Earnings preview: NVIDIA to put up a good show in Q3 despite crypto slump

While NVIDIA (NVDA) continues to thrive on the strength of the cryptocurrency and gaming industries, the faltering enthusiasm among crypto miners is weighing down on the demand for GPUs, a technology the company has pioneered successfully. The most recent outlook for the crypto sector is not as encouraging as before, and it has already started reflecting in the performance of NVIDIA’s stock.

The company will be reporting results for the third quarter of fiscal 2019 Thursday after the market closes. The graphics cards maker is widely expected to report earnings of $1.91 per share on net sales of $3.24 billion, which represent 43% and 23% growth respectively compared to the year-ago quarter. The top-line estimate is broadly in line with the management’s own prediction.

Meanwhile, the results will unlikely be impacted by the ongoing slump in the crypto market, because it will be balanced by the gaming boom. The bullish outlook for the sector points to sustained demand for gaming GPUs in the foreseeable future. Moreover, the market is witnessing a rapid shift to the GPU-accelerated computing model even as the conventional computing technology nears stagnation.

Also see: NVIDIA Corp. Q2 2019 Earnings Conference Call Transcript

In the second quarter, all of the business segments of NVIDIA registered record revenues, pushing up the top-line about 40% year-on-year to $3.12 billion. Earnings nearly doubled to $1.76 per share. Reflecting the company’s strong cash flow, the management has laid down a program to return about $1.25 billion to shareholders through share repurchases and dividend payments in fiscal 2019.

Whopping $1.8-billion gaming revenue in Q2 fails to impress NVIDIA investors

Intel, the unchallenged leader of the microprocessor industry, last month reported a 42% jump in earnings and a 19% growth in revenues. Fellow chipmaker Advanced Micro Devices (AMD) registered a 12% revenue growth in its computing and graphics segment for the September quarter when revenues rose 4% and earnings surged 67%.

NVIDIA shares have followed a path much like the other tech stocks this year, going through several ups and downs and hitting a record high mid-year. Since early October, the stock pared most of the gains it made over the past ten months, underperforming the industry, amidst concerns that the crypto boom is cooling off.

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