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Earnings Results: Nvidia stock bounces back after clearing lowered earnings bar

Nvidia Corp. shares rallied in the extended session Thursday after the chip maker topped Wall Street’s lowered earnings expectations for the quarter thanks to server sales, but predicted that revenue would stay flat or fall this year.

Nvidia

NVDA, +1.08%

 shares surged 8% after hours, following a 1.1% rise to close the regular session at $154.53. The stock has been beaten down since Nvidia first signaled issues with its graphics chips in the last earnings report: IN the past three months, Nvidia shares have dropped 22%, while the S&P 500 index

SPX, -0.27%

has gained 1.6%, the tech-heavy Nasdaq Composite Index

COMP, +0.09%

 has risen 4.1%, and the PHLX Semiconductor Index

SOX, +0.25%

  is up 12.5%.

Nvidia reported fourth-quarter net income of $567 million, or 92 cents a share, compared with $1.12 billion, or $1.78 a share, in the year-ago period. Adjusted earnings were 80 cents a share.

Of the 28 analysts surveyed by FactSet, Nvidia on average was expected to post adjusted earnings of 62 cents a share. Thursday’s Wall Street estimate was down from the $1.85 a share expected at the beginning of the quarter, before the company slashed its outlook twice owing to weakness in China and slower-than-expected gaming card and data-center sales.

“This was a turbulent close to what had been a great year,” said Nvidia Chief Executive Jensen Huang in a statement.

“Despite this setback, Nvidia’s fundamental position and the markets we serve are strong,” Huang said. “The accelerated computing platform we pioneered is central to some of world’s most important and fastest growing industries — from artificial intelligence to autonomous vehicles to robotics. We fully expect to return to sustained growth.”

Revenue declined to $2.21 billion from $2.91 billion in the year-ago quarter. Wall Street expected revenue of $2.24 billion from Nvidia, according to 29 analysts polled by FactSet. That’s down from $3.42 billion Wall Street had forecast at the beginning of the quarter. In the year-ago period, Nvidia had reported revenue of $2.91 billion. Leading up to earnings, Nvidia had forecast revenue of $2.16 billion to $2.24 billion.

Nvidia’s revenue is broken down into five segments: Gaming, data center, professional visualization, automotive and “OEM & IP,” or original equipment manufacturers and intellectual property. Nvidia beat estimates for data-center sales, but fell short in every other sales category.

Gaming revenue fell 45% from a year ago to $954 million, while analysts were looking for $974.1 million. Data-center sales rose 12% to $679 million, while Wall Street expected $670.5 million. Professional visualization sales rose 15% to $293 million, while the Street expected $299.3 million. Auto sales rose 23% to $163 million, while analysts expected $175.6 million. OEM & IP revenue to declined 36% to $116 million, compared with the analyst consensus of $132.8 million.

For the first quarter, Nvidia expects revenue of $2.16 billion to $2.24 billion, while analysts have forecast revenue of $2.32 billion. For the year, Nvidia said it expects “flat to down slightly” revenue, compared with the $11.72 billion it reported for fiscal 2019. Analysts expect $11.2 billion.

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