we have available and prices, not perfect yet, but near normal levels of what we would like to see.”

Earlier this month, Nvidia had announced it reached a settlement with the SEC over its cryptocurrency mining disclosures. Additionally, Nvidia said that its board had authorized an additional $15 billion in share buybacks through to the end of 2023.

For the most part, the results were pretty good. Despite this, just the one piece of bad news regarding Q2 guidance figures was enough to send shares of Nvidia tumbling on Wednesday evening. It goes to show just how nervous and volatile the markets are behaving right now.

Shares of Nvidia were down around 6.9% in after-market trading following the news. Like most other popular tech stocks, Nvidia is still down substantially since the year began by around 43.6%.

In contrast, other graphics card makers, like AMD (NASDAQ: AMD), have actually reported better-than-expected results. Regardless, most tech stocks that used to be popular are all suffering greatly in this market, no matter how well their financials are.


Nvidia Company Profile

Nvidia is the leading designer of graphics processing units that enhance the experience on computing platforms. The firm’s chips are used in a variety of end markets, including high-end PCs for gaming, data centers, and automotive infotainment systems. In recent years, the firm has broadened its focus from traditional PC graphics applications such as gaming to more complex and favorable opportunities, including artificial intelligence and autonomous driving, which leverage the high-performance capabilities of the firm’s graphics processing units. – Warrior Trading News