Nvidia reported fiscal third-quarter results on Wednesday for the period ending in October with sales beating analyst expectations but earnings per share coming in light.
Nvidia stock rose 1% in extended trading.
Here's how the company did versus Refinitiv consensus estimates:
- EPS: $0.58, adjusted, versus $0.69 expected
- Revenue: $5.93 billion, versus $5.77 billion expected
Nvidia said it expected about $6 billion in sales in the fourth quarter, lower than Refinitiv consensus estimates of $6.09 billion.
Gross margin for the third quarter was down 11.6 percentage points to 53.6%, which the company attributed to taking an inventory charge because of low demand for data center chips in China. Revenue was down 17% on a year-on-year basis.
Nvidia expects gross margin for the current quarter to recover to between 63.2% and 66.0%.
Nvidia is closely watched by analysts and investors as a leading indicator for the health of the technology industry, because it sells chips and software to so many PC makers and cloud providers.
In the past few months, chip companies like Nvidia have been slashing order expectations and warning that their customers are overstocked with computer parts. In May, Nvidia said it would slow the pace of its hiring.
Nvidia CEO Jensen Huang said in a statement that the company was "adapting to the macro environment."
The PC gaming market is slowing after the pandemic boom. Nvidia graphics cards, which had been hard to find in stock in 2020 and 2021, are now seeing retail discounts. Nvidia also recently announced a new generation of graphics cards which are priced higher than the previous models.
Nvidia's gaming division reported $1.57 billion in sales, down 51% year-over-year. Nvidia said it was selling less to retailers because they have more inventory than current demand. It said that macroeconomic conditions, in addition to China's zero-Covid policy, are hurting consumer demand.
A brighter spot was Nvidia's data center business, which reported $3.83 billion in sales, up 31% year-over-year. Nvidia attributed the growth to sales to U.S. cloud service providers and consumer internet companies.
In July, Nvidia cut its guidance for the October quarter. Nvidia also warned in August that it would be hit by U.S. export controls that prevent some fast artificial intelligence chips from being sold to Chinese companies. In November, it revealed a new chip that is designed to meet the U.S. export rules.
Nvidia said that the reduced sales from the GPUs barred in China would be largely offset by its alternative products.
Nvidia has a few smaller lines of business, including professional visualization and automotive chips. They are small. Professional visualization shrunk 65% on an annual basis to $200 million. Automotive grew 86% but is still very small, reporting $251 million in sales.
The company's "other" category reported $73 million in revenue. It includes Nvidia's cryptocurrency mining chips (CMP). The company said sales from the CMP chips were "nominal."
"We believe the recent transition in verifying Ethereum cryptocurrency transactions from proof-of-work to proof-of-stake has reduced the utility of GPUs for cryptocurrency mining," the company said.
Nvidia said it spent $3.75 billion on share repurchases and dividends during the quarter.