Nvidia stock tumbles on reduced Q4 outlook

Nvidia Corp. (NVDA) tumbled about 15% in the pre-market trading hours today as the semiconductor giant cut down its revenue expectations for Q4 2019. Revenue is expected to be $2.20 billion versus the previous estimate of $2.70 billion, reflecting the weaker-than-expected revenue from Gaming and Data Center businesses.

Here is a quick look of Nvidia’s third quarter 2019 earnings results.

With regards to the Gaming business, the company stated that the deceleration in the global economy, particularly in China, impacted the consumer demand for Nvidia gaming GPUs. Also, lower-than-expected sales of certain high-end GPUs hurt the Gaming revenue.

Datacenter unit’s revenue fell short of Nvidia’s expectations as a number of forecasted deals did not close in the last month of the fourth quarter because of customers’ cautiousness in spending.

Nvidia also lowered its gross margin expectations for the fourth quarter ended January 27, 2019. GAAP gross margin is expected to be 55%, plus or minus 100 bps versus the previous estimate of 62.3%, plus or minus 50 bps. Non-GAAP gross margin is expected to be 56%, plus or minus 100 bps versus the previous estimate of 62.5%, plus or minus 50 bps.

“Q4 was an extraordinary, unusually turbulent, and disappointing quarter,” said CEO Jensen Huang. In a letter to Nvidia shareholders, Huang stated, “We are disappointed to revise our guidance, which was already down significantly. It was a challenging quarter with several extraordinary dynamics.”

All the semiconductor companies in the Philadelphia Semiconductor Index opened in the red on Monday, except Entegris (ENTG), which announced its merger with Versum Materials (VSM).

The Santa Clara, California-based company is slated to release its fourth quarter and fiscal 2019 earnings results as well as Q1 2020 outlook on February 14, 2019.

Shares of Nvidia plunged to a yearly low ($124.46) on December 26, 2018. Nvidia stock had gained 26% in the last 30 days and dropped 19% in the past three months period.

Listen to publicly listed companies’ earnings conference calls along with the edited closed caption text