Nvidia Q2 FY23 Investment Note
Nvidia encounters challenging markets with a weak Q3 forecast: Panic or Opportunity?
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Key Takeaways:
Attitude: Nvidia had a challenging quarter with total revenue of $6.7 billion, up 3% YoY but down 19% sequentially, below the $8.1 billion preview. The main shortfall was primarily due to the weaker Gaming revenue but Nvidia believes the long-term fundamentals in Gaming remain strong. Nvidia got another record revenue of $3.81 billion on Data Center, but it was short of the management's expectation because of supply chain disruptions.
Guidance: For the Q3 FY23, NVIDIA estimates revenues of $5.90 billion (+/-2%). Also, the company expects Gaming and Professional Visualization revenues to decline sequentially, whereas a sequential revenue increase in Data Center and Automotive sectors is likely to offset the negative impact partially. The GAAP and non-GAAP gross margins are projected at 62.4% and 65%, respectively (+/-0.5%). GAAP and non-GAAP operating expenses are estimated at $2.59 billion and $1.82 billion, respectively. Nvidia has slowed operating expense growth, balancing long-term investments while managing near-term profitability. Nvidia believes the long-term gross margin profile is intact.
Product: GeForce's registered members exceeded 20 million in Q2. NVIDIA RTX has redefined computer graphics and is now supported by almost 300 applications. As the next-generation platform, the flagship Hopper architecture H100 data center GPU is in production. Besides, top computer makers including Del, HPE, and Lenovo are adopting the company's first CPU, NVIDIA Grace CPU Superchip, to build the next generation of products. For Professional Visualization sector, as macroeconomic headwinds intensified, enterprise demand slowed and OEMs worked to reduce inventory.
NVIDIA Drive: Automotive revenue of Q2 is about $220 million, which increased 59% sequentially and 45% from the year-ago quarter. Strong growth was owing to auto AI solutions, which included self-driving and AI cockpit revenue. Nvidia believes Q2 was an inflection point for its Automotive sector, as new energy vehicle design wins ramp into volume. Besides, Nvidia announced rollout plans of new vehicles from partners, like NIO, Li Auto and more. Looking forward, Nvidia expects an $11 billion Automotive design-win pipeline to convert to continued growth.
Q: Once Nvidia's Gaming business normalizes, with the absence of crypto in a general sense and with the merge coming, how do you view the pricing environment?
Jensen Huang: I would say that the mix would go down without crypto dynamic. However, the ASP is drifting up for the long-term because it's more useful than ever.
GeForce essentially is a game console inside your PC. And we've always believed that the ASP of GeForce should drift toward the average selling price of a game console. So it should be something along the lines of $500 roughly at this time. There's also the design aspect of it. Most designers and creators can now use GeForce inside PC to create contents. So the GeForce is not only for Gaming, it's also essential as their creative workstation as well.
So several dynamics are causing the ASP of GeForce to go up, and we've seen this trend for several years.
Q: Considering a 1.22 billion inventory charge in Q2, how do you think about the demand in Data Center over the next couple of quarters?
Colette Kress: We're taking a thorough look at our inventory charges not only for this last quarter, but also looking over the long term of what we need for demand and then what we had in terms of supply. Remember, we had purchased this very early in the year as we needed to drive the commitment of the supply.
We still have a very strong, solid growth projection for Data Center. But we're going to take this opportunity for some of the prior architecture pieces, to write down those, given what we see as just a change in our expectations. We have written down some silicon and chips for the macroeconomic condition and we get ready for our future product launches. But there are also components, services, capacity and some of the other drivers that are incorporated in those write-downs.
Q: Nvidia has done a great job in a challenging supply chain environment recently, but why did the supply constraints hit you this quarter?
Colette Kress: Our execution has been phenomenal, when we think about the challenges of we are almost putting together a full data center for our customers and getting it shipped out. In the same way that the CSPs (Cloud Service Providers) are challenging, we're setting up their data centers as we're an integral part of that. So networking has been short of supply. These are the same supply issues that some of our CSPs are having. Our supply arrived late in the quarter for some key products we needed to get out. Putting that together caused some disruption in our logistics and distribution.
We were pleased to reach the level of networking but we did have some challenges this quarter.
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Last but not least,
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Disclaimer
This article is a script from the NVDA Q3 FY23 earnings conference call. In order to facilitate reading, we have made appropriate cuts and revisions. Moomoo is a financial information and trading app offered by Moomoo Technologies Inc. In the U.S., investment products and services available through the moomoo app are offered by Moomoo Financial Inc., a broker-dealer registered with the U.S. Securities and Exchange Commission (SEC) and a member of Financial Industry Regulatory Authority (FINRA)/Securities Investor Protection Corporation (SIPC). In Singapore, investment products and services available through the moomoo app are offered through Moomoo Financial Singapore Pte. Ltd. regulated by the Monetary Authority of Singapore (MAS).Moomoo Financial Singapore Pte. Ltd. is a Capital Markets Services License (License No. CMS101000) holder with the Exempt Financial Adviser Status. This advertisement has not been reviewed by the Monetary Authority of Singapore. In Australia, financial products and services available through the moomoo app are provided by Futu Securities (Australia) Ltd., an Australian Financial Services Licensee (AFSL No. 224663) regulated by the Australian Securities and Investment Commission (ASIC). Please read and understand our Financial Services Guide, Terms and Conditions, Privacy Policy and other disclosure documents which are available on our websites https://www.moomoo.com/au. Moomoo Technologies Inc., Moomoo Financial Inc., Moomoo Financial Singapore Pte. Ltd. and Futu Securities (Australia) Ltd are affiliated companies.
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Milk The Cow : I think hold & wait
+
?
. 3Q22 guideline also seem to look 
dim...
From its' report it does not seem to look that good
tongdachen : nvdia still have a very strong, solid growth projection for Data Center.
tongdachen : We still have a very strong, solid growth projection for Data Center. But we're going to take this opportunity for some of the prior architecture pieces, to write down those,
101833933 : just a round of ndustry cycle
anchovy3 : Seems like there are some challenging times ahead, with forecasts being adjusted downward. This seems like a better stock to watch, research, and potentially add in a few months.
Eddie Jauriqui : when are you dumbasses need to answer me about my dividends checks I want my BP dividends checks five of them deposited into my bank account they don't belong to any of you f****** assholes they belong to me I'm sick of f****** trying to get money that I earned those dividend checks from BP are mine from a buyback program you dumbass you should know about that I'm sick of you f****** playing with my money
Dream Weaver : i am accumulating this excellent company stocks as they correct. every dollar down is added value. what an opportunity !!!
Ixy The Cat : Share price remains high and needs to trend lower. High inflation and USD are challenges that will affect bottom line.
posenton : . The data center still has a very strong and robust growth forecast.
Only any scientific and technological revolution can't do without him. A share will soar sooner or later.
TigerAlan : Nvidia is a good chips company. I think its earnings and share price will increase in the next quarter.