Nvidia stock falls as China’s COVID shutdown dampens expectations
Nvidia Corp shares fell in the extended session on Wednesday after the COVID shutdown in China and the war in Ukraine slashed half a billion dollars from the chipmaker’s forecast for the current quarter, while the company reported record results.
For the current or second fiscal quarter Nvidia NVDA
Expected revenue from $7.94 billion to $8.26 billion, while analysts polled by FactSet forecast revenue of $8.4 billion on average. The company said its “Russian insurance operations and COVID virus in China” were responsible for an expected revenue shortfall of about $500 million in the second or current quarter.
This is similar to Cisco Systems Inc. CSCO,
Which announced its earnings last week and has a quarter ending in April as Nvidia. Cisco noted that it expanded after Chinese authorities shut down Shanghai from March 27, which threw a monkey wrench into its ability to source components. As a result, Cisco issued a poor outlook and stocks had their worst day in more than a decade.
“We estimate the $400 million impact of lower sales in Russia and China on game sales in the second quarter,” said Colette Kress, Nvidia’s chief financial officer, on the call with analysts. “Furthermore, we estimate that the lack of sales to Russia will have an impact of $100 million on the second quarter in the data center.”
Game sales rose 31% to a record $3.62 billion from $2.76 billion, while analysts polled by FactSet expected Nvidia’s game sales to reach $3.46 billion. However, gaming revenue is expected to decline in the current quarter, further weakening Nvidia’s outlook.
“As we anticipate a continuing impact, as we prepare for a new architectural transition later in the year, we expect gaming revenue to decline sequentially in the second quarter,” Chris said. “Channel stock has almost flattened and we expect it to remain near these levels in the second quarter.”
“We continue to believe that our bottom line demand remains very strong,” Chris told analysts, adding that gaming revenue is expected to grow year-over-year. Nvidia reported second-quarter gaming revenue of $3.06 billion in the second quarter of 2021.
“But all in all, it’s going to be down Q2 games from Q4 Q1 and likely going down in teens as we try and work through some of these lockdowns in China that are holding us back,” Chris said. “Overall, demand for games remains strong: we continue to expect final demand to grow year-over-year in the second quarter.”
Nvidia shares were down more than 7% after hours, after rising 5.1% in the regular session to close at $169.75.
Meanwhile, Nvidia’s first-quarter data center sales rose 83% to a record $3.75 billion from $2.05 billion in the same period last year, while analysts had expected $3.6 billion. During the call, Chris told analysts that the company sees “continued momentum going forward,” and that “customers remain supply constrained in their infrastructure needs.”
Read: The end of the single-chip wonders – why Nvidia, Intel, and AMD ratings have experienced massive upheaval
“All these different factors, whether it’s just industrial recognition of the importance of AI, the transformative nature of these new AI models, recommendation systems, big language models, conversational AI, and the thousands of companies around the world that use Nvidia,” Nvidia CEO Jensen Huang told analysts at The call is AI in the cloud driving demand for public cloud.”All of these things are driving our data center growth, and so we expect to see data center demand still strong.”
Nvidia reported first-quarter net income of $1.62 billion, or 64 cents a share, compared to $1.91 billion, or 76 cents a share, in the same period last year. Adjusted earnings, which excludes stock-based compensation expense and other items, was $1.36 per share, compared with 91 cents per share in the same period last year. All numbers have been adjusted for last year’s stock split 4 for 1.
Revenue jumped to a record $8.29 billion from $5.66 billion in the first quarter of last year.
Analysts expected $1.30 per share on revenue of $8.12 billion, based on Nvidia’s forecast of $7.94 billion to $8.26 billion.
Read: Why Semiconductor Stocks Are ‘Almost Uninvestable’ Despite Record Profits Amid Global Shortage
Nvidia’s scores follow those of major chip makers such as Advanced Micro Devices Inc. AMD,
Intel Corp. INTC,
and Qualcomm Inc. QCOM,
While Broadcom Ltd. AVGO,
He is due to report on June 2.
Over the past 12 months, Nvidia shares are up 8%, while at the same time nearly 50% from their record closing high of $333.76 set on November 29. In comparison, the PHLX semiconductor index SOX,
down 8% in the past 12 months, the S&P 500 SPX,
Down 5%, the Nasdaq Composite Index,
It is from 16%.