NVIDIA: data center sales are growing, but gaming is in free fall

Nvidia has published the financial results of third quarter fiscal 2023. The US company had revenues of $5.93 billionin down 17% from a year ago and 12% on the previous quarter. Operating income reached $601 million, down 77% from $2.67 billion last year, while net income fell 72% to $680 million. The gross margin stood at 53.6%down on 65.2% last year but up on 43.5% in Q2 FY23.

“We’re here rapidly adapting to the macroeconomic environmentcorrecting i inventory levels and paving the way for new products,” said Jensen Huang, founder and CEO of NVIDIA. new platforms – Ada Lovelace in graphics, Hopper in AI, BlueField and Quantum in networks, Orin in autonomous vehicles and robotics and Omniverse – got off to a great start and is the foundation of our next phase of growth“.

Breaking down the financial data by platform, we observe one NVIDIA “two-speed”: the Datacenter sector is growing, the Gaming one is heavily held back. White fly the Automotive. In the field DatacentersNVIDIA had sales of $3.83 billion, an increase of 31% on last year.

Growth is due to one increased demand for hardware from US cloud service providers, vertical industries and other web-related companies. Compared to the previous quarter, revenue increased by only 1% due to the reduced sales in China.

Despite the start of deliveries of Hopper H100 accelerators, US government restrictions on exports to the Asian state of products such as the A100 and H100 have had an impact on NVIDIA’s accounts: the decline has been offset by the sale of “alternative products” , like the new A800.

The segment Gaming recorded revenue for $1.57 billionin 51% drop on last year and 23% on the previous quarter. The results are the result of lower sales to partners to “help them to align inventory levels on the channel with current demand estimates“. Macro-economic conditions and lockdowns in China continue to weigh on consumers’ purchasing decisions.

The market therefore discounts again large quantities of cards from previous generations to be disposed of and this has led to a decline in sales of desktop and notebook GPUs compared to the past year. The decrease compared to the previous quarter, however, is mainly due to the slowdown in the mobile sector rather than the desktop one.

“We believe that the recent Ethereum transition from PoW to PoS have reduced the usefulness of GPUs for cryptocurrency mining. This may have contributed to theincreased aftermarket sales of our GPUs in some marketspotentially impacting demand for some of our products, particularly at the low end,” commented NVIDIA CFO Colette Kress, noting that even sales of Cryptocurrency Mining Processor (CMP) solutions have been small.

As for the departure of the new GeForce RTX 4000or the RTX 4090 since the RTX 4080 has been available since yesterday, Colette Kress spoke of a “exceptional launch“, with a’very high demand and positive feedback from the gaming community. “We have sold everything quickly in many countries and we are working hard to keep up with demand.”

The sector of GPUs dedicated to professional graphics is also slowing down, with a 65% drop in revenues on the previous year to 200 million dollars. 86% jump in automotive salesa result mainly related to autonomous driving solutions.

Finally, for the fourth quarter of fiscal 2023, NVIDIA expects revenue of around $6 billion with a gross margin close to 63.2%.