- Pascal GPU Inventory Still Hurts Demand, But Market Will Return To Solid Growth By The End Of This Quarter
- With regard to the immediate prospects of the server market, NVIDIA does not have such confidence, so the company has so far refrained from making annual forecasts.
- Every gaming platform will switch to ray tracing in the future
- The new process itself means nothing, NVIDIA is in no hurry to move to 7nm
NVIDIA has just on the results of the first quarter of fiscal year 2020, which in her calendar ended on April 28, 2019. The main financial indicators of the company's activities for the period either coincided with analysts' expectations, or turned out to be even slightly better than predicted. At least the gaming segment performed better than expected, as did the automotive segment, while professional visualization tools and data center products sold worse than independent experts expected.
NVIDIA's total revenue for the period reached $2,22 billion, up 1% from the previous quarter but down 31% from the same period last year. The “high base” effect is still affecting – a year ago, the company’s revenues were determined by the cryptocurrency boom, but in its pure form, it now recognizes only the absence of revenue of $ 289 million from the implementation of specialized mining solutions that were sold directly in the OEM segment.
GPU revenue reached $2,02 billion, accounting for 91% of the total. On a year-on-year basis, the decline was 27%, but sequentially there was an increase of 1%. CFO Colette Kress explains that the decline in GPU revenue is due to trends in the gaming and server segments, as well as the "cryptocurrency" factor.
Don't think, however, that everything is bad with the implementation of gaming GPUs. Indeed, the gaming business as a whole posted a decline in revenue to $1,05 billion (down 39% year-on-year), but in a sequential comparison, revenue increased by 11%. That is, in the first quarter, NVIDIA sold fewer GPUs and Tegra processors for game consoles, but the first of the factors is due to overstocking of warehouses after the cryptocurrency boom, and the second is due to seasonal phenomena. On the other hand, growth in revenue from the sale of gaming products in sequential comparison at NVIDIA is explained both by the improvement in the situation with surpluses of Pascal and the high popularity of Turing.
In general, the head of NVIDIA Jensen Huang (Jen-Hsun Huang) urged not to make hasty conclusions about the reasons for overstocking warehouses. Turing graphics solutions, he says, are outselling Pascal generation products in a comparable phase of the life cycle. Everything that has accumulated in warehouses is related specifically to the previous Pascal architecture. So far, NVIDIA has not been able to finally normalize the situation with stocks, but it expects to do this at the turn of the second and third quarters of the current fiscal year.
When asked about the reasons for the decline in profit margins from 64,5% to 58,4%, NVIDIA's CFO cited weaker gaming margins and shifting demand patterns as the main factors that undermined the business's profitability. However, in a sequential comparison, margins rose by 3,7 percentage points due to no write-offs in the server segment. By the way, this did not help him much, but we will talk about this below.
The server segment showed no growth
So, NVIDIA's revenue in the segment of data center components did not exceed $634 million, which is 10% less than the result of the same period last year, and 6% more than the revenue of the previous quarter. In fact, the drop in revenue was offset only by the demand for components used in artificial intelligence systems that can draw logical conclusions. The head of NVIDIA several times mentioned in this context the recent achievements of Google and Microsoft in the technologies of simultaneous machine translation, speech recognition and synthesis. However, both representatives of the company, who participated in the reporting conference, referred to the difficulties of the server market as temporary, indicating great prospects for NVIDIA products in the coming years. Jensen Huang still believes that the growth of the company's business in the near future will be determined by three factors: ray tracing in games, the development of the server segment and progress in the field of robotics, which includes "autopilot".
In the latter context, it was also said that light vehicles are just the “tip of the iceberg” of the larger robotics market, which will cover logistics, industrial automation, and agriculture segments. So far, NVIDIA is proud that robotic taxis will start operating in the next two years, and the majority of core projects use components from its production. In addition, among the partners from among the automakers, the head of NVIDIA most often mentioned Toyota, counting on the large-scale coverage of the market by driver assistance systems of various levels of autonomy.
In the server segment, among other things, NVIDIA is betting on the development of the "cloud" platform and the fruits of the deal with Mellanox, which will manifest themselves in the category of supercomputers. In the second quarter, however, NVIDIA does not expect a significant recovery in the server market. As the head of the company explained, in the field of "cloud gaming" NVIDIA expects to approach the audience coverage that was achieved in the PC segment using GeForce graphics solutions. The estimated audience growth potential here is estimated at one billion new users.
To the future NVIDIA is now trying not to look too far
An interesting change in the quarterly reporting policy was NVIDIA's refusal to regularly update its financial forecast for the year. Now the ultimate "planning horizon" in the public field is the next quarter. In the second quarter of fiscal year 2020, which has already begun, the company expects to receive revenue of $ 2,55 billion, the profit margin should fit in the range from 58,7% to 59,7%. Operating expenses will be increased to $985 million. In the past quarter, by the way, they also grew, mainly due to compensation packages - the company continues to increase its staff and payroll. Some infrastructure costs are also rising.
The process must be efficient
Toward the end of the Q&A session, the CEO of NVIDIA was asked if he could, in general terms, share plans for the development of the 7nm process technology and the release of related products this year. Jensen Huang did not hesitate to return to the discussion of the thesis that had already sounded earlier that the technical process itself does not mean anything, and any technological migration of products should be economically justified. According to him, NVIDIA's current 12nm offerings outperform the competitor's 7nm products in both performance and power efficiency.
The advantage of NVIDIA, according to him, lies in close cooperation with TSMC in the development of products that will be released according to the new lithographic standards. Jensen Huang argues that NVIDIA "does not buy a ready-made process" from TSMC, as competitors do, but deeply adapts it to the features of their own products. In addition, NVIDIA engineers, according to the head of the company, are able to design architectures that demonstrate high energy efficiency, regardless of the process technology used.
The primary reaction of the stock market to the publication of quarterly reports was an increase in the market value of the company's shares, but now it has declined from 6% to 2%. Interestingly, the shares of the rival company AMD also strengthened by a couple of percent. However, this may be due to the reaction of the market to the statements of the head of the company, made during the annual meeting of shareholders. The recording of the event was published only late yesterday evening.
Source: 3dnews.ru