Nvidia predicted stronger fiscal 2020 sales than analysts had estimated, according to Bloomberg. It is raising optimism the company can quickly return to growth when it clears a buildup of unused gaming chips. The stock rallied 6 percent after the report.
Revenue will be flat to down slightly in the fiscal year, the company said in a statement. Analysts, on average, estimated a 7 percent drop. The chipmaker also forecast a 20 percent decline in the current quarter, suggesting Nvidia sees a big boost in sales coming later in the year.
Nvidia last month warned that it hadn’t met its targets for the fiscal fourth quarter, citing weaker gamer demand and slower orders from data center operators. It predicted revenue of about $2.2 billion in the period, down from a previous forecast of about $2.7 billion. The company reported that sales fell 24 percent to $2.205 billion, the first quarterly decline since 2014. Net income was $567 million, or 92 cents a share, in the quarter, compared with $1.1 billion, or $1.78 a share in the same period a year earlier.
CFO Colette Kress estimated that “normalized“ revenue for gaming chips is about $1.4 billion per quarter. Underlining the distortion caused by gyrating cryptocurrency miner demand, sales declined 45 percent to $945 million in the period ended Jan. 27. The company cut shipments while its customers tried to sell their unused stockpiles. In each of the prior four quarters, Nvidia reported revenue for the gaming unit at more than $1.7 billion.
Data center revenue, a relatively new business that has driven rapid growth for the company, gained 12 percent from a year earlier, but declined 14 percent from the prior quarter. That reflects widespread caution at cloud service providers, the company said. Executives said they can’t predict when orders from those customers will pick up.
For the fiscal first quarter, Nvidia projected sales of $2.2 billion, plus or minus 2 percent. That compares with an average analyst estimate of $2.29 billion. Gross margin, or the percentage of sales remaining after deducting costs of production, will be 59 percent, the company said. Analysts projected 59 percent.
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