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Nvidia (NVDA) Q4 Earnings Preview: Gaming, Data Centers & More

Benjamin Rains

Shares of Nvidia NVDA popped 1.13% during regular trading hours Wednesday, with the firm set to release its Q4 fiscal 2019 financial results after the closing bell Thursday. Wall Street will be watching the newly struggling chip power closely. So, let’s look at what investors should expect from Nvidia.

Overview

Nvidia joined the likes of Apple AAPL when it drastically lowered its holiday quarter guidance amid the economic slowdown in China. The company, known for its gaming-focused graphics chips, dropped its Q4 revenue projection from $2.70 billion to $2.20 billion in late January.

The company had been on a tear for a roughly three-year stretch and launched in 2018 its new GPUs based on its much-anticipated Turing architecture. But Nvidia, like Advanced Micro Devices AMD and others, has experienced a downturn in cryptocurrency-related demand in the already historically cyclical chip business. “Q4 was an extraordinary, unusually turbulent, and disappointing quarter,” CEO Jensen Huang said in a recent statement.

With that said, shares of NVDA have surged over 20% since Christmas—along with the likes of Facebook FB and Amazon AMZN—despite it updated guidance. Nvidia stock has also slightly outpaced its peer group over the last year, which includes Texas Instruments TXN and Intel INTC.

Still, NVDA stock closed regular trading at $152.88 a share Wednesday. This marked a 48% downturn from its 52-week high and means there is room for NVDA to run if investors see any signs of positivity.

 

Q4 Outlook

Moving on, NVDA’s fourth-quarter fiscal 2019 revenues are projected to plummet 18.6% from the year-ago quarter to reach $2.36 billion, based on our current Zacks Consensus Estimate. This would mark Nvidia’s first revenue decline in more than five years and stand in stark contrast to Q3’s 21% top-line expansion, Q2’s 40% climb, and Q1 66% jump.

More specifically, our NFM estimates call for the company’s vital gaming unit to tumble roughly 28% from the year-ago period to hit $1.257 billion. Investors might find some hope in the fact that it looks like Nvidia’s gaming unit is expected to account for a bulk of the company’s projected Q4 revenue decline.

NVDA’s datacenter division is projected to see its revenues pop 33% to reach $807.8 million. Meanwhile, the chip firm’s automotive unit is expected to reach $167.42 million in Q4, which would mark a 27% climb.

Earnings Trends

At the bottom end of the income statement, Nvidia is projected to see its adjusted quarterly earnings tank 56.4% from the prior-year quarter to $0.75 a share. Plus, the chart below shows us just how much NVDA’s bottom-line outlook has come down over the last 30 days—and not just for Q4.

Bottom Line

Nvidia is currently a Zacks Rank #5 (Strong Sell) based, for the most part, on its negative earnings estimate revision activity. But let’s not forget that NVDA stock sits so far off its highs that it could pop after its earnings release if it posts better-than-expected results or provides upbeat guidance.

The company is scheduled to release its Q4 fiscal 2019 financial results after the closing bell on Thursday, February 14. Make sure to head back to Zacks for a complete breakdown of the company’s actual metrics.

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