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Nvidia earnings: Chip giant squeaks by Wall Street expectations, despite 46% drop in gaming revenue

Graphics card giant Nvidia (NVDA) announced its Q4 earnings after the bell on Wednesday, beating analysts' estimates on the top and bottom line despite a 46% year-over-year decline in gaming revenue.

Better still for Nvidia, the company says it expects Q1 revenue of $6.5 billion versus Wall Street's estimates of $6.35 billion.

Shares of Nvidia were up more than 6% immediately following the report and was up around 8% as of 6:37 AM in premarket trading on Thursday.

Here are the most important numbers from the report compared to what Wall Street was expecting from the company, as compiled by Bloomberg.

  • Revenue: $6.05 billion versus $6.02 billion expected

  • Adjusted EPS: $0.88 versus $0.81 expected

  • Data center revenue: $3.62 billion versus $3.87 billion expected

  • Gaming: $1.83 billion versus $1.6 billion expected

  • Professional visualization: $226 million versus $195 million expected

  • Auto and robotics: $294 million versus $267 million expected

"AI is at an inflection point, setting up for broad adoption reaching into every industry,” Nvidia CEO Jensen Huang said in a statement. “From startups to major enterprises, we are seeing accelerated interest in the versatility and capabilities of generative AI.

Wall Street believes Nvidia has a new potential growth opportunity with the new explosion in interest in generative A.I. platforms like OpenAI’s ChatGPT, Microsoft’s (MSFT) Bing, and Google’s (GOOG, GOOGL) Bard. Artificial intelligence platforms require huge amounts of processing power and Nvidia’s graphics cards are well suited for such applications.

Nvidia’s AI-powered data center business revenue has jumped from $968 million in Q4 2019 to $3.62 billion in the latest quarter.

Nvidia Corp CEO Jensen Huang holds one of the company's new RTX 4090 chips for computer gaming in this undated handout photo provided September 20, 2022. Courtesy of Nvidia Corp/Handout via REUTERS ATTENTION EDITORS - THIS IMAGE HAS BEEN SUPPLIED BY A THIRD PARTY
Nvidia Corp CEO Jensen Huang holds one of the company's new RTX 4090 chips for computer gaming in this undated handout photo provided September 20, 2022. (Image: Nvidia) (Handout . / reuters)

But the chip maker, like the rest of the gaming industry, has also been dealing with a decline in sales relative to the same time last year when gamers were clamoring for new hardware and software towards the tail end of the pandemic era. In Q3, the company’s game business revenue collapsed 51% year-over-year.

The pandemic sent gamers searching for graphics cards and computers running Nvidia hardware so they could play big-name titles like “Call of Duty,” “Fortnite,” and “Roblox.” Now that they have that hardware, they don’t need to upgrade, sending Nvidia’s gaming revenue spiraling.

“Gaming is recovering from the post-pandemic downturn, with gamers enthusiastically embracing the new Ada architecture GPUs with AI neural rendering,” Huang said.

Take out the pandemic era, though, and look at the company’s Q4 earnings from Feb. 2020 and gaming revenue was at $1.5 billion. The year before? Just $954 million. In other words, the gaming segment is correcting for the unsustainable growth it saw during the pandemic.

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Got a tip? Email Daniel Howley at dhowley@yahoofinance.com. Follow him on Twitter at @DanielHowley.

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