• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • TheStreet Smarts
  1. Home
  2. / Investing
  3. / Technology

Nvidia Reports Earnings on Thursday: 5 Important Things to Watch

Cloud demand trends, gaming GPU sales and Mellanox deal commentary are among the things to watch as Nvidia reports.
By ERIC JHONSA
Nov 12, 2019 | 05:34 PM EST
Stocks quotes in this article: NVDA, INTC, WDC, MLNX

Nvidia's (NVDA) shares are up 40% since the GPU giant posted better-than-feared results and guidance in August, and 57% on the year.

It's safe to say that expectations have risen a bit going into Nvidia's October quarter (fiscal third quarter) report, which arrives on Thursday afternoon. The consensus among analysts polled by FactSet is for revenue of $2.92 billion (up 13% sequentially and down 8% annually), GAAP EPS of $1.24 and non-GAAP EPS of $1.58.

For the January quarter -- Nvidia provides sales guidance within its reports -- the consensus is for revenue of $3.06 billion (up 39% annually with the help of an easy comparison).

TheStreet will be live-blogging Nvidia's earnings report on Thursday, along with a call that's set for 5:30 P.M. Eastern Time. Here are some things for investors to keep an eye on.

1. Demand from Cloud Clients

Though Nvidia topped July-quarter sales estimates, its Datacenter segment, which covers sales of server GPUs and Nvidia's GPU-filled DGX systems, fell 14% annually to $655 million and missed estimates. Nvidia suggested that a recent cloud hardware spending pause -- an issue also affecting a slew of other chip suppliers -- weighed on sales, while adding that its enterprise sales (boosted by DGX deal activity) grew. CEO Jensen Huang noted that Nvidia has limited sales visibility for some of its major cloud clients (the proverbial hyperscalers).

For the October quarter, the consensus is for Datacenter revenue of $754 million -- up 15% sequentially and down 5% annually. Though some hyperscalers are spending more aggressively than others right now, there have been some signs -- from Intel (INTC) , Western Digital  (WDC) and others -- that total cloud hardware spend is starting to pick up.

2. Gaming Sales Trends

Nvidia gaming GPU sales began to recover in the July quarter from a late-2018/early-2019 tumble caused in large part by inventory corrections that followed a plunge in demand from cryptocurrency miners. That trend is believed to have continued in the October quarter: The consensus is for Nvidia's Gaming segment revenue, which covers gaming GPUs as well as console processor sales, to come in at $1.54 billion -- down 13% annually but up 18% sequentially.

The July launch of Nvidia's "Super"-branded Turing architecture GPUs, which deliver moderate performance gains relative to their predecessors, might have provided a lift. Also, Nvidia, whose Tegra X1 system-on-chip (SoC) powers Nintendo's Switch console, indicated in August that it's getting a boost from production ramps for new Switch models.

3. Automotive Trends

Nvidia's Automotive segment, which covers infotainment processors as well as engagements related to the company's Drive platform for autonomous and semi-autonomous vehicles, was a standout in the July quarter, with revenue rising 30% annually to $209 million. Nvidia indicated the growth largely stemmed from a new autonomous development agreement (possibly with Volvo).

CFO Colette Kress cautioned afterwards that Nvidia's Automotive sales can be lumpy from one quarter to another, while reiterating that the company sees the segment as a long-term growth driver. For the October quarter, the Automotive revenue consensus stands at $199 million (up 16%).

4. Gross Margin Growth

After falling in the prior quarters due to lower sales volumes and the loss of high-margin revenue from the crypto mining segment, Nvidia's non-GAAP gross margin (GM) rose 1.1 points sequentially in the July quarter to 60.1%, with the help of Automotive services revenue and a more favorable Gaming product mix.

Nvidia guided for its GM to rise to a level of 62% to 63% in the October quarter. Kress indicated an improved Gaming product mix would be the biggest driver of margin growth.

5. Mellanox Commentary

In August, Nvidia insisted that is still expects its $6.9 billion deal to buy high-speed data interconnect supplier Mellanox Technologies (MLNX) , which was announced in March, to close by year's end. However, amid ongoing trade tensions, there still hasn't been any word to date about Chinese regulatory approval.

With trade tensions having eased a little lately, Mellanox's stock has risen to around $115. However, that still leaves it comfortably below Nvidia's $125-per-share buyout price. Any comments that Nvidia's management shares about the deal's approval process will be closely watched.

Nvidia is a holding in Jim Cramer's Action Alerts PLUS member club.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.
TAGS: Investing | Technology

More from Technology

Xylem Posts an Earnings Beat: Time to Test the Waters?

Bruce Kamich
Feb 7, 2023 9:30 AM EST

Let's check out the charts of this water technology company to see how the short and long-term are shaping up.

Hot for AI Stocks? Try This Intelligent Approach to Artificial Intelligence

Bob Byrne
Feb 7, 2023 8:30 AM EST

Rather than get burned by issues with suddenly inflated prices that eventually could crash back to earth, go with tried-and true-names in technology development.

Skyworks Solutions Is Improving but Doesn't Appear to Be Heading Skyward

Bruce Kamich
Feb 7, 2023 7:50 AM EST

The charts indicate that the shares of the semiconductor maker are likely to trade sideways for a while even as it gains an analyst's buy recommendation.

Delving Into Dell's Charts After It Joins the List of Tech Layoffs

Bruce Kamich
Feb 6, 2023 2:55 PM EST

What's next for the shares?

The Father of FANG Says Not to Give Up on His Four Children

Bob Lang
Feb 6, 2023 12:30 PM EST

The man who lays claim to coining the FANG acronym says those who walk away from the stocks that make up that quartet are making a mistake.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 08:22 AM EST REAL MONEY

    LIVE EVENT: Bruce Kamich and Todd Campbell Share Their Stock Market Insights

    This Monday, Feb. 6 at 12 p.m., our very own exper...
  • 02:58 PM EST REAL MONEY

    Sarge Guilfoyle Breaks Down the Jobs Report, Fed Policy and Stocks!

    Watch it here!
  • 11:35 AM EST JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    Trading an Irrational Market
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2023 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login